Opinion #164. Release of Insured's Client Confidences and Secrets to Auditing Firm Retained by Insurance Company

Issued by the Professional Ethics Commission

Date Issued: December 2, 1998


A law firm has been retained by an insurance company to defend the insureds of the company. Subsequently, the insurance company advises the law firm, that it has hired an auditing company to review the insurance company’s case files at the law firm to insure that the amount of time devoted by the law firm to each file was reasonable and that the amount billed to the insurance company was consequently appropriate.

Following its retention by the insurance company, the auditing company sends an “audit agreement”, to the law firm. The agreement provides that the law firm will produce all documentation supporting its billing to the insurance company, as well as make available all firm personnel to answer all questions about the billing posed to them by the auditing company. The agreement has no provisions for the law firm to withhold from the auditing company any confidence or secret that it may have obtained from an insured.

Question Presented

May the law firm agree with an insurance company or its auditing company to provide information from files of the insurance company’s insureds, if that information contains confidences or secrets within the meaning of the Maine Bar Rules?


On several occasions in the past, the Ethics Commission has had occasion to determine the identity of the client when a lawyer is retained by an insurance company to defend an insured of the company. In each case, the Commission concluded that, even though the insurance company may be paying the cost of representation, the client is the insured and not the company. Opinions Nos. 63, 72, 122. Therefore, the provisions of Maine Bar Rule 3.6(h), concerning the preservation of confidences and secrets of a client by a lawyer, fully apply to the relations between a lawyer and an insurance company’s insured. Those provisions prevent a lawyer, and his or her co-workers, from disclosing the confidences or secrets of his or her clients, subject to certain exceptions not applicable here. Consequently, without client consent the inquiring law firm here may not provide, or agree to provide, information containing confidences or secrets of a client-insured, either to the insurance company, or to an agent of the company, such as a retained auditing company.

It is, of course, true that insureds may give express consent to communications between their counsel and their insurer pursuant to which counsel passes along to the insurer confidences or secrets of the insured. Sometimes the consent is in writing, as Rule 3.6(h) requires. Such communications are made, generally, for the purpose of allowing the insurance company to make decisions it is entitled to make, or in which it is entitled to participate, such as settlement. The Commission is of the view, however, that the giving of such express written consent by the insured should not be read to mean that the insured has impliedly consented to the disclosure of confidences or secrets to an auditing company retained by the insurance company for purposes other than defending the claim. Absent express written consent for this purpose there is nothing in the relationship between counsel and the insured or counsel and the insurer that makes the provisions of Bar Rule 3.6(h) inapplicable.

Similarly, the Commission does not think that the consent of the insured to the disclosure of confidences or secrets to an auditing company may be implied either from his or her undertaking a general duty to cooperate with the insurer, a common provision in insurance policies, or from the common law rule that an ethical duty to preserve confidences or secrets does not prevent the disclosure of confidences or secrets by a lawyer when necessary to further the representation. In the Commission’s view, client consent to the disclosure of confidences or secrets is not lightly to be implied; and a client’s consent to the disclosure of confidences or secrets to an auditing company cannot therefore be implied from a general duty to cooperate with the insurer (since the auditor is a different entity from the insurer) or from the implied power of a lawyer to make disclosures to further the representation (since the activities of the auditor have no relation to the conduct of the representation).

This conclusion does not mean, of course, that the law firm may not cooperate with the insurance company or its auditing company in providing information to justify its bills. It only means that, in providing such information, the law firm must take care not to release any confidence or secret which it may have obtained from the insured. The Commission suggests, therefore, that any agreement between the law firm and the auditing company simply recite that such information is excepted.

Enduring Ethics Opinion