The duty to give information and the duty of confidentiality.

PositionPart 7 - Manual for lawyers representing insured defendants

Open Communication with Both Clients Is the Rule in Tripartite Relationships

Insurers control the defense, investigation and settlement of claims. To exercise that control effectively, they need accurate and complete information about the merits of claims and reliable advice. They retain defense lawyers in part to provide these services. Defense lawyers should operate on the assumption that they have the freedom, indeed the obligation, to give carriers all the information they reasonably need to make intelligent decisions, regardless of the source from which the information is received. Any other arrangement would prevent the insurer from exercising the full extent of its contractual powers, jeopardizing its ability to minimize the loss to the liability claimant.

Consider an example. In an initial interview, the insured tells defense counsel, "When the accident occurred, I was driving within the speed limit, the light was green, and I was sober." Can defense counsel give this information to the company and, if so, why? Although defense lawyers convey such information routinely, an affirmative answer is not self-evidently correct. The American Bar Association Model Rules of Professional Conduct permit a lawyer to reveal information relating to a representation only when the client expressly or impliedly authorizes disclosure. Defense counsel therefore can inform the company only with the insured's approval, express or implied.

Few defense lawyers obtain insureds' express consent before conveying this sort of information to carriers. This does not mean that defense lawyers act improperly. Express consent is not needed because the authority to give insurers relevant information received from insureds is clearly implied. When purchasing insurance, insureds authorize carriers to investigate, defend and settle liability claims. Insureds also bind themselves to cooperate in the defense of claims. Because the company needs access to relevant information to do its job correctly and because the insured has covenanted to help, the propriety of communication of relevant information received from any source, including the insured, is clear.

The baseline rule in the tripartite relationship is open communication to the carrier of all material information bearing on the investigation, defense or settlement of liability claims. The distinction between material information and other information is basic. A defense lawyer has no duty to pass along to a carrier irrelevant information received from any source.

Nor need a defense lawyer convey every scrap of relevant information received. Impropriety occurs only when defense counsel falls to communicate relevant information the insurer reasonably would want to know. The insurance company may not want bits of information that, although relevant to defense or settlement in some way, are unimportant or bear on matters the company expects defense counsel to handle independently. For example, suppose that a deposition of a claimant's expert witness has been scheduled to take place at defense counsel's office and that the claimant's counsel calls and asks to change the location to the expert's office, which just happens to be across the street. Absent a reason for thinking the company would care about the venue, defense counsel can agree to the change without bothering the company about it. Counsel may think it advisable to inform the company later if, in counsel's opinion, the expert's unease is a sign that the expert will perform poorly at trial. The point is only that counsel need not communicate the information at the time the change is made because the information is then of little importance and because the company expects counsel to handle scheduling matters without consultation.

The baseline of open communication comports with black-letter professional responsibility law. Model Rule 1.4 (Communication) provides:

(a) A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information.

(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.

The common law of agency imposes a similar duty. Section 381 of the Restatement (Second) of Agency subjects a lawyer to "a duty to use reasonable efforts to give his principal information which is relevant to affairs entrusted to him and which, as the agent has notice, the...

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