Formal Advisory Opinion No. 05-2
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FORMAL ADVISORY OPINION NO. 05-2
Approved And Issued On April 25, 2006 Pursuant To Bar Rule 4-403
By Order Of The Supreme Court Of Georgia Thereby Replacing FAO No. 90-1
Supreme Court Docket No. S06U0791
"Hold Harmless" Agreements Between Employers and Their In-House Counsel.
Whether an attorney employed in-house by a corporation may enter into an agreement by which his or her employer shall hold the attorney harmless for malpractice committed in the course of his employment.
"Hold harmless" agreements between employers and attorneys employed in-house are ethical if the employer is exercising an informed business judgment in utilizing the "hold harmless" agreement in lieu of malpractice insurance on the advice of counsel and the agreement is permitted by law.
Georgia Rule of Professional Conduct 1.8(h) offers the following direction:
"A lawyer shall not make an agreement prospectively limiting the lawyer's liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement . . . ."
This rule seeks to prevent attorneys from taking advantage of clients and avoiding the removal of negative consequences for malpractice. See, Opinion 193 (D.C. 1989). Neither of these policies would be well served by prohibiting the use of "hold harmless" agreements between employers and attorneys employed in house if the employer is exercising an informed business judgment in utilizing the "hold harmless" agreement in lieu of malpractice insurance and doing so on the advise of any counsel other than the counsel being employed. Consultation with in-house counsel satisfies the requirement of the rule. First, the position of the client as employer, and the sophistication of those who employ in house counsel, eliminates almost all overreaching concerns. Secondly, the lawyer as employee does not avoid the negative consequences of malpractice because he or she is subject to being discharged by the employer. Apparently, discharge is preferred by employers of in house counsel to malpractice suits as a remedy for negligent performance. See, Opinion 193 (D.C. 1989).
Accordingly, we conclude that "hold harmless" agreements are ethical when an employer of in house counsel makes an informed business judgment that such an agreement is preferable to employee malpractice insurance, is done on the advice of counsel, and is permitted by law. The determination of whether such agreements are permitted by law is not within the scope of this Opinion. Finally, we note that the proposed "hold harmless" agreement does not limit liability to third parties affected by in house counsel representation. Instead, the agreement shifts the responsibility for employee conduct from an insurance carrier to the organization as a self insurer.
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