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Floridians who face lawsuits and have their attorney provided by their insurance carrier will have to be informed of the possible conflicts of interest faced by their lawyer. Under a new mandatory disclosure rule adopted last week by the Florida Supreme Court, lawyers hired by insurance companies to defend policyholders must give the policyholders a 2 1/2-page Statement of Insured Client’s Rights. The document spells out the policyholder’s rights and explains the ethically tricky three-way relationship between the lawyer, the policyholder and the carrier. The required disclosure is believed to be the first of its kind in the nation. The insurance industry, which participated in the drafting of the document after it initially resisted the effort to draft new rules, says it supports the mandatory disclosure statement. But some plaintiffs’ attorneys say the new rule doesn’t go far enough to protect insurance consumers. Miami lawyer David W. Bianchi, who chaired the Bar committee that drafted the statement of client rights, says it would have been impossible to include every contingency in a simple, understandable document. “This is a giant step forward in protecting policyholders in Florida,” he says. The effort to draft a client’s rights statement was prompted by attorney complaints that insurance industry moves to slash claims-related legal costs were hurting their ability to properly represent their policyholder-clients. The Bar board of governors formed a special committee in June 1999 on insurance practices, chaired by Bianchi, to examine a number of insurance defense ethics issues. Among them: � 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 insurance 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 judgment if it decides that the claim wasn’t covered? � Does a policyholder have any greater say in his legal defense when he faces a judgment that exceeds his policy limits? After a year of study and hearings and insurance industry resistance, the committee said it was unable to definitively answer these questions. “There’s no bright line,” the committee said in its report. “What the insurance industry calls ‘controlling the litigation,’ many attorneys call ‘treading on the attorney’s professional conduct.’” But the committee drafted the statement of client rights as a compromise with the insurance industry. The committee forwarded its completed proposal to the Florida Supreme Court about a year ago. The high court approved it last week without comment. The insurance industry supports the disclosure statement, says Katherine Giddings, a shareholder at Katz, Kutter, Alderman, Bryant & Yon in Tallahassee who represents insurance industry groups in Florida. Giddings was on the special committee. The statement provides beneficial information to policyholders without undermining the rights and obligations of insurers and policyholders under the insurance contract and Florida law, she says. THREE-WAY RELATIONSHIP EXPLAINED The document tells policyholders that the insurance carrier is paying the lawyer, and what it’s paying the lawyer to do. It explains that if the client wants additional services, he or she is free to make separate arrangements with the lawyer. It also states that the lawyer has an obligation to keep the policyholder informed about the case and to protect the confidentiality of policyholder information. It also informs clients that most insurance carriers have litigation guidelines that their defense lawyers must follow. These guidelines set forth what the company expects from the lawyer, how the case should be staffed and what functions a paralegal can perform, among other details. The newly adopted rule is intended to make sure that the client is aware of such guidelines, and of what the lawyer can and cannot do in defense of the case. The form that policyholders will be given also includes the phone number for the Bar’s ethics hotline, in case the policyholder has questions about the nature of a case and how it’s going to be defended, says Bianchi, a member of the Florida Bar board of governors and a partner at Stewart Tilghman Fox & Bianchi in Miami. He says his special committee presented a draft of statement of client rights to a consumer focus group, some of whose members had been sued and represented by an insurance company lawyer. “They loved it,” he says. “They uniformly said they wished they’d had this form first.” Bianchi predicts that other states will develop similar insurance defense client’s rights disclosure statements. Giddings says that the new rule gives insurance defense lawyers an opportunity to sit down with policyholders and explain the possibility of judgments in excess of policy limits, she says. “Everybody recognized that you don’t want to undermine the insurance contract or Florida law, but at the same time you want to provide information to policyholders,” she says. “This is information that attorneys should have been giving policyholders all along.” DOESN’T GO FAR ENOUGH? But David L. Deehl, president at Deehl & Carlson in Coral Gables and a member of the Florida Bar’s professional ethics committee, says the newly approved statement of client rights doesn’t go far enough. On close reading, the rule even says as much, notes Deehl, who has done both plaintiff and insurance defense work. For instance, he says, insurance defense lawyers need to do a better job at informing their clients about their rights, in situations where the insurance carrier sends the policyholder a reservation of rights letter indicating that the policyholder is free to pick his or her own attorney. “It’s sad that many lawyers have not been adequately advising clients of this right, out of a desire to keep the assignment from the insurance company,” Deehl says. The new statement of rights was developed at the same time that the Bar’s professional ethics committee was drafting similar ethics advisory opinions on insurance defense conflicts. But the insurance industry opposed the nonbinding guidelines, and a Bar review committee shot down the three proposed opinions on jurisdictional grounds. Those three proposed opinions, which have yet to resurface, addressed, among other things, the obligation of insurance defense lawyers hired by carriers to exercise independent legal judgment.

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