THE ASSOCIATION OF THE BAR OF THE CITY OF NEW
COMMITTEE ON PROFESSIONAL AND JUDICIAL ETHICS
FORMAL OPINION 2005-04
COMMUNICATIONS WITH INSURANCE ADJUSTERS
IN LITIGATION WHERE THE INSURANCE COMPANY IS A PARTY
Topic: Communications between non-lawyer representatives of an insurer and opposing counsel; scope of “prior consent” requirement
Digest: Where an insurance company is a party to litigation, an opposing party’s counsel may not communicate with an insurance adjuster in the absence of prior consent from the insurance company’s lawyer. This prohibition arises from the plain language of DR 7-104(A)(1) and applies notwithstanding that it is the non-lawyer who initiates the communication, notwithstanding the presumed sophistication of the adjuster and notwithstanding that the goal of the communication is to facilitate a quick and efficient settlement. “Prior consent” means actual, formal consent of counsel, whether conveyed orally or in writing; a lawyer risks violating the rule by relying on the adjuster’s word that insurance company counsel consents or otherwise inferring consent from the circumstances.
Code: DR 7-104
Question: Where a sophisticated non-lawyer insurance adjuster, who is employed by a party to a lawsuit, initiates contact with counsel for the adverse party in the lawsuit for the purpose of effectuating a fast and efficient resolution of the claim, does DR 7-104 apply? If so, must the lawyer obtain the actual consent of opposing counsel for the insurance company, or may the lawyer rely on the non-lawyer’s assurances or circumstantial evidence of consent?
This opinion considers the ethical propriety of a law firm’s direct
communications with non-lawyer claims adjustors employed by the insurance
company with which the firm’s client is in litigation. Such communications
raise questions concerning the scope and application of DR 7-104(A)(1),
the so-called “anti-contact” disciplinary rule permitting
direct communications with a represented party only with the consent
of opposing counsel. These questions include: (1) Does DR 7-104 apply
even in situations where the non-lawyer is sophisticated, the communications
are initiated by the non-lawyer and the purpose of the communications
is to achieve a fast and efficient resolution of the claim?; and (2)
Does a lawyer need to obtain the actual consent of
opposing counsel, or may the lawyer rely on the non-lawyer’s assurances
or circumstantial evidence of consent?
The Committee addresses these issues in the following factual context: A law firm represents providers of medical services in litigation or arbitration with insurance companies over unpaid medical bills. Although the insurance company appears in these cases through a lawyer, it is frequently a non-lawyer claims adjustor who calls plaintiff’s counsel to discuss settlement. These communications occur without the express consent of the lawyer representing the insurance company. We further assume: (1) direct communications between lawyers and insurance adjusters are commonplace in this area of practice; (2) the adjusters are sophisticated businesspersons employed by sophisticated insurance companies; (3) the direct approach from the adjuster is intended to facilitate settlement at low cost; and (4) if asked, the adjuster would advise that the insurance company’s counsel is aware of, and consents to, the communication.
We conclude that, while these factors suggest that the consent of opposing counsel should be readily obtainable in most cases, the plain language of DR 7-104(A)(1) requires that opposing counsel receive notice and provide actual consent before an attorney may participate in such communications with a non-lawyer representative. We further conclude that the opposing counsel’s consent cannot be inferred from circumstances, and that the consent must be conveyed in some form by opposing counsel to the attorney.
DR 7-104(A) provides, in pertinent part, that during the course of the representation of a client, a lawyer shall not: “(1) communicate or cause another to communicate on the subject of the representation with a party the lawyer knows to be represented by a lawyer in that matter unless the lawyer has the prior consent of the lawyer representing such other party …” T he anti-contact rules “provide protection of the represented person against overreaching by adverse counsel, safeguard the client-lawyer relationship from interference by adverse counsel, and reduce the likelihood that clients will disclose privileged or other information that might harm their interests." ABA Formal Op. 95-396, 558 N.E.2d 1030, 1033; see also ABCNY Formal Op. 2002-1; Niesig v. Team I, 76 N.Y.2d 363, 370, 559 N.Y.S.2d 493, 496 (1990) ("By preventing lawyers from deliberately dodging adversary counsel to reach - and exploit - the client alone, DR 7-104(A)(1) safeguards against clients making improvident settlements, ill-advised disclosures and unwarranted concessions.") (citation omitted).
