Similarly, in the insurance context, use of in-house counsel poses substantial ethical difficulties. Insurers have, to a substantial degree, moved from managing outside counsel in liability insurance d efense matters to forming their own cadre of inside counsel.312
In-house counsel has been an increasing development throughout the law since the 1970s but has existed in some form throughout the twentieth century. The move of legal services in-house has been thought to foster substantial savings and concentration of expertise. In the insurance defense context, however, it presents problems. In the ordinary rendering of legal serv- ices to a business, questions of client identity are clear. The in-house lawyer works for the company and has the company as a client. But, when the company is a liability insurer defending a policyholder, the in- house lawyer works for the company and has another—the policy- holder—as a client.
According to the rules of professional responsibility, the lawyer must put the client/policyholder’s interest first, must preserve the attorney- client privilege, must keep confidences, must zealously repr esent the cli- ent, even when it is potentially not in the interest of the third-party payor insurer, and he or she must exercise the best professional judg- ment on behalf of the client.313
The in-house insurance defense lawyer, however, must discharge these already difficult du ties while drawing a paycheck from the insurer. The insurance company may wish the lawyer to spend less time and money on the client’s cause while also hoping the lawyer will advise the company if the client makes an admission against interest that will hold the company in lurking coverage dispute. Even if the in-house lawyer is not at immediate risk of being discharged for zealous client advocacy and resistance to any improper insurer influ - ence, the lawyer probably wants increased compensation and promotion in the future. Being a good lawyer—to the policyholder-client--may not be in the in-house attorney’s best job in terests.314
312. See Debra Baker, A Grab for the Ball, A.B.A. J., Apr. 1999, at 42 (noting that move by insurance companies to use of staff counsel has fed into concern among many about fu ture of the profession).
313. See RULE 1.8(f).
314. Professor Silver takes a diametrically opposed view and defends use of in-house coun - sel for defense of policyholders absent palpable conflict of interest. See Silver, Unnecessary Casualties, supra note 297 , at 243-56. Responding to his extensive defense of the practice is impossible in the space allotted to this article. Suffice it to say that I disagree with his apparent view that routine use of in-house counsel cannot. as a structural matter, present ethical prob- lems for the insurance company lawyers. However, I propose regulat ing in-house counsel or i n - stalling guarantees of professional independence rather than leaving staff counsel to company regulation. See id. at 250-51 (explaining that Professional Responsibility Professor Bruce Green of Fordham Law School concludes that staff counsel may review case files with insurer- employer, but only if the policyholder “clients” consent).
Insurers have also worked to create “captive” outside insurance de- fense firms. Although these firms are organized as separate professional and commercial entities, they are not law firms in the traditional sense. The firm is assembled by an experienced outside insurance defense law- yer working at the behest of the insurer. Once so assembled, the new firm’s work exclusively consists of representing policyholders insured under liability policies issued by the founding insurer or its affiliates.315
Although I do not want to denigrate the professionalism or independ - ence of captive firms, a good case exists for treating such firms as in-
house counsel for the insurer, at least for regulatory purposes, rather
than as traditional outside counsel.
My point is not to conduct a searching analysis of the role of la wyers and liability insurance defense. The issue is complex, evolving, and r e- quires extensive analysis. Much excellent scholarship on all sides of the issue is already in print.316
Whatever the ultimate resolu tion of this diffi- cult and important matter in the delivery of legal services, however, it is vital that the analysis and decision be made according to professional norms rather than business norms. Under a business paradigm applying business norms in the interest of business, the important and difficult questions appear not to be raised, are given short shrift, or are readily resolved in favor of the greatest business benefit—to the business with the most economic power.317
Concerns of the individual client are left in the dust without much re- flection or remorse. Business thinking by insurers led to the rapid prolif- eration of inside counsel, captive law firms, and managed care for law- yers. Some insurers have even gone so far as to actively di scourage the
315. See Silver, Unnecessary Casualties, supra note 297 , at 237-38.
316. See generally Symposium, Liability Insurance Conflicts and Professional Respon si- bility, 4 CONN. INS. L.J. 1 (1997) (containing a collection of articles addressing the issue of pro- fessional responsibility in liability insurance by Thomas D. Morgan, Kent D. Syverud, Stephen L. Pepper, William T. Barker, Tom Baker, Robert H. Jerry II, Charles Silver, Nancy J. Moore, George M. Cohen, David A. Hyman, and Robert E. Keeton); Charles Silver & Kent Syverud, The Professional Responsibilities of Insurance Defense Lawyers, 45 DUKE L.J. 255 (1995); Eric Mills Holmes, A Conflicts-of-Interest Roadmap for Insurance Defense Counsel: Walking an Ethical Tightrope Without a Net, 26 WILLAMETTE L. REV. 1 (1989); Robert E. O’Malley, Ethics Principles for the Insurer, the Insured, and Defense Counsel: The Eternal Triangle Reformed, 66 TUL. L. REV. 511 (1991).
317. Like Prof. Pearce, Prof. Silver seems to suggest that lawyers should simply learn to “lump” the consequences of economic force rather than attempting to constrain it under a pro- fessionalism paradigm.
[A]lternative fee structures will revolutionize the way many lawyers practice, just as managed care regimes have radically altered the practice of medicine over the past ten years. When significant economic actors press for change, change will come, even if the solons of the legal profession do not want it. Creative clients and creative lawyers seeking to win their business will find ways to come to terms.
Silver, Unnecessary Casualties, supra note 297 , at 216.
Unintentionally, Silver makes my case, right down to the use of managed care as a basis of comparison. To some extent, the entire point of a professionalism paradigm is the ap propriate constraint of economic power and resistance to it as may be necessary to effect other vital pro- fessional goals such as client loyalty, client protection, the integrity of the system, and so on. At some point, a healthy system of law prevents or at least discourages the “creative” efforts of avarice made by its membership. Rather than resisting or taming the potentially corrupting in - fluence of wealth, the business paradigm seems premised on celebrating wealth.
use of counsel by third-party claimants.318
All of this was done to benefit the insurers’ bottom line. Under the business paradigm, that is enough reason to forge ahead. Under the more sophisticated client protection regime of the professionalism paradigm, serious questions are asked and limits are likely to be placed on insurer tactics that hurt clients or un - dermine lawyers’ professional judgment.