Academic journal article Defense Counsel Journal

Looking to the Millennium: Will the Tripartite Relationship Survive?

Academic journal article Defense Counsel Journal

Looking to the Millennium: Will the Tripartite Relationship Survive?

Article excerpt

That relationship is threatened by unilateral, economic-driven action that may result in its becoming a relic of the past

IN THE tripartite relationship, the insurer is a client and has a fundamental interest in how its appointed lawyer handles the defense. Even when the insurer is regarded as only a third-party payor, it needs fundamental information in a timely manner to fulfill its obligations under the policy. During the last two decades, however, insurance companies have imposed a variety of guidelines, case-handling regulations and bill-auditing procedures that affect the professionalism, interpersonal relationships and ethical integrity of counsel selected to defend their insureds.

Insurers always have had guidelines. Some address the most basic needs, such as timely reporting; some specify the information the insurer requires; some require that retained counsel get permission to incur extraordinary expenditures. Some guidelines have been motivated by the desire to improve the quality of representation and by the sincere belief that controls can improve the competence of the defense. Another motivation is to reduce cost by limiting what defense counsel can do without express permission.

Although none of these guidelines or motives is inappropriate--indeed, salutary when consciously balanced--an emphasis on economy can produce a reduction in the competence of the representation and detract from a lawyer's obligation of independent judgment. Concern focuses on guidelines that restrict the ability of defense counsel to perform basic and essential functions unless the prior approval of the insurer is obtained. Some guidelines mechanically limit the time or expense that can be devoted to a task, which initially removes the ability of the lawyer to make the decision.

A second issue is the imposition of billing guidelines, particularly when they entail the forwarding of billing statements to third-party auditors. The requirement to provide detailed information of this type to third parties raises concerns about waiver or disclosure of confidential client information. This articles examines the professional responsibility implications of third-party audits, leaving for other forums the examination of the economic impact on the defense lawyer and the adverse effect on the attorney-client relationship.

TESTING THE TRIPARTITE RELATIONSHIP

Recent judicial decisions, as well as debates within the legal profession, have tested both the existence and the boundaries of the tripartite relationship, which traditionally has been thought to be composed of dual attorney-client relationships by defense counsel with both the insured and the insurer. There is a triangular relationship among the parties. The triangle is completed by the contractual relationship between insurer and insured by contract, the insurance policy, and by the implied covenant of good faith and fair dealing.

Both the American Bar Association 1969 Model Code of Professional Responsibility and the 1983 Model Rules of Professional Conduct assume that insurance defense counsel can act ethically, but they impose requirements when another pays for the legal services. Model Rule 1.8(f) now provides:

      (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 the representation of a client is protected
   as required by Rule 1.6.

One of the comments to Rule 1.7 states that Rule 1.8(f) applies to insurer-appointed defense counsel and situations in which a corporation pays for the defense of its directors or employees in a matter in which it may have a conflict of interest.

Rule 1.8(f) makes no distinction between whether defense counsel is selected by the insurer or by the insured, the sole predicate being whether the lawyer is paid by another to represent a client. …

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