Utilizing Confidentiality Clauses: The Legal Considerations

Posted on: June 13, 2019 by Huntersure

Confidentiality agreements, or clauses, in settlement cases draw the line in legal matters today. Breaking a confidentiality agreement can lead to a breach of contract situation, which will then in turn bring on damages to the party that broke the clause.

Defendants in a case usually force plaintiffs into confidentiality agreements as most plaintiffs don’t have a desire to make a settlement known, depending on the issue at hand. While plaintiffs and defendants are typically required to sign a confidentiality agreement, lawyers rarely sign them. But no matter who is signing or not, there are legal considerations to go over when an agreement is being sought.

Are Lawyers Bound to Sign?

Defendants in a case may insist that the legal counsel of a plaintiff sign a confidentiality agreement of their own. This would prevent the lawyer from talking about certain facts of a case and the overall terms of the settlement with anyone, and that includes future clients. Defendants can take this further by arguing that the lawyer in question, by working on behalf of the plaintiff, must sign a clause.

There is plenty for attorneys to consider here when they find themselves in the middle of a confidentiality agreement. These clauses can raise ethical and legal issues for layers. That’s why adding attorney liability insurance is the right kind of coverage to protect lawyers in the event of a claim made against them.

Violating a Confidentiality Clause

If a clause restricts a plaintiff’s lawyer from speaking about a settlement and they break that clause, the plaintiff could also be held liable through principles of agency. The decision by the lawyer to publish the terms of a settlement may cause that agreement to become void, which would then cause the client to completely forfeit the settlement amounts initially agreed upon. This would open up a world of legal issues for the lawyer who broke the clause.

If a lawyer breaks a confidentiality agreement, it could also result in a lawsuit being brought against them by the settling defendant. Breach of contract may be brought up against the lawyer as well if the violation has caused significant additional litigation.

Best Practices to Avoid Violations and Penalties

It’s important for all parties involved to write down specifically what is and is not allowed in terms of handling an agreement. An effective confidentiality clause would prevent all parties and their attorneys from disclosing the specific amounts and other terms of an agreement.

If a plaintiff’s lawyer is preparing to submit an article to a legal publication or talk to anyone in the media about a case, it’s best to lay out specifically what will be discussed with the defendant before the settlement is finalized. There may even be specific wording that needs to be agreed upon by everyone involved.

When drafting a confidentiality clause it is also very important to make sure that all parties have the ability to make disclosures of the terms of the settlement as this is necessary for business purposes.

About Huntersure

At Huntersure, we specialize in providing quality professional liability solutions to accounting professionals. Our Accountant Liability Insurance program provides coverage for accountants, auditors, bookkeepers, and tax preparers, so no matter where your clients lie in the industry they can have the coverage they need to protect themselves and their assets. To learn more about our operation and our Professional Liability Insurance solutions, contact us today at (855) 585-6255.

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