Opinions of The General Counsel, 0918 ALBJ, 79 The Alabama Lawyer 354 (2018)

PositionVol. 79 5 Pg. 354


Vol. 79 No. 5 Pg. 354

Alabama Bar Lawyer

September, 2018

Third-Party Auditing of Lawyer's Billings-Confidentiality Problems and Interference with Representation


The Office of General Counsel has received numerous opinion requests from attorneys who represent insureds pursuant to an employment agreement whereby the attorney is paid by the insured's insurance carrier. Some insurance companies have begun to submit to the attorney billing guidelines and litigation management guidebooks which place certain restrictions on discovery, the use of experts and other third-party vendors. The billing guidelines also restrict the lawyers who will be allowed to work on the files and require pre-approval of time spent on research, travel and the taking and summarization of depositions. Some insurance companies also require the attorneys they employ to submit their bills to a third-party billing review company for their review and approval. The bills obviously contain descriptions of work done on behalf of the insureds. In most instances, the insureds have not been consulted and have not approved the use of the billing guidelines and litigation management guidebook or the billing review process. The inquiry presented is whether there is any ethical impropriety in following these procedures which some insurance companies are attempting to impose.


It is the opinion of the Disciplinary Commission of the Alabama State Bar that a lawyer should not permit an insurance company, which pays the lawyer to render legal services to its insured, to interfere with the lawyer's independence of professional judgment in rendering such legal services, through the acceptance of litigation management guidelines which have that effect. It is further the opinion of the commission that a lawyer should not permit the disclosure of information relating to the representation to a third party, such as a billing auditor, if there is a possibility that waiver of confidentiality, the attorney-client privilege or the work product privilege would occur. The Disciplinary Commission expresses no opinion as to whether an attorney may ethically seek the consent of the insured to disclosure since this turns on the legal question of whether such disclosure results in waiver of client confidentiality. However, the commission cautions attorneys to err on the side of non-disclosure if, in the exercise of the attorney's best professional judgment, there is a reasonable possibility that waiver would result. In other words, if an attorney has any reasonable basis to believe that disclosure could result in waiver of client confidentiality, then the attorney should decline to make such disclosure.


The Disciplinary Commission has addressed the conflict of interest issues raised by dual representation of the insurer and the insured in several earlier opinions. In one of those, RO-87-146, the commission concluded: "Although you were retained to represent the insured by the insurance company and are paid by the company, your fiduciary duty of loyalty to the insured is the same as if he had directly engaged your services himself. See, RO-84-122; Nationwide Mutual Insurance Company v. Smith, 280 Ala. 343,194 So.2d 505 (1966) and Outboard Marine Corporation v. Liberty Mutual Insurance Company, 536 F.2d 730,7th Cir. (1976). Since the interests of the two clients, the insurance company and the insured, do not fully coincide, the attorney's duty is first and primarily to the insured."Similar conclusions were reached in RO-90-99 and RO-81 -533. Additionally, the Alabama Supreme Court discussed the insurer-insured relationship in Mitchum v. Hudgens, 533 So.2d 194 (Ala. 1988) and confirmed the Disciplinary Commission's analysis of that relationship, viz: "It must be emphasized that the relationship between the insured and attorney is that of attorney and client. That relationship is the...

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