In insurance-defense or employer-paid representations, can the defense lawyer share the client's confidential information with a third-party administrator, broker, HR manager, or risk manager?

Plain-English summary

A lawyer retained by an insurer or employer to defend an insured or employee often works within a "tripartite relationship" among the lawyer, the client, and the paying entity. Sophisticated insurers and employers sometimes bring in a fourth participant, like a third-party administrator, a broker, an HR manager, or a hospital risk manager, creating a "quadripartite relationship." The committee addressed four scenarios in which that fourth participant asks the defense lawyer for the client's confidential information: case evaluations, status reports, the written case assessment, and strategic input.

The committee's answer across all four scenarios was no, unless the lawyer's client provides informed consent to the disclosure. It grounded the conclusion in RPC 1.6(a), which bars revealing information relating to the representation unless the client gives informed consent, the disclosure is impliedly authorized, or it falls within RPC 1.6(b). Informed consent, defined in RPC 1.0A(e), requires the lawyer to communicate adequate information about the material risks of and reasonably available alternatives to the proposed disclosure. The committee held the lawyer may seek that consent and then disclose as requested, but only so long as the lawyer's professional judgment is not directed or regulated by the non-clients, citing RPC 1.2(a) (the client controls the objectives) and RPC 5.4(c) (a payer may not direct the lawyer's judgment).

The committee added two practical points it framed as the lawyer's existing duties. In seeking consent, the lawyer should analyze how the disclosure might affect the attorney-client privilege, work-product protection, and other privileges or privacy protections, though those are matters of substantive law beyond the committee's scope. And whether an attorney-client relationship also exists between the lawyer and any of the non-client participants is itself a fact-specific question of substantive law. If circumstances change, for example the insurer issues a reservation of rights or direct adversity arises, the lawyer must reevaluate and, if the client so directs, discontinue the disclosure.

In practice

Under the Washington rules as they stood at the time of the opinion, the committee held that the tripartite or quadripartite structure does not relax RPC 1.6(a): disclosing the client's confidential information to an insurer, third-party administrator, broker, HR manager, or risk manager requires the client's informed consent as defined in RPC 1.0A(e). The opinion conditions any such disclosure on the lawyer retaining independent professional judgment under RPC 1.2(a) and 5.4(c), and treats the privilege and work-product consequences of disclosure as substantive-law questions the lawyer should analyze when obtaining consent. It directs the lawyer to reevaluate consent if circumstances change (such as a reservation of rights or emerging adversity) and to stop disclosing if the client directs.

Common questions

Q: Can defense counsel send case reports to the insurer or a third-party administrator?

A: Only with the client's informed consent. The committee held that under RPC 1.6(a) the lawyer may not disclose the client's confidential information to the insurer, third-party administrator, broker, HR manager, or risk manager without the client's informed consent.

Q: Does the tripartite or quadripartite relationship create an exception to confidentiality?

A: No. The committee held the traditional Rules of Professional Conduct apply the same way, so the added participants do not relax RPC 1.6(a); the client must still consent to disclosure.

Q: Can the insurer or administrator direct how the lawyer handles the defense?

A: No. The committee held that under RPC 1.2(a) the client controls the objectives and under RPC 5.4(c) a person who recommends, employs, or pays the lawyer may not direct or regulate the lawyer's professional judgment.

Q: What if circumstances change after the client consents?

A: The committee held the lawyer must reevaluate if circumstances change, such as a reservation of rights or direct adversity arising, confer with the client about the risks and benefits, and discontinue disclosure if the client so directs.

Background and rules framework

The opinion interprets Washington RPC 1.6(a) (Model Rule 1.6, confidentiality) together with the definition of informed consent in RPC 1.0A(e) (Model Rule 1.0(e)). It applies RPC 1.2(a) (Model Rule 1.2(a), the client's authority over the objectives of representation) and RPC 5.4(c) (Model Rule 5.4(c), preserving the lawyer's professional independence from a third-party payer) to the insurance-defense setting. The committee treats the privilege and work-product effects of disclosure, and whether an attorney-client relationship exists with the non-client participants, as substantive-law questions outside its review.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.6 / Washington RPC 1.6(a) (confidentiality; informed consent)
• Model Rule 1.0(e) / Washington RPC 1.0A(e) (definition of informed consent)
• Model Rule 1.2(a) / Washington RPC 1.2(a) (client's authority over objectives)
• Model Rule 5.4(c) / Washington RPC 5.4(c) (professional independence from a payer)

