Professional Conduct and Professionalism

There is no doubt about it: defense lawyers are clearly service providers in the insurance industry. They are part of a complicated mechanism by which individuals and businesses reduce and transfer risk to insurers in exchange for the premium. Claims is but one segment of the risk transfer process, and litigation is an even smaller subset of claims, one in which defense lawyers play a role.

Even though defense counsel is generally employed by the insurer as part of minimizing risk exposure, claims professionals do well to identify and hire lawyers who have a high view of their roles and their profession—particularly in the face of skepticism among the general public about their integrity and ethics. In addition to extended education, bar licensing requirements, and continuing education, lawyers are beholden to ethical obligations stated in the rules of professional conduct. Lawyers who have a high regard for these rules are better representatives of your insured and your company and will always provide a better defense.

It should be noted that there is a difference between the terms professional responsibility and professionalism. Professional responsibility sets out in the rules, and marks the minimum standard of, acceptable behavior for any lawyer in any context. Professionalism, although less defined, suggests the manner in which a lawyer carries himself and the reputation he maintains.

Defending claims for insurance companies and their insureds presents a host of unique dilemmas. With that in mind, this month we examine some of the top rules of professional responsibility that claims professionals should be aware of when working with defense counsel. Most states have adopted the Model Rules of Professional Conduct promulgated by the American Bar Association, and they will serve as the basis for our discussion.

Model Rule 1.3 on diligence sets the expectation for a lawyer’s efforts. The rule states, “A lawyer shall act with reasonable diligence and promptness in representing a client.” This is the antidote to slothfulness and poor organization. A lawyer’s time is his client’s time. A case or a claim should not be compromised because a lawyer is not being diligent or prompt. For the lawyer, this means not letting personal issues or other cases impact the haste with which he pursues the client’s interests. As an aside, this is a good reminder for claims departments to keep their pending files to a reasonable number. This allows both lawyers and claims professionals to provide diligent service to their clients and insureds.

Communication with the client is the subject of Model Rule 1.4. In the fast-paced world of claims, efficiency is often heralded to the detriment of effective communication. Rule 1.4 requires a lawyer to “keep the client reasonably informed about the status of the matter.” The detail of the communication is always subjective, particularly when a lawyer is reporting to an adjuster. We’ve all probably joked about the lawyer who provides a 30-page summary of a 50-page deposition transcript, but, on the other hand, not getting a timely report of any size is a problem and falls below the minimum required by the rule. Have clear expectations with counsel about the speed and detail required in reporting case developments.

Model Rule 1.4 also requires the lawyer to “promptly comply with reasonable requests for information.” What is “prompt” and “reasonable” is dependent upon circumstances. However, any unclear expectations should be addressed early in the representation. If there is an ongoing relationship between claims and defense counsel, this should be addressed regularly.

Speaking of the client, who is the client? This is the subject of differing approaches among various jurisdictions (and could be the subject of an entirely separate column). Some states hold that the duty of loyalty is from the lawyer to the insured only. Others hold that both the insured and the carrier are the client. Complicating matters is the defense under a reservation of rights. In some states, this changes the duty to and definition of a client.

The attorney-client privilege is the highest privilege in the law and is the bedrock of the trust between a lawyer and a client. Model Rule 1.6 addresses the confidentiality of information in this context: “A lawyer shall not reveal information relating to the representation of a client.” Although the rule goes on to state several exceptions, it is clear that professional conduct requires that a client be able to discuss his case confidentially with counsel. What does this do for reporting the status of a case to the carrier when the insured is the sole “client” in a particular jurisdiction? One of the exceptions allows disclosure where “the disclosure is impliedly authorized in order to carry out the representation.” This is certainly implied when the carrier is providing and paying for the defense. Sharing information with the carrier, which is obligated by contract to indemnify the insured up to the limits of the policy, is essential in order to work for the best interests of the insured.

Along with providing a diligent representation (Rule 1.3), Model Rule 3.2 requires a lawyer to “make reasonable efforts to expedite litigation consistent with the interests of the client.” This means that written discovery, depositions, and a trial setting should all be pursued in a way that brings about a resolution and disposition of the claim within a reasonable time frame. It is frequently the case that a firm trial setting forces the parties to expedite the discovery that is necessary to reach a resolution. For that reason, it can be in the best interest of the insured and the carrier to have the case set for trial within a reasonable period of time.

Finally, Model Rule 3.3 regarding candor is an area that can create the most ethical conflicts for counsel. Under this rule, lawyers have a duty to disclose to the court any legal authority or precedent that is “adverse to the position of the client and not disclosed by opposing counsel.” This does not mean that your counsel must make arguments that the opposing counsel has not made. But it does mean your lawyer must disclose any adverse case or statute that has not been disclosed by a less than diligent plaintiff’s lawyer. Lawyers are still free to distinguish or argue against any adverse authority.

Most importantly, a “lawyer shall not knowingly…offer evidence the lawyer knows to be false.” If evidence is offered and the lawyer later learns it was false, the rules impose a duty to remediate the evidence, including potentially disclosing it to the court.

There is a lot of room for less than scrupulous lawyers (both defense and plaintiff’s) to cut corners on these rules. However, a lawyer who cuts corners here is likely to cut corners in the representation of you and your insured. You’ll also note as you read through the rules that they paint a picture of an effective advocate. The rules are the minimum standard of professional conduct. When considering defense counsel, be aware of these rules, but don’t just look for someone who meets the bare minimum. Retain counsel that upholds and esteems the idea of professionalism in the way they practice law, represent your insured, and represent your company.