Can a lawyer negotiate a claim directly with the insurer's lay adjuster when the insurance company is represented by counsel?

Plain-English summary

A lawyer representing a claimant in an automobile accident case asked whether he could negotiate directly with the insurance company's lay adjuster when the company was represented by local counsel. The inquiry sought clarification of KBA E-28 in light of the 1939 "Statement of Principles on Respective Rights and Duties of Lawyers and Laymen in the Business of Adjusting Insurance Claims," which recognized a liability insurer's right to discuss and settle a third-party claim. The committee answered that the direct negotiation is improper.

The committee anchored its answer in Canon 9 of the Canons of Professional Ethics, which bars a lawyer from communicating, much less negotiating, about the subject of a controversy with a party represented by counsel, and in DR 7-104(A)(1) of the Code of Professional Responsibility, which permits such communication only with the other lawyer's prior consent or where authorized by law. The committee found the rules clear and admitting no exception for the "Statement of Principles." It relied on ABA Informal Decision 523 (May 31, 1962), which held, following ABA Opinion 124, that a lay adjuster, though an employee of the insurer, is treated the same as an adverse party because the adjuster clearly represents the insurer; a plaintiff's attorney therefore violates Canon 9 by dealing with the adjuster without the consent of the insurer's counsel.

The committee noted that ABA Informal Decision 523 also cautioned that a lawyer may not delegate his professional discretion to a layman or let the layman make final settlement without the lawyer's approval. The committee upheld KBA E-28 (November 1965), which had held it unethical to discuss a pending case with the insurance carrier's representative when the parties are represented by counsel, and concluded that it is improper to negotiate directly with the layman representing the insurer without the insurer's counsel's consent.

Currency note

This opinion was issued in 1973 under Kentucky's former Code of Professional Responsibility (in effect 1971 to 1990), before the Kentucky Bar Association's 1990 adoption of the Rules of Professional Conduct (SCR 3.130) and the substantial 2009 revisions to those rules. The no-contact rule it applies is now Model Rule 4.2 (and Kentucky's SCR 3.130(4.2)), whose text and commentary differ from former Canon 9 and DR 7-104. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a claimant's lawyer deal directly with the insurer's lay adjuster when the insurer has counsel?

A: No. The committee held, following ABA Informal Decision 523, that a lay adjuster is treated like the represented adverse party, so dealing with the adjuster without the insurer's counsel's consent violates the no-contact rule.

Q: Did the 1939 "Statement of Principles" create an exception?

A: No. The committee held that the only exceptions are the other lawyer's consent or authorization by law, and that the Statement of Principles changes nothing about the canon's strict application.

Q: Can a lawyer let a lay adjuster finalize a settlement?

A: The opinion quotes ABA Informal Decision 523 that a lawyer may not delegate his professional discretion to a layman or authorize the layman to make final settlement without the lawyer's approval.

Background and rules framework

The opinion applied Canon 9 of the Canons of Professional Ethics and DR 7-104(A)(1) of the Code of Professional Responsibility, the rules barring communication with a represented adverse party about the subject of the representation. The modern analog is Model Rule 4.2 (communication with a person represented by counsel), adopted in Kentucky as SCR 3.130(4.2).

Citations and references

Rules of Professional Conduct:

• Canon 9 (Canons of Professional Ethics) and DR 7-104(A)(1) (Code of Professional Responsibility); modern analog Model Rule 4.2

Other opinions cited:

• ABA Informal Decision 523 (May 31, 1962) (lay adjuster treated as the adverse party; no delegation of professional discretion)
• ABA Opinion 124 (improper to negotiate a settlement with an adverse party without that party's lawyer's knowledge)
• KBA Opinion E-28 (Nov. 1965) (unethical to discuss a pending case with the insurance carrier's representative when the parties are represented by counsel), upheld

See also

• KBA Ethics Op. E-65: Contacting a Represented Party
• KBA Ethics Op. E-95: Copying Insurer on Demand
• KBA Ethics Op. E-213: Contacting an Opponent's Employees

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-067.pdf

Original opinion text

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

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-67
Issued: May 1973

This opinion was decided under the Code of Professional Responsibility, which was in effect from 1971 to 1990. Lawyers should consult the current version of the Rules of Professional Conduct and Comments, SCR 3.130 (available at http://www.kybar.org), before relying on this opinion.

