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The Florida Bar approved a proposed “Statement of Insured Client’s Rights” this month in an effort to resolve ethical conflicts lawyers face when they represent policyholders but are paid by insurance companies. Yet the legal profession and the insurance industry remain on a collision course to define ethical boundaries. With insurance companies aggressively attempting to cut claim-related legal costs, tough questions remain: � When an insurance company hires a lawyer to defend a policyholder, can the company’s claims adjuster tell the lawyer how to conduct the defense? � Can the company require the lawyer to sacrifice independent professional judgment in favor of cost-cutting “guidelines” imposed by the company? � Can the law firm hired by the company send an itemized bill containing confidential client information to the insurer’s outside auditor? � What happens when the insurance company agrees to pay for the policyholder’s lawyer, but reserves the right not to pay any court-ordered judgment that may result from legal action because the company disputes basic coverage? “There’s no bright line,” according to the report of the Florida Bar’s Insurance Practices Special Study Committee. “What the insurance industry calls ‘controlling the litigation,’ many attorneys call ‘treading on the attorney’s professional conduct.’” Nonetheless, committee chairman David W. Bianchi, of Stewart Tilghman Fox & Bianchi in Miami, says the disclosure is the first of its kind in the nation. “For the first time, insured [clients] will be told in much more detail about the relationship among the insured, lawyer and insurance company,” he says. The insurance industry, which participated in the hearings and the Florida Bar’s insurance practices special study committee’s deliberations, approved the disclosure form. If it’s adopted by the Florida Supreme Court in January, the form must be given to each insured client at the outset of the attorney-client relationship. The form is a compromise, concedes Bianchi, since it leaves undecided whether the lawyer owes his or her sole loyalty to the insured client. The insurance industry steadfastly asserts the lawyer represents the insured and company as “co-clients.” Bianchi’s committee dodged an impasse with the industry by referring that issue to the Bar’s Unlicensed Practice of Law Committee. “I’m very satisfied with it,” Bianchi says. “It’s not meant to be a legal treatise.” But some legal ethics lawyers argue the proposed rules are inadequate or run afoul of existing ethical rules. “A lawyer must refuse to be limited in representing an insured if [limitations are] inconsistent with his best lawyering judgment; it’s a flat-out prohibition,” says Harvard Law School ethics professor David Herwitz. The statement should detail more about what happens when a court says a policyholder must pay more than the limits of an insurance policy, says Robert Sundak of Cohen Chase & Hoffman in Miami, a member of Bianchi’s committee. The committee has recommended that the Bar’s committee on the unlicensed practice of law take up the issue of an insurer’s control of how a lawyer should defend the insured client. That group is debating the issue today, according to committee counsel Mary Ellen Bateman. Sundak says the special insurance committee also wants the state Department of Insurance to review the document and decide whether the department should create regulations limiting insurance company practices. The disclosures don’t make it clear that the lawyer represents only the insured client, says David Deehl of Deehl & Carlson of Miami, a seven-year member of the Bar’s Professional Ethics Committee. Since 1997, says Deehl, the Bar has ruled that when there’s a question of coverage under an insurance contract, the outside insurance defense lawyer must not divulge any client confidence to the company that might hurt the insured’s rights under the policy. He sees the insured client’s statement of rights as misleading. The Bar’s ethics committee has charted an independent course aimed at clarifying a lawyer’s duties to the insured client. It has approved three advisory opinions that are ready for the Bar Board of Governors when it meets Aug. 23, says Florida Bar chief ethics counsel Elizabeth Tarbert. Those opinions would prohibit a lawyer from sending bills with confidential information to outside auditors unless the client consents, and from representing an insured client if the insurance company’s billing practices impair the lawyer’s independent professional judgment. The latter states that an attorney who is an employee of an insurance company who defends the insured client has a potential conflict of interest. Insurance companies oppose those opinions and have vowed to lobby for legislative action against the Bar if the board of governors approves them. “The whole issue is self-serving, a grab by defense lawyers to have an open checkbook, a very foolish move on their part, and shows the same greed by plaintiffs’ lawyers over the years,” said Jon Shebel, executive director of Associated Industries of Florida in Tallahassee. “Our committee has repeatedly put the interests of the public first,” Deehl counters. He says the insurance industry has bullied, maligned and threatened the bar’s ethics committee to delay action. Bar ethics committee chair Elizabeth Schwabedissen, of Adorno & Zeder in Miami, disagrees. She says insurance industry representatives frequently wanted to speak on various issues but were limited to seven minutes before the group. Instead, they submitted written briefs. The industry has appealed the ethics committee’s approval of the three opinions to the Board of Governors. Adds Tarbert: “Our opinions [about insurance defense lawyers] are in line with what all other states are doing, and 25 states have taken the same position we have.”

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