The insurer that hired me to defend its insured wants me to follow litigation guidelines that require its pre-approval before I do research, file motions, or take depositions. Can I agree to that?

Plain-English summary

An insurer retained the inquiring attorney and firm to represent its insureds and required them to abide by "litigation management guidelines" governing the financial relationship and setting approval prerequisites for legal services. The attorney asked whether agreeing to abide by the guidelines would violate the Rules of Professional Conduct.

The panel concluded that a lawyer hired by an insurer to represent an insured must represent the insured with undivided loyalty and exercise independent professional judgment under Rule 2.1, and that Rules 1.8(f) and 5.4(c) prohibit letting a non-client interfere with that judgment. Reviewing the specific guidelines, the panel found that provisions merely defining the financial and working relationship between insurer and counsel, including reimbursable expenses, rate schedules, and detailed billing, did not raise ethical concerns.

The panel concluded that other provisions did. Those requiring the insurer's prior approval before counsel could take steps such as conducting legal research beyond three hours, filing counterclaims or third-party actions, visiting the accident scene, preparing dispositive motions or briefs, customizing discovery, scheduling depositions, retaining experts, scheduling independent medical examinations, instituting surveillance, or conducting additional investigation, reached beyond the financial relationship and infringed on the attorney-client relationship. To the extent the insurer reserved the right to withhold approval for reasonable and necessary legal services, the panel concluded those provisions impermissibly interfered with counsel's independent judgment, caused counsel to abdicate the obligations of Rules 2.1 and 5.4(c), and created a conflict of interest under Rule 1.7 by producing a material disincentive to provide necessary services.

The panel concluded that counsel could not ethically agree to such guidelines in their entirety. The better course, it stated, was to seek a modification consistent with the Rules; if counsel could not obtain one, counsel should decline the representation under Rule 1.8(f). The panel expressly did not address whether other insurers' guidelines violate the Rules, noting an attorney may agree to guidelines that do not direct or regulate the attorney's independent judgment.

Currency note

This opinion was issued in October 1999, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rules 1.7, 1.8(f), 2.1, and 5.4(c) as originally adopted. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.

Common questions

Q: Can defense counsel agree to an insurer's litigation management guidelines at all?

A: Sometimes. The opinion stated an attorney may agree to guidelines that do not direct or regulate the attorney's independent professional judgment in representing the insured; it was the specific guidelines here, with their pre-approval provisions, that went too far.

Q: Which parts of the guidelines were acceptable?

A: Provisions that merely defined the financial and working relationship, such as reimbursable expenses, hourly rate schedules, detailed billing requirements, and coordination of roles, did not raise ethical concerns under the Rules per the opinion.

Q: Why were the pre-approval provisions a problem?

A: The opinion concluded that requiring the insurer's approval before counsel could perform reasonable and necessary legal services let a non-client regulate counsel's judgment, contrary to Rules 2.1 and 5.4(c), and created a material disincentive to provide necessary services, which is a conflict of interest under Rule 1.7.

Q: What should counsel do when faced with such guidelines?

A: The opinion stated the better course is to seek an acceptable modification consistent with the Rules, and if counsel cannot obtain one, to decline the representation under Rule 1.8(f).

Background and rules framework

The opinion applied several Rhode Island Rules of Professional Conduct as originally adopted: Rule 2.1 (Model Rule 2.1), requiring the lawyer to exercise independent professional judgment and render candid advice; Rule 1.8(f) (Model Rule 1.8(f)), permitting compensation from a third party only if the client consents, there is no interference with the lawyer's independent judgment or the client-lawyer relationship, and confidentiality is protected; Rule 5.4(c) (Model Rule 5.4(c)), prohibiting a person who recommends, employs, or pays the lawyer from directing or regulating the lawyer's professional judgment; and Rule 1.7 (Model Rule 1.7) on conflicts of interest. The panel also cited the Comment to Rule 1.5 on agreements that might induce a lawyer to curtail services, and Indiana Bar Association Opinion 3 (1998).

Citations and references

Rules of Professional Conduct:

• Model Rule 2.1 / RI RPC 2.1 (independent professional judgment; candid advice)
• Model Rule 1.8(f) / RI RPC 1.8(f) (compensation from a third party)
• Model Rule 5.4(c) / RI RPC 5.4(c) (professional independence of a lawyer)
• Model Rule 1.7 / RI RPC 1.7 (conflict of interest: general rule)
• Comment to RI RPC 1.5 (agreement may not induce a lawyer to curtail services)

Other opinions cited:

• R.I. Ethics Advisory Panel Op. 98-10 (1998): a lawyer retained by an insurer represents the insured with undivided loyalty
• R.I. Ethics Advisory Panel Op. 99-17 (1999): insurer billing requirements and submission of bills to outside auditors
• Indiana Bar Association Op. 3 (1998): insurer guidelines that infringe independent judgment

