Ethics Advisory Opinion No. 02-03

(Issued February 27, 2002)
1 Issue:
What are the ethical obligations of an insurance defense lawyer with respect to insurance company guidelines and flat-fee arrangements?

2 Opinion: An insurance defense lawyer’s agreement to abide by insurance company guidelines or to perform insurance defense work for a flat fee is not per se unethical. The ethical implications of insurance company guidelines must be evaluated on a case by case basis. An insurance defense lawyer must not permit compliance with guidelines and other directives of an insurer relating to the lawyer’s services to impair materially the lawyer’s independent professional judgment in representing an insured. If compliance with the guidelines will be inconsistent with the lawyer’s professional obligations, and if the insurer is unwilling to modify the guidelines, the lawyer must not undertake the representation. Flat-fee arrangements for insurance defense cases are unethical if they would induce the lawyer improperly to curtail services for the client or perform them in any way contrary to the client’s interests. Obligations of lawyers under the Utah Rules of Professional Conduct, including the duty zealously to represent the insured, cannot be diminished or modified by agreement.
Insurance Company Guidelines
3 Opinion Request Concerning Insurers’ Guidelines. The Ethics Advisory Opinion Committee has received a request for an ethics advisory opinion concerning insurance company guidelines for counsel who are employed to defend litigation brought by a third party against an insured. The requestors state that insurance companies doing business in Utah have incorporated in their defense-counsel retainer agreements certain billing protocols or guidelines governing attorneys’ procedures and payments that raise ethical issues.
4 Prior Opinions. Although issues pertaining to insurance company guidelines have been the subject of considerable discussion elsewhere,1 they have not been addressed directly by this Committee.2 When ethical concerns about insurance company guidelines have been raised in ethics opinions from other jurisdictions, the opinions are generally consistent with the summary set forth in ABA Opinion No. 01-421:
A lawyer must not permit compliance with “guidelines” and other directives of an insurer relating to the lawyer’s services to impair materially the lawyer’s independent professional judgment in representing an insured.
Although most of the ethics opinions on insurance company guidelines take a general approach, a few—while acknowledging that certain guidelines may be appropriate—have taken issue with particular guidelines. For purposes of illustration, portions of selected ethics opinions from other jurisdictions are set forth in Appendix A. We do not intend to imply agreement with the conclusions of these opinions. Rather, we wish to describe more fully the kinds of concerns that have been raised elsewhere, many of which are raised directly in the request before us.
5 Montana Supreme Court Decision. The Montana Supreme Court has issued an opinion that addresses these topics, but only after having determined that the insured is the sole client of the defense lawyer. Under that structure, the court noted that defense counsel (a) does not have a “blank check” to escalate litigation costs, (b) should consult with the insurer, (c) must charge reasonable fees, and (c) can be held accountable for its work. The Montana court then held that “defense counsel in Montana who submit to the requirement of prior approval [obtaining consent of the insurer prior to taking certain actions] violate their duties under the Rules of Professional Conduct to exercise their independent judgment and to give their undivided loyalty to insureds.”3
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Ethics Advisory Opinion No. 02-10

Issued December 18, 2002
1 Issue:
May a lawyer review pleadings prepared by a non-lawyer mediator for simple, uncontested divorces and advise the mediator on how to modify the pleadings for filing in court?

2 Conclusion: (1) As lawyer for the mediator, a lawyer may advise the mediator on the issues likely to arise in the course of the mediation, but may not advise the mediator how to prepare the divorce agreement and court pleadings for particular parties who are clients of the mediator. This would constitute assisting in the unauthorized practice of law and would violate Utah Rules of Professional Conduct 5.5. (2) An attorney may provide representation to a party engaged in a divorce mediation that is limited to advising the party and assisting with pleadings, but may not so limit the representation without first fully informing the party of the proposed limitation and obtaining the party’s informed consent.
3 Background: A divorce mediator has requested that a lawyer perform a limited service: review pleadings prepared by the mediator and amend them as needed. Prior to the attorney’s involvement, the mediator would meet with the divorcing parties and assist them in reaching a settlement of all issues in their divorce. Then, the mediator would draft the parties’ agreement, which would be filed with the court or incorporated into the judgment of the court. Finally, the mediator would draft the various additional court documents (e.g., complaint, findings of fact and conclusions of law, judgment) needed for the parties’ divorce. The mediator would inform the divorcing parties that the pleadings were not prepared by an attorney, but had been reviewed by an attorney for “sufficiency.” The divorcing parties would pay the attorney a small fee for this service.
4 Analysis: The request raises the following issues:
* Whether the lawyer is representing the mediator or the divorcing parties.
* Whether this plan involves the lawyer’s assisting in the unauthorized practice of law in violation of Utah Rules of Professional Conduct 5.5.
* Whether this plan constitutes an appropriate limitation on the lawyer’s representation for the client under Utah Rules of Professional Conduct 1.2 and 1.1.
A. Whether the lawyer is representing the mediator or the divorcing parties.
5 The original request appears to presume that the lawyer is advising the mediator. However, the advice sought from the Committee focuses on the agreement and pleadings for a divorce between two particular parties. Here, we consider the ethical constraints on both possible relationships.
B. Whether the lawyer, in advising the mediator, is assisting in the authorized practice of law.
6 Rule 5.5 provides that a lawyer shall not “assist any person in . . . the unauthorized practice of law.” However, the Comments to Rule 5.5 state that the rule “does not prohibit lawyers from providing professional advice and instruction to nonlawyers whose employment requires knowledge of law.” Accordingly, it should be permissible for a lawyer to form an attorney-client relationship and provide a mediator with professional advice that the mediator needs for this occupation. In order to understand the limits of what is appropriate legal advice to give a mediator, we first examine what constitutes the practice of mediation under Utah law and current codes of conduct for mediators.
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