Cases:

• Tank v. State Farm Fire & Cas. Co., 105 Wn.2d 381, 715 P.2d 1133 (1986), reservation-of-rights defense; counsel represents only the insured
• Bohn v. Cody, 119 Wn.2d 357 (1992), existence of an attorney-client relationship

Other opinions cited:

• WSBA Advisory Op. 195 (1999); WSBA Advisory Op. 1758 (1997): disclosure to outside auditor's service

See also

• ABA Formal Op. 01-421: a lawyer under insurance-company guidelines
• ABA Formal Op. 03-430: insurance staff counsel representation and naming
• ABA Formal Op. 08-450: confidentiality when representing multiple clients in the same matter

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1689

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Advisory Opinion: 201802
Year Issued: 2018
RPC(s): RPC 1.0A(e), 1.2(a), 1.6(a), 5.4(c)
Subject: Quadripartite and Tripartite Relationships: May Lawyer Provide Client Confidential Information to Third or Fourth Party?

Executive summary: Lawyers are often retained by third parties, like insurers or employers, to defend an assured or an employee, respectively. In the course of doing to, the retained lawyer must often communicate both with the client and with the insurer or employer in order to effectively manage the defense and enable to the insurer or employer to evaluate and resolve the claim.

A vast body of case law has developed regarding this tripartite relationship. The nature of the tripartite relationship differs from jurisdiction to jurisdiction. But generally, communications made within the tripartite relationship are afforded the same or similar protections as lawyer-client privileged communications or work product.

Sophisticated insurers or employers sometimes consult with or engage others to manage the claim or otherwise participate in the tripartite relationship, thereby adding a fourth stakeholder. Although case law involving this quadripartite relationship is not as well developed, the traditional application of the Rules of Professional Conduct inform the relationship similarly.

Before communicating to a fourth party, the lawyer will need to take certain steps in order to avoid disclosing information in violation of the lawyer’s duty of confidentiality to the client. This opinion addresses the so-called quadripartite relationship across four different scenarios.

Facts: Scenario 1:

Driver causes an automobile accident and is sued.

Driver notifies Broker of the claim. Broker tenders the claim to Insurer, who engages Third-Party Administrator to manage the litigation.

Third-Party Administrator hires Lawyer to defend Driver in the lawsuit. Third-Party Administrator asks Lawyer for an initial case evaluation and status reports every 30 days.

Scenario 2:

Supervisor is employed by Company. Supervisor is sued for harassment and discrimination.

Supervisor notifies HR Manager of the lawsuit, and HR Manager reports the claim to Insurer. Insurer appoints Lawyer to defend Supervisor in the lawsuit.

HR Manager asks Lawyer to copy HR Manager and Insurer on all future communications about the case, including status reports and case assessments.

Scenario 3:

Associate is employed by Law Firm. Associate is accused of legal malpractice, and suit is filed against Associate and Law Firm.

Associate informs Partner, who notifies Broker of the claim. Broker tenders the claim to Insurer under Law Firm’s professional liability insurance policy. Insurer assigns Lawyer to defend the claim.

Broker asks Lawyer to copy Broker, Partner, and Insurer on Lawyer’s all correspondence and status reports.

Scenario 4:

Physician is employed by Hospital. Hospital purchases from Insurer professional liability insurance coverage for Physician as a term of employment.

Physician is sued for medical malpractice. Physician tenders the claim to Insurer, who hires Lawyer to defend Physician in the lawsuit.

In the course of defending Physician, Lawyer drafts a written case assessment, which is addressed to Physician and Insurer. Insurer does not issue a reservation of rights.

Hospital’s Risk Manager calls Lawyer and asks (1) for a copy of the written case assessment, (2) to receive copies of all future status reports in the case, and (3) to provide strategic litigation input to the extent that Hospital is a potential co-defendant to the lawsuit. On the particular facts of the lawsuit, there is no indication that the interests of Hospital and Physician are directly adverse.

Questions:

May Lawyer provide the requested information to Third-Party Administrator (Scenario 1), HR Manager and Insurer (Scenario 2), Broker, Partner, and Insurer (Scenario 3), and Risk Manager (Scenario 4)?