Question:

May an attorney negotiate directly with a layman representing the insurer during pending litigation?

Answer:

No.

References:

Canon 9; DR 7-104

OPINION

An inquiry has been received concerning the propriety of an attorney's representing a claimant in an automobile accident case and negotiating directly with a lay adjuster representing the insurance company where the insurance company is represented by local counsel. The inquirer asks for a clarification of KBA E-28 in light of the "statement of principles on respective rights and duties of lawyers and laymen in the business of adjusting insurance claims," which was adopted January 8, 1939, by the Conference Committee on Adjusters, composed of representatives of the American Bar Association and the insurance industry. In particular the following passage is cited:
(3) In the second class (a claim of a third person in tort against the holder of a policy of liability insurance), under a policy by which the company insures the liability of the policyholder, it is recognized that the company has a direct financial interest in the claim represented against the policyholder, and in a suit in which the name of the company may not appear as a party litigant, but which the company is obliged to defend in the name of the policyholder. Therefore, the company has a right
(a) To discuss with the policyholder or the claimant the merit of the claim, and to settle it.
To consider this problem we look first to Canon 9 of the Canons of Professional Ethics.

A lawyer should not in any way communicate upon the subject of controversy with a party represented by counsel much less should he undertake to negotiate or compromise the matter with him, but should deal only with his counsel.
This Canon has been strictly construed throughout all the Opinions handed down from the American Bar Association.
The newer Code of Professional Responsibility, adopted by both the American Bar Association and the Kentucky Bar Association, states in DR 7-104:
(A) During the course of his representation of a client a lawyer shall not
(I) Communicate or cause another to communicate on the subject of the representation with a party he knows to be represented by a lawyer in that matter unless he has the prior consent of the lawyer representing such other party or is authorized by law to do so.
The principles and rules as stated are clear and evident No exception is mentioned except with consent of the lawyer representing such other party or when authorized by law. No mention is made of the "Statement of Principles."
Indeed, the American Bar Association has dealt with this problem frequently. In Informal Decision Number 523, issued May 31, 1962, approximately twenty-three years after the adoption of the "Statement of Principles," it held:
In Opinion 124 this Committee specifically held that it is contrary to the principles of professional propriety as enunciated in Canon 9 for a lawyer to negotiate a settlement with an adverse party without the knowledge of the lawyer for the adverse party. Lay adjusters, while only employees of the insurance company, shall be treated the same as an adverse party since they are clearly representing the insurance company. It is, therefore, our opinion that the plaintiff's attorney would be in violation of the specific provisions of Canon 9 in dealing with lay adjusters, without the specific consent and approval of the insurance company's counsel.
ABA Informal Opinion 523, supra, further provides:
Although the adjuster may negotiate settlements, there are definite limitations; if the attorney permits his professional discretion to be delegated to the layman, or authorizes the layman to make final settlement without reporting to and obtaining the approval of the attorney, such conduct would be improper.
No exception for the "Statement of Principles" was noted.

KBA E-28, which the inquiring member feels may be in conflict with the "Statement of Principles," was issued in November, 1965. Its question was identical to the one at hand. It held:
It is our opinion that it would be unethical conduct for an attorney to discuss the case pending in court with the representative of the insurance carrier when the parties are represented by counsel.
As a result of the proceeding, KBA E-28 is upheld. ABA rules and decisions make no difference to the "Statement of Principles" and neither will the Committee. It is therefore improper to negotiate directly with the laymen representing the insurer without the consent of the insurer's counsel.

Note to Reader
This ethics opinion has been formally adopted by the Board of Governors of the Kentucky Bar Association under the provisions of Kentucky Supreme Court Rule 3.530 (or its predecessor rule). The Rule provides that formal opinions are advisory only.