DTCI: A refresher in insurance defense client and company reporting

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PinkieBusy lawyers practicing in insurance defense law sometimes forget the basic tenets of the practice. This article is a refresher course for the seasoned civil defense practitioner and a primer for those new to the practice.

Client and company reporting

Reporting to the client may sound elementary, but there are horror stories about the lack of reporting client companies receive from counsel. Poor communications and non-diligence account for almost a third of grievances filed for alleged misconduct. (See Indiana Supreme Court Disciplinary Commission, 2008-2009 Annual Report, available at The duty to the client and insurance company representative of timely and accurate reporting cannot be overlooked.

Client reporting starts after receipt of the assignment and after the details of the initial engagement are agreed upon. An acknowledgment letter sent upon receipt of the new assignment is the client’s assurance that his counsel received the matter, performed a conflict check, and agreed to the representation. Telephoning the new client helps overcome any of the client’s hesitancy to call counsel because of unfamiliarity with the legal process.

The initial communication should be in plain English and inform the client that you are his lawyer and that this and all future communications are protected by privilege. The initial communication also confirms proper service of process, should that not be obvious from the documents already in possession.

An acknowledgment to the insurance company representative assures him the lawyer received the assignment, his insured is now represented by counsel, and the record is (or soon will be) protected. A phone call to the insurance company representative promotes open communications from the start and serves as an opportunity to thank the representative for the business.

Review your acknowledgment practices. Electronic discovery and litigation hold letters have imposed new obligations about which clients need to be informed early and often. Electronic discovery raises the bar on initial communications – specifically the duty to preserve any electronically stored information and to ask about the retention policies of the client. Failing to take these necessary steps early on may lead to professional liability issues for the lawyer and discovery sanctions from the court.

Lastly, check to identify any conflicts that may lead to a waiver or preclude representation. If representation is precluded, then a phone call to the client or insurance representative followed by a letter declining the assignment is appropriate. It should be made clear that no attorney-client relationship was formed.

Litigation guidelines

Outside counsel must meet company reporting requirements defined in an insurance company’s litigation guidelines. The complexity of these guidelines varies from one page to several pages including indexes, definitions, and appendices. Review these guidelines with the insurance company representative.

An initial evaluation report may follow the receipt and analysis of any pre-suit file materials that the insurance company representative has compiled. The report may include the following: communications with your client, confirmatory communications with the company representative, communications with opposing counsel, any fact witness interviews, a site visit to the loss scene, description of any documents informally produced by opposing counsel, and whatever else the company representative ought to know about. The initial case evaluation should also set out theories of liability, damages presented, applicable defenses known to date, applicable law to be applied, possible alternative dispute resolution, discovery undertaken or recommended, evaluation based on the facts and evidence to date, and recommendations for future handling. Litigation guidelines usually allow 60 to 90 days from the case assignment for counsel to provide a preliminary case evaluation.

Status reports should be sent to the client and company representative after any significant development, including the following: a material change in the facts; the discovery of a new witness; substantial developments in the damages presented, whether mitigated or aggravated; a new expert witness; discovery responses received or discovery directed at the client; deposition testimony; summaries of records and documents; dispositive motions; the status of settlement negotiations; and any change in the gestalt of the case. Several of the aforementioned developments are best communicated by telephone, followed by a letter memorializing them.

Clients and company representatives will frequently ask counsel for recommendations on the future handling of the case. Clear, concise, and supported recommendations should be contained in your report. Alternatives and options should also be provided, even when unsolicited. Remember, it is not your case, but your client’s!

Effective communications include disclosing any reservations or adverse consequences that may follow from a key strategic decision. It also strengthens the trust between the lawyer, client, and company representative. Only after informed communications should decisions affecting the case be made, and the decision is to be in the best interests of the client.

Insurance defense lawyers may have to complete documents called for in the litigation guidelines, such as litigation action plans, discovery plans, and proposed budgets. The attorney representing clients through an applicable policy of insurance that provides for the defense of the insured must become familiar with the litigation guidelines and billing protocols for that particular company. Any applicable reporting dates or required reports should be calendared after the acknowledgment and acceptance of the assignment.

The practice of law is a service-providing industry. Noncompliance with company guidelines does not bode well for the attorney’s reputation. In some circumstances it can be interpreted as an indication of the value the lawyer places on the business.

Insurance defense work remains competitive in the legal services market. If the practitioner cannot take the time to adhere to company litigation protocols, then the lawyer should be neither upset nor surprised when the company takes its work elsewhere. Losing a source of business is certainly not worth any perceived benefits of haphazard compliance with mandated litigation guidelines.

Ethical obligations and tripartite relationship

The tripartite relationship is the cornerstone of insurance defense law practice. It is created by the insurance contract and the hiring of defense counsel by the insurer to defend the insured under the policy. The lawyer’s familiarity with ethical obligations to the client and the client’s insurance company, which may not coincide, can go a long way in safeguarding the insurance defense practitioner from running afoul of ethical obligations.