Under the facts presented by this inquiry, there is no question that the discussions with the adjuster take place during the course of representation of a client regarding the subject of the representation. Nor is there any question that the adjuster is the representative of a party that has retained counsel in that matter.1 It is also clear that the discussions between the firm and the non-lawyer adjuster constitute a communication within the meaning of DR 7-104(A) regardless of who initiates it. See Roy Simon, Simon’s New York Code of Professional Responsibility Annotated, p. 976 (2005 ed.) (“Even if the represented party initiates the conversation or agrees to the communication, DR 7-104(A)(1) prohibits a lawyer from engaging in any discussion with the represented party without first obtaining a lawyer’s consent.”). Finally, the existence of an industry practice making commonplace such communications with adjusters does not excuse a New York lawyer from compliance with Disciplinary Rules or deprive the insurance company counsel of the right to expect such compliance. See In re. Illuzzi , 616 A.2d 233, 236 (Vt. Supreme Ct. ) (“Given the absence of ambiguity in [DR 7-104], we find irrelevant respondent’s contention that it is the common and accepted practice for Vermont attorneys to have direct contact with insurance companies whose defense counsel have not consented to such contact.”)
Accordingly, we conclude that “prior consent” of adversary counsel is necessary before communications with an adjuster for the defendant-insurer can occur. Although it may well be reasonable to assume that consent will be readily forthcoming because opposing counsel is already aware of the adjuster’s actions, such consent should not be implied. Indeed, we believe that the additional effort needed to obtain the prior consent of opposing counsel should not unduly interfere with the expeditious settlement of matters. Because the rule requires the consent of opposing counsel, the safest course is to obtain that consent orally or in writing from counsel. A lawyer who proceeds on the basis of other evidence of consent, such as the opposing client’s assurance that its counsel has consented, runs the risk of violating the rule if opposing counsel did not in fact consent.
Although we conclude that a lawyer runs the risk of violating DR 7-104(A)(1) by relying on the non-lawyer adjuster's word that counsel's consent has been obtained, an insurance company that wishes to facilitate direct contact with an adjuster may instruct its counsel to provide the adjuster with a letter granting consent to such contact. “The nonclient’s lawyer has a duty to the client to consent when doing so would be in the interest of the client or when the client so instructs the lawyer.” Restatement ( Third) Of The law governing Lawyers § 99, Comment j (2000) (hereinafter, “ Restatement”). Obviously, even when the opposing counsel has consented to direct communication with an adjuster, a lawyer communicating with the adjuster may not engage in dishonesty or in other improper conduct such as seeking information the adjuster is obliged to keep confidential. DR 1-102 (4); Niesig v. Team I, 76 N.Y.2d 363, 370, 559 N.Y.S.2d 493, 496 (1990); Restatement § 102.
For these reasons, we conclude that DR 7-104(A)(1) applies to direct communications between a plaintiff’s attorney and an adjuster representing a defendant insurance company. An attorney who proceeds without prior consent received from opposing counsel (orally or in writing) therefore risks running afoul of the rule.
1 In so stating, we do not address the application of DR 7-104 to communications with an adjuster when the insurance company is not itself a party. See NYSBA Op. 785 (2005) (because adjuster is not represented by counsel employed to represent defendant insured, direct communications between and adjuster and plaintiff’s counsel are permissible without consent of insured’s counsel); but see, e.g.,In reIlluzzi, 616 A.2d 233, 236 (Vt. Sup. Ct. (though not named in the suit, insurer was arrayed on the opposite side of the case and would be considered an adverse party for purposes of the no-contact rule); Utah State Bar Op. 00-05 (direct contact with insurance adjuster would be improper unless plaintiff’s counsel has affirmatively determined that the insurer does not consider itself represented by counsel in the matter); Colorado Bar Op. 73 (1986); Virginia Ethics Op. 550 (1983); New Mexico Bar Advisory Op. 1988-2 (1988).