Ethics-Board of Professional Responsibility Formal Ethics Opinion Number 99-F-143: Is There a Realistic Approach to the Tripartite Relationship That Exists between an Insured, the Insurer,

The general issue herein, which was brought before the Board of Professional Responsibility of the Supreme Court of Tennessee (Board), concerns an attorney laboring under a tripartite relationship.1 The tripartite relationship is created when an insurance company retains an attorney to represent one of the company's insureds, and the insurance company is permitted to audit the legal expenses of the attorney and to give directives pertaining to the defense of the insured.2 The insurance company hires outside auditors to perform the audit of the attorney's fees, expenses, and files.3 In some instances, either the auditors, the insurance companies, or both issue directives to the attorney concerning the attorney's efforts as to the defense of the insured.4 The directives may vary and can include anything from a list of tasks the insurance company is willing to pay for, specific arguments that are deemed acceptable or unacceptable or even the insurance company controlling what work the attorney performs.5 The Board addressed two issues arising from the tripartite relationship: [t]he first is whether the disclosure of information to the auditors is a violation of the insured's attorney-client confidentiality privilege, and the second is whether an impermissible conflict has occurred as a result of the insurer's directives to the attorney.6 The Board of Professional Responsibility of the Supreme Court of Tennessee, as to both questions, answered, affirmative.7 An attorney violates the duty of confidentiality when he includes, without the client's consent, confidential information in billing and file reviews submitted to auditors; further, an attorney violates the duty of loyalty and independent judgment when he enters into an agreement with an insurance company that gives the insurance company the power to control the manner of the attorney's representation through any sort of directive. Board of Professional Responsibility Formal Ethics Opinion Number 99-F- 143,1999 WL 406866, at * 1 (Tenn. Bd. Prof 1 Responsibility, June 14, 1999). The duties of confidentiality, loyalty, and independent judgment are all ethical duties an attorney owes his clients. Two areas of the law govern client confidences: the law of professional ethics and the law of evidence.8 The law of evidence recognizes a privilege within the attorney-client relationship, while the law of ethics guides and monitors an attorney's decisions concerning client confidences.9 The law of professional ethics imposes much broader duties on attorneys than the attorney-client privilege of evidence law imposes.10 The 1969 Model Code of Professional Responsibility refers to those matters covered by the law of ethics as secrets; matters covered by the rules of evidence are considered confidences under the attorneyclient privilege.11 In Tennessee, an attorney mayshall not knowingly .. [r]eveal a confidence or secret of a client.12 The attorney-client privilege is addressed in the rules of evidence. The rules of evidence exclude any testimony about communication exchanged between an attorney and his client in confidence that is for the purpose of obtaining legal advice.13 The privilege was recognized as early as the sixteenth century in English common law.14 Dean Wigmore explained that the ideas of the privilege were evidenced as early as Roman Law and have been applied in English and American courts without serious question since the reign of Elizabeth I.15 Today, the privilege continues to be recognized for reasons other than adherence to tradition.16 Open communication between a legal advisor and an individual is crucial to the success of the relationship, and an attorney's advice and counsel must be based on the actual facts and circumstances of a situation.17 Attorneys need to be able to assure their clients that the conversations between they and their clients will always be confidential.18 Normally an individual or a company hires an attorney to represent them. …