See also

• ABA Formal Op. 01-421: A lawyer's obligations under insurance company guidelines
• Alaska Bar Op. 89-3: Insured objects to insurer-selected counsel
• Arizona Op. 99-08: Confidentiality and conflicts in insurance representation
• RI EAP Op. 99-17: Billing statements to an insurer's outside auditor need client consent

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2099-18.pdf

Original opinion text

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

Final

                               Rhode Island Supreme Court
                                   Ethics Advisory Panel
                           Opinion No. 99-18, Request No. 763(B)
                                  Issued October 27, 1999

Facts:

     The inquiring attorney and his/her law firm have been retained by an insurance company to

represent its insureds. The insurer requires the attorney to abide by "litigation management guidelines"
established by the insurance company which delineate the financial relationship between the insured and
the law firm, and which set parameters and approval prerequisites for the legal services to be provided.
The inquiring attorney has submitted a copy of the insurer's litigation management guidelines to the
Panel.

Issue Presented:

    The inquiring attorney asks whether it is a violation of the Rules of Professional Conduct to

agree to abide by the insurer's "litigation management guidelines?"

Opinion:

    The litigation management guidelines submitted to the Panel in this inquiry contain provisions

which in the opinion of the Panel interfere with the independent professional judgment of defense
counsel and ultimately with the quality of legal services provided to the insureds. As such, the inquiring
attorney and his/her law firm may not ethically agree to abide by these guidelines in their entirety.

Reasoning:

     A lawyer hired by an insurance company to represent its insured must represent the insured as

his/her client with undivided loyalty. R.I. Sup. Ct. Ethics Advisory Panel Op. 98-10 (1998). The Rules
of Professional Conduct define the ethical responsibilities of a lawyer to his/her client. Id. Several
Rhode Island Rules of Professional Conduct govern a lawyer's ethical obligations within the context of
the tripartite relationship between and among a lawyer, a client-insured, and an insurance company.
Foremost among an attorney's ethical obligations is the duty to exercise his/her independent professional
judgment on behalf of a client. Rule 2.1 of the Rules of Professional Conduct sets forth this obligation
in absolute terms:

             Rule 2.1. Advisor. - In representing a client, a lawyer shall
         exercise independent professional judgment and render candid
         advice.

Final Op. 99-18
Page 2

     Rule 1.8(f) and Rule 5.4(c) prohibit an attorney from permitting one who is not his/her client

from interfering with the attorney's independent professional judgment. Both rules are
particularly applicable to the situation where an insurer retains counsel to represent its insured. Rule
1.8(f) provides:

            Rule 1.8. Conflict of Interest: Prohibited Transactions . -

             (f) A lawyer shall not accept compensation for representing a
      client from one other than the client unless:

                   (1) the client consents after consultation;

                   (2) there is no interference with the lawyer's
                   independence of professional judgment or with the
                   client-lawyer relationship; and

                   (3) information relating to representation of a client
                   is protected as required by Rule 1.6.

Rule 5.4(c) states:

            Rule 5.4. Professional Independence of a Lawyer. -

            (c) A lawyer shall 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.

      The Comment to Rule 1.5, entitled "Fees," specifically addresses impermissible limits placed

on the legal services to be provided:

                  "An agreement may not be made whose terms might
            induce the lawyer improperly to curtail services for the client or
            perform them in a way contrary to the client's interest."

       In addition, because the tripartite relationship between and among defense counsel, a

client-insured, and an insurer exposes the attorney to the risks of serving two masters, a conflict of
interest can arise under Rule 1.7, which states:
Final Op. 99-18
Page 3

            Rule 1.7. Conflict of Interest: General Rule. -

            (a) A lawyer shall not represent a client if the representation of
            that client will be directly adverse to another client, unless:

                  (1) the lawyer reasonably believes the representation
                  will not adversely affect the relationship with the other
                  client; and

                  (2) each client consents after consultation.

            (b) A lawyer shall not represent a client if the representation
            of that client may be materially limited by the lawyer's
            responsibilities to another client or to a third person, or by the
            lawyer's own interests, unless:

                  (1) the lawyer reasonably believes the
                  representation will not be adversely affected; and

                  (2) the client consents after consultation. When
                  representation of multiple clients in a single matter
                  is undertaken, the consultation shall include
                  explanation of the implications of the common
                  representation and the advantages and risks
                  involved.


      The Panel has examined the litigation management guidelines submitted by the inquiring

attorney. It is reasonably apparent to this Panel that certain of the guidelines under consideration, even
though intended to achieve cost efficiency, infringe upon the independent judgment of counsel and
induce violations of our Rules. See Indiana Bar Assoc. Op. 3 (1998).

