Guidelines established for allowing title insurers to audit trust accounts.

Attorneys must decide that it is in their clients' best interests--and the clients must have not prohibited it--before allowing title insurers to audit trust accounts containing funds from clients who are not using that insurer.

After grappling with the implications of a new state law for more than a year, the Bar's Professional Ethics Committee has approved Proposed Advisory Opinion 12-4 that reaches that conclusion. Now the committee is seeking input from Bar members.

The opinion came from a Bar member inquiry stemming from F.S. [section] 626.8473(8), which became effective July 2, 2012. The law requires attorneys acting as title agents or real estate settlement agents to deposit client funds for those transactions in a special trust account and allow title insurers to audit that account "unless maintaining funds in the separate account for a particular client would violate applicable rules of The Florida Bar."

PEC Chair Loretta O'Keeffe, who chaired the subcommittee that drafted and redrafted the PAO, said the committee had to strike a balance between the law, Bar rules, and a previous ethics opinion, 93-5.

"The attorney is the only person who can make the decision on what is in his or her client's best interests. That's the bottom line," O'Keeffe said. "The Florida Bar cannot make a wide, sweeping opinion that it's in the client's best interest [to allow the audit by an uninvolved company]. The lawyer needs to make that decision."

The inquiring attorney noted that his firm employed several lawyers handling real estate transactions with multiple title insurers and that some transactions were done without title insurance. That system means the special trust account holding funds for those transactions would have funds from several clients not involved with a title insurer conducting an audit of that account.

The attorney asked the committee two questions: If the firm could allow such an audit which would hold funds from clients not using the auditing title company; and, if the answer to the first question is no, how the firm could comply with the law.

The opinion began its answer by citing Bar Rule 4-1.6, which prohibits an attorney from revealing any information about the representation of a client without the client's informed consent. The rule comment further explains the prohibition applies not just to confidential information "but also to all information relating to the representation, whatever its source."

The only applicable...