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Ethics Opinion

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RI-338

November 17, 2006

SYLLABUS

    Insurance staff counsel are employees of an insurance company that represent the insurance company's policy holders in litigation matters.

    An association of insurance staff counsel may share office space with other employees of the insurance company if: the office space, telephone and fax lines, computer systems, and common areas are arranged so as to ensure that the operations of the insurance company remain separate and distinct from the operations of the insurance staff counsel; and adequate safeguards and policies are in place so that client confidences and secrets are preserved and insurance staff counsel's independent professional judgment is not compromised.

    An association of insurance staff counsel may share a common entrance with the insurance company if appropriate safeguards are in place to maintain client confidences during business and non-business hours.

    An association of insurance staff counsel and an insurance company may share a receptionist if there are separate phone lines for the insurance staff counsel and the insurance company and they are answered separately by the receptionist and other safeguards are implemented to protect client confidences.

    References: MRPC 1.6; 1.8; 5.4; RI-249; RI-313; CI-1006; CI-1146; ABA Formal Op. 03-430; Kirschner v. Process Design Assoc. Inc, 459 Mich 587 (1999).

TEXT

An association of insurance staff counsel desires to move its offices into a building owned by an insurance company. The insurance company's claim department personnel are currently housed in the building, but would relocate to another building if the move were to take place. The building also houses training and conference rooms, but not within the space that the insurance staff counsel propose to occupy. Insurance company agents and executives may also be housed in the building, but would be physically separated from the space that the insurance staff counsel would occupy. The computer systems of the insurance staff counsel and the other insurance company employees would be segregated, meaning that insurance staff counsel would not have access to the computer system used by the other insurance company employees and vice versa.

One of the staff attorneys for the insurance staff counsel has asked for guidance on the following questions:

  1. Is it permissible for the insurance staff counsel's office to be located in a building owned by the insurance company when the building is to be used jointly by other insurance company personnel?

  2. If it is permissible for the insurance staff counsel's office to be located in a building owned by the insurance company, would the insurance staff counsel be allowed to share a common reception area with a receptionist for the entire building when the staff counsel would be physically separated from and independent of the other departments/facilities?

Question 1

Lawyers employed by an insurance company (the "insurance staff counsel") may represent the insurance company's policy holders (the "insured-client"), provided that the insurance company's interests do not conflict with the insured-client's interests. CI-1146. In that situation, insurance staff counsel's professional duties are owed to the insured-client. Kirschner v. Process Design Assocs. Inc, 459 Mich 587, 598 (1999). The issue presented here is whether, in light of the foregoing, insurance staff counsel may share office space with the insurer.

Generally, lawyers may share office space with non-lawyers so long as "the businesses are segregated, client confidences are protected, and public communications about each business entity are clear and do not create the unjustified expectations about the results which can be achieved." RI-135; RI-206; RI-313. However, the facts here are different because those situations involve lawyers sharing office space with non-affiliated businesses or other lawyers. Here, there is an employer-employee relationship between the insurance company and the insurance staff counsel.

As a practical matter, this distinction means that concerns regarding improper solicitation of clients to or from the office-sharer business are not implicated because insurance staff counsel do not solicit clients. They obtain clients solely through their affiliation with the insurer. ABA Formal Op. 03-430.

However, many of the concerns that arise when lawyers share space with other lawyers or non-affiliated businesses are present.

First, insurance staff counsel must comply with MRPC 1.6(b), which prohibits the disclosure of the insured-client confidences or secrets. Insurance staff counsel contemplating sharing office space with other insurance company employees must be alert to and adequately address all concerns that would compromise confidentiality.

While non-lawyers may have access to insured-client files in the normal course of representation, that access should be limited to secretaries, paralegals, law clerks, attorneys and other staff within the insurance staff counsel's organization. Insurance company employees not in the insurance staff counsel's organization must not have access to confidential insured-client data.

The work areas should also be segregated. Here, the offices of the other insurance company employees would be physically separated from the insurance staff counsels' offices. The training and conference rooms in the building are not within the space that would be used by the insurance staff counsel. And there would be separate computer systems, including email, for the insurance staff counsel and the other insurance company employees. While the facts given do not explain the telephone and fax arrangements, insurance staff counsel and the other insurance company employees should have separate telephone and fax lines. RI-118; RI-249.

Second, the insurance staff counsel must comply with MRPC 7.1, which requires accurate communications concerning the lawyer's services. This means that the employer-employee relationship between the insurance company and staff insurance counsel must be disclosed to the insured-client by staff insurance counsel at the earliest opportunity. ABA Formal Opinion 03-0430 and MRPC 1.8(f). Signage in the building should clearly reflect the employer-employee relationship between the insurance company and insurance staff counsel.

Finally, insurance staff counsel must be vigilant of MRPC 5.4(c), which requires a lawyer to exercise independent professional judgment in advising or otherwise representing insured-clients, regardless of who may be paying for the lawyer's services. This rule underscores the importance of undivided loyalty to the insured-client.

While it is common practice for insurance staff counsel to discuss defense tactics and settlement strategy with other insurance company employees, insurance staff counsel must be unhampered in exercising their independent professional judgment and must be free to advise the insured-client unimpeded by the influence of the insurance company, which is paying the fee. If the insurance company exerts improper influence that interferes with insurance staff counsel's independent professional judgment, insurance staff counsel must withdraw as counsel for the insured-client. CI-1146.

Within the insurance staff counsel setting, the exercise of independent professional judgment should be further safeguarded by the structure of the organization. The insurance staff counsel organization should be designed as law firms that are controlled by senior attorneys. Attorneys within the insurance staff counsel organization should be responsible for employment reviews, salary administration and promotions/demotions. The fact that insurance staff counsel are employees of the insurer does not diminish their obligation or ability to comply with MRPC 5.4(c) or any of the other ethical rules.

Question 2

The use of a common entrance presents unique challenges to protecting confidentiality. Unauthorized or accidental access into insurance staff counsel's offices, either by visitors or by other employees of the insurance company must be prevented. If appropriate lock and key safeguards are in place during business and non-business hours, meaning there are no common unlocked or unattended common passage ways, and if appropriate signage is maintained by the insurance company and the insurance staff counsel, the use of a common entrance would not violate ethics rules. RI-313.

The use of a common receptionist is not improper per se. RI-249; RI-313. The facts do not indicate whether the receptionist would be a member of the insurance staff counsel organization. If the receptionist is a member of the insurance staff counsel organization, the receptionist should not perform clerical duties for the insurance staff counsel in a common area because that would expose the contents of insurance staff counsel files to other employees of the insurance company and other visitors to the building. RI-313. If the receptionist is not a member of the insurance staff counsel organization, the receptionist's duties as they relate to insurance staff counsel should be limited to directing phone calls and visitors to the appropriate department in the building.

 
     

 

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