     Overall, the guidelines establish the financial relationship between the insurer and defense

counsel. Noncompliance with the guidelines results in nonpayment. Certain guidelines identify
reimbursable expenses, hourly rate schedules for counsel and for support staff, permitted legal services
for which compensation will be made, and activities for which compensation will not be made. Billing
statements must be detailed and must adequately describe the services provided. See RI Sup.Ct. Ethics
Advisory Panel 99-17 (1999) (discussing insurer's billing requirements and submission of bills to
Final Op. 99-18
Page 4

insurer's outside billing auditors.) To the extent that these provisions merely define the financial
relationship between the insurer and defense counsel, they do not present ethical concerns under the
Rules. See Indiana Bar Assoc. Op. 3 (1998).

     Other provisions of the guidelines purport to coordinate the roles of defense counsel and

various employees of the insurer assigned to the claim. Such provisions also do not raise ethical
concerns under the Rules.

       However, certain other provisions, specifically those that require the insurer's pre-approval

for specified legal services, extend beyond the financial and working relationship between the insurer
and defense counsel, and infringe upon the attorney-client relationship between the insured and the
inquiring attorney. For example, the insurer's prior approval is required before defense counsel engages
in the following: conducting legal research in excess of three hours; filing counterclaims, cross-claims or
third-party actions; visiting the accident scene; preparing substantive dispositive motions or briefs;
customizing interrogatories or document requests; and scheduling depositions. The insurer's prior
approval is also required before counsel incurs expenses related to any of the following: retaining expert
witnesses; scheduling independent medical examinations or peer reviews; instituting surveillance; and
conducting additional investigations. To the extent that the insurer reserves unto itself the right to
withhold approval for reasonable and necessary legal services to be provided to an insured, these
provisions of the guidelines impermissibly interfere with the independent professional judgment of the
inquiring attorney. By agreeing to abide by the preauthorization provisions, an attorney impermissibly
abdicates the obligations imposed by Rule 2.1 and Rule 5.4(c). Therefore, the inquiring attorney may
not agree to them. Furthermore, such provisions result in a material disincentive to provide legal
services that are reasonable and necessary to the defense of the insured. See Indiana Bar Assoc. Op. 3
(1998). A material disincentive creates a conflict of interest pursuant to Rule 1.7.

      Under the litigation management guidelines submitted to the Panel, counsel who is

unsuccessful in obtaining the insurer's approval for legal services which in his/her judgment are
reasonable and necessary would have two options. Either he/she must withdraw from the representation
pursuant to Rule 1.8(f), or he/she may choose to provide the unauthorized services without
compensation. Neither of these alternatives responsibly addresses the threshold question of whether an
attorney may agree in advance to subordinate his/her professional judgment on behalf of a client to the
judgment of another person or entity. For this reason, the Panel does not believe that defense counsel
must be without guidance from this Panel until he/she is faced with the choice of either withdrawing from
the representation of an insured or providing legal services for free.

      In the Panel's opinion, when confronted with proposed guidelines, such as those submitted in

this inquiry, which have the effect of directing and regulating counsel's independent professional
judgment in the representation of an insured, counsel may not ethically agree to
Final Op. 99-18
Page 5

them. The better course is for counsel to seek an acceptable modification that comports with the
obligations imposed by the Rules. If counsel is unable to obtain a modification, he/she should decline
the representation pursuant to Rule 1.8(f).

       The Panel does not address today whether the litigation management guidelines of

other insurers violate the Rules of Professional Conduct. An attorney may agree to abide by an
insurer's litigation management guidelines provided that the guidelines do not direct or regulate the
attorney's independent professional judgment in the representation of an insured. The level of control
given to the insurer in the guidelines submitted in this inquiry extends too far.

       The Panel has noted that the guidelines under consideration contain precatory language

relating to counsel's responsibilities to the insured. The guidelines provide:

            The following billing requirements have been compiled and adopted by
            the [insurer] office of claims in order to provide guidelines for billing
            purposes only. These guidelines should never interfere with any duties,
            obligations, or responsibilities owed to a client nor should they diminish
            the quality of the defense [insurer's] outside counsel will provide the
            [insurer's] insured.

The guidelines also state:

            If the firm believes that any part of these billing requirements is
            inappropriate or would not be in the best interest of [insurer]
            or its insured(s) or customer(s), such issues must be discussed with
            [insurer], or [insurer's] designee.

These recitals conflict directly with the preauthorization provisions of the guidelines, and in the opinion of
the Panel, do not adequately safeguard the independent professional judgment of defense counsel.

      The Panel concludes that the specific litigation management guidelines submitted by the

inquiring attorney in this inquiry contain provisions which interfere with the independent professional
judgment of defense counsel and ultimately with the quality of legal services provided to the insureds.
As such, the inquiring attorney and his/her law firm may not ethically agree to abide by the litigation
management guidelines in their entirety. Counsel and his/her law firm are advised to seek a modification
consistent with the Rules of Professional Conduct. If they are unable to obtain a modification, they are
advised to decline the representation.