UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.
Ethics Advisory Opinion 02-01
Law Firm's practice is concentrated in insurance defense litigation, representing insured persons on behalf of an insurance company. The insurance company utilizes the services of an independent software provider to aid in payment of Law Firm's invoices. The software provider aggregates billing data and transmits it to the insurance company, provides prompt payment to law firms and other vendors, and supplies the insurance company with analyses of the financial data regarding the expenses of representation. These services all occur programmatically and without any human intervention. According to the insurance company, the software is helpful in allowing the insurance company to approve payments promptly. This situation is similar that of Ethics Advisory Opinion 97-22, except for the fact that the third party auditor in this situation is not a person but is essentially a computer program which automatically compiles and disseminates information to the insurance company.
QUESTION
If an independent software provider examines the legal bills of an insurance company, through a computer program with no human intervention, has there been a breach of confidentiality regarding the third party insured under Rule 1.6 of the Rules of Professional Conduct?
OPINION
Although the process described in the question involves the use of an automated software program, confidential client information would be revealed to a nonclient and could be accessed. Based on opinions 97-22 and 98-36 the attorney may not reveal this information without the consent of the insured and the insurance company.
DISCUSSION
There are two previous South Carolina Ethics Advisory Opinions dealing with similar issues.
Opinion 97-22 concerned an insurance company which sent its legal bills to an outside auditor who would then recommend payment or nonpayment of the bills. The opinion concluded that this would not violate the Rules of Professional Conduct as long as there is fully informed consent by the insurance company and the insured (emphasis added). Under the particular facts in Opinion 97-22, an independent auditor was hired to examine the law firm's bills, which necessarily required the auditor to review confidential client information.
Opinion 98-36 dealt with the same topic but clarified that the law firm would still need to obtain the consent of the insured even if the firm stated on the bills that the information, in the lawyer's professional judgment, was confidential or privileged.
These two opinions take the position that any time an insurance company submits its legal bills to an auditor, even if confidential information has been redacted from the bills, the lawyer must obtain the informed consent of the insured.
The instant situation is factually different from the situation in Opinion 97-22, in that there are no persons reviewing the bills, as the bills are merely programmatically sorted, paid, and that information transmitted to the insurance company. Presumably, there is no reason why persons other than employees of the insurance company should ever see the bills. The prudent lawyer will recognize that any information, no matter how automated, can be accessed by knowledgeable programmers.