Several Indiana Rules of Professional Conduct pertain to the tripartite relationship and lead to ethical considerations. (See Indiana Professional Conduct Rules 1.1, 1.2, 1.3, 1.4, 1.6, 1.7, and 1.8. See also Cincinnati Ins. Co. v. Wills, 717 N.E.2d 151 (Ind. 1999).)

The most often cited rule leading to potential problems in the tripartite relationship is Indiana Rule of Professional Conduct 1.8(f)(2):

(f) A lawyer shall not accept compensation for representing a client from one other than the client unless:

(2) there is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship; …

Indiana Rule of Professional Conduct 5.4(c) also provides:

A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer’s professional judgment in rendering such legal services.

In some circumstances, it is possible that the insurance company’s litigation strategy may be interfering with defense counsel’s judgment or defense counsel’s attorney-client relationship, thus impeding the lawyer’s ability to do his job. The keen practitioner recognizes this threat and should obviate it through the use of efficient communication with the client and company. In the event efficient communication fails to eliminate the conflict, the lawyer may be placed in the uncomfortable position of being unable to follow his own judgment.

The lawyer’s ultimate duty is to the client, the insured of the company, and not to the insurer. (See Indiana State Bar Ass’n Legal Ethics Comm., Op. 3 (1998). See also Indiana State Bar Ass’n Legal Ethics Comm., Op. 4 (1998) addressing the issue: May an Indiana attorney submit statements for insurance defense services to the insurance company’s outside audit company, which statements contain confidential or privileged information?).

Communicating with counsel, courts, and colleagues

Lawyers are communicators. When not communicating with clients and company representatives in pursuit of the cause, lawyers communicate with their learned adversaries, judges and court personnel, and, of course, colleagues. As members of this noble profession, lawyers are held to higher standards than are other members of the community.

Rule 22 of the Indiana Rules for Admission to the Bar and the Discipline of Attorneys is the oath of attorneys. The Indiana Rules of Professional Conduct contain a preamble titled, “A Lawyer’s Responsibilities,” at paragraphs 1-13. This is the code by which lawyers are to live and practice. (In addition, for lawyers practicing in Marion County, see Appendix A and B of Marion Circuit and Superior Court Civil Rules pertaining to the Commitment to Respect and Civility.)

Lawyers must continue to treat each other with the dignity and respect that the profession demands and human beings deserve. Certainly, heated disagreements with our adversary will take place – both in and out of the courtroom. But when the fireworks cease, it is good to remember that the lawyers may find themselves on the other side of the “v.” next time. Agreeing to disagree is healthy, but do not lose sight of the need to promote and practice civility in the practice of law.

Providing good service and managing expectations

A lawyer can wear many hats in the course of one client representation: advisor, advocate, and counselor. It is, among many other things, the lawyer’s ability to wear these hats and to promptly recognize and switch roles according to the task at hand that sets lawyers apart from other professions.

A lawsuit can be devastating for the client even if sufficient insurance coverage exists. Most clients have never been in a contested lawsuit and are unaware of how the legal process works. They are unaware of the time, effort, and resources that go into taking the case to trial by jury. The time demands associated with preparing for a civil jury trial will undoubtedly affect the client’s life. The lawsuit will likely take away time from the client’s family. It may consume time from the client’s job. It may lead to cancellation or adjustment in planned vacations. The addition of the unwelcomed and unanticipated stress can place a strain on the client’s already hectic life. Lawyers need to tell their clients all of this and explain to them in advance the rigors of civil litigation.

Timely, informative oral and written communications speak volumes about the level of service the lawyer provides to clients. Being open and honest with the client as to what the legal process entails, and the corresponding expectations placed on the client, will go a long way toward building an attorney-client relationship based on trust.

In some cases, the insurance company representative may have a misconceived expectation of the desired end result. The company representative may fail to appreciate detrimental evidence the case presents that makes it difficult, or even impossible, to achieve the hoped-for outcome. Communicating this information to the client and company representative – sometimes repeatedly – during the course of the representation should help to modify the company’s expectation. A lawyer well versed in the facts of a particular case should be able to evaluate the potential risk the case presents, including an evaluation of the exposure facing the insurer. For obvious reasons, this is very important information the company representative wants to know.

The insurance defense lawyer plays a vital role in civil defense litigation. The lawyer owes ethical obligations to his client and duties to report to the insurance company representative. Keeping your client and the insurance company representative well informed throughout the life of the lawsuit is important. It not only fulfills the lawyer’s duties and obligations under the tripartite arrangement inherent in an insurance defense practice, but practicing effective communications will enhance the lawyer’s reputation in the legal community.•

Elliott Pinkie is a partner with Hoover Hull LLP, in Indianapolis, and he is a member of the DTCI Trial Tactics Section. His practice focuses on civil litigation for the defense, including professional liability, premises liability, unique auto liability, retail liability, and long-term care liability. The opinions expressed in this column are those of the author.


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