Conclusion:

No, unless Lawyer’s client in each matter provides informed consent to the disclosures. [n.1]

Discussion:

Traditionally, a lawyer who is retained by an insurer to represent and defend an insured against claims acts within what is commonly referred to as a tripartite relationship. This relationship differs, depending on the jurisdiction. The tripartite relationship governs or describes how the lawyer, client, and insurer communicate and contribute to the defense.

Often, however, another party can become involved in some aspect of the defense. A third-party administrator, for example, might be hired by the insurer to manage administrative and financial aspects of the claim, paying invoices for legal fees and costs, providing the insurer with consolidated or abridged status reports, or establishing a reserve for the defense and indemnity of the claim. Scenario 1 above sets forth this example. Other examples of a fourth stakeholder or participant include the HR Manager in Scenario 2, the Broker in Scenario 3, and the Hospital Risk Manager in Scenario 4.

Although the tripartite relationship is relatively well defined in many jurisdictions, the addition of a fourth stakeholder or participant is not well defined. Nevertheless, traditional application of the Rules of Professional Conduct inform this so-called quadripartite relationship similarly to that of the tripartite relationship.

Under RPC 1.6(a), a lawyer “shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).” The term, “informed consent” refers to “the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” RPC 1.0A(e).

When obtaining informed consent, “[t]he lawyer must make reasonable efforts to ensure that the client or other person possesses information reasonably adequate to make an informed decision.” RPC 1.0A cmt. 6. This generally requires the lawyer to disclose “the facts and circumstances giving rise to the situation, any explanation reasonably necessary to inform the client or other person of the material advantages and disadvantages of the proposed course of conduct and a discussion of the client’s or other person’s options and alternatives.” Id. “Obtaining informed consent will usually require an affirmative response by the client or other person.” RPC 1.0A cmt. 7.

“[A] lawyer shall abide by a client’s decisions concerning the objectives of representation and, as required by RPC 1.4, shall consult with the client as to the means by which they are to be pursued.” RPC 1.2(a). A lawyer must not “permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer’s professional judgment in rendering such legal services.” RPC 5.4(c).

Therefore, in each of the four scenarios, Lawyer can seek informed consent from the client to disclose confidential information as requested, provided that in doing so, Lawyer’s professional judgment is not directed or regulated by the non-clients.

However, in providing diligent representation to each client, Lawyer should become or remain familiar with law that is applicable to the matter. For example, in obtaining informed consent from a client to make the requested disclosure, Lawyer should analyze the extent to which such disclosures might adversely affect the lawyer-client privilege, work product protections, and other applicable privileges or privacy protections. Such questions are matters of substantive law, which are beyond the scope of this Committee’s review.

Similarly, whether a lawyer-client relationship exists between Lawyer and Third-Party Administrator, HR Manager, Insurer, Broker, Partner, and Risk Manager in these various contexts is also a matter of substantive law that turns on the specific facts of the case. See, e.g., Bohn v. Cody, 119 Wn.2d 357, 363, (noting that “[t]he existence of lawyer-client relationship ‘turns largely on the client’s subjective belief that it exists’”) (quoting In re McGlothlen, 99 Wn.2d 515, 522, 663 P.2d 1330 (1983)); but also see, e.g., Tank v. State Farm Fire & Cas. Co., 105 Wn.2d 381, 388, 715 P.2d 1133 (1986) (stating that “[i]n a reservation of rights defense, RPC 5.4(c) demands that counsel understand that he or she represents only the insured, not the company”), Clark Co. Fire Dist. No. 5 v. Bullivant Houser Bailey, P.C., 180 Wn. App. 689, 699–700, (holding that insurer lacked standing to sue lawyer hired by insurer to defend the assured).

If circumstances were to change such that it later became necessary to reevaluate the parties’ interests or to reaffirm or obtain new informed consent from Lawyer’s client (e.g., Insurer later issues a reservation of rights or direct adversity arises between Lawyer’s client and Third-Party Administrator, HR Manager, Insurer, Broker, Partner, or Risk Manager in these various contexts), then Lawyer must do so. If the circumstances become such that it is no longer in a client’s interest to continue to agree that information should be disclosed as requested, then Lawyer must confer with the client about the risks and benefits, and discontinue disclosure if the client so directs.

Endnotes

1. The question of whether information can be disclosed to an outside auditor’s service was addressed in earlier advisory opinions. See Wash. Adv. Op. 195 (1999); see also Wash. Adv. Op. 1758 (1997).