Who should be able to audit trust accounts?

Would allowing title insurance companies to audit attorney trust accounts--including those transactions the companies are not insuring--be a breach of confidentiality for clients with funds in those accounts or an extra protection?

During its September 21 meeting, the Professional Ethics Committee looked at that question stemming from a new state law requiring law firms to allow title insurance companies to audit trust accounts, which contain funds for real estate transactions.

The question was brought to the PEC's attention from an attorney who inquired whether such audit would violate confidentiality provisions of Bar rules because the auditing companies would have access to information about clients and transactions the companies were not insuring.

The committee looked at a subcommittee draft opinion which said client information would impermissibly be revealed and heard from representatives of the Real Property, Probate and Trust Law Section and title insurance companies which said there would be little, if any, harm to clients. The committee ultimately deferred action after the subcommittee chair stated the panel needed to reconsider its draft in light of some late submissions from the section and title companies.

However, Loretta O'Keeffe, the subcommittee chair, said any changes would not likely alter the final conclusion that the audits cause ethical problems.

At issue is new subsection (8) to F.S. [section]626.8473, which requires attorneys acting as title or real estate settlement agents to keep funds for those transactions in a separate trust account to which title insurance companies insuring those deals would have access "unless maintaining funds in the separate account for a particular client would violate applicable rules of The Florida Bar." The provision, part of an overhaul of title insurance laws, became effective July 1.

The subcommittee, O'Keeffe said, looked at this question: "Is the attorney permitted to allow the title insurance company to audit the firm's special trust account ... without the informed consent of the client who has no involvement with the title insurance company?

"The special subcommittee said the answer is 'no,'" O'Keeffe added, "if the special trust account holds funds for client transactions that are unrelated to the title insurer requesting the audit, unless the client gives informed consent."

The subcommittee based its answer on Bar Rule 4-1.6(a), which prohibits an attorney from revealing...