UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.
Ethics Advisory Opinion 90-44
Plaintiff's attorney has filed suit against a defendant in an automobile wreck case. Defendant's insurance company retains attorney B to represent defendant in the suit. After discovery has been completed attorney A submits a written demand to attorney B for settlement of the case for a certain sum. Attorney B responds in writing: "I do not have the authority to negotiate. My role is simply to prepare the case in anticipation of trial. I have forwarded your letter to (the insurer). I would recommend that you speak once again with (the adjuster)."
Question:
Does attorney B's conduct violate the rules of Professional conduct, and in particular rule 1.8 (f) and rule 5.4 (c) and if so what action should attorney A take in the matter?
Summary:
Attorney B's conduct, assuming insured has limited the scope of representation as defined in Rule 1.2, does not appear to violate any of the Rules of Professional Conduct.
Opinion:
There are many aspects of a lawyer's activities which are permitted by the Rules of Professional Conduct, provided the client "consents after consultation." The relationship between and among an attorney, an insured and an insurer, while common in practice, presents unusual situations vis-a-vis the Rules. This relationship could be viewed as one in which the insured is the client, with the insurer only paying for the representation. Alternatively, the relationship could be viewed as one where the attorney represents two clients. Either is permissible provided that the client or clients have "consented after consultation." For the purposes of answering your questions, we assume that both the insured and the insurer have "consented after consultation", since your fact presentation offers no evidence to the contrary. Were this not the case, the answer might be different.
Rule 1.7 provides that an attorney may represent two clients if the lawyer reasonably believes that the representation will not be adversely affected, and the clients consent after consultation. We assume here that the insured has consented to the insurer's directing the litigation and retaining charge of negotiations. We further assume that negotiations are within the policy limits, and, consequently, that leaving negotiation in the hands of the insurer does not put the insured at risk. Rule 1.2 (c) clearly provides that the objectives of a lawyer's representation may be limited by a client. It is perfectly permissible for a client in any situation to tell the lawyer that he, the lawyer, is only to prepare the case for trial; that the client intends to retain the right to conduct any settlement negotiations. Again we must assume here, given no evidence to the contrary, that the insured has limited the scope of representation pursuant to Rule 1.2. (If the insurer is also considered a client, it has, of course, also limited the scope of representation pursuant to Rule 1.2).
It would be the opinion of this Committee that, unless and until evidence of divergence of interest between insured and insurer appears, such as in a situation where the demand is greater than the policy limits, a question of coverage or other conflict exists, both the insured and the insurer are "clients" of the attorney, and therefore the conditions contained in Rule 1.8 (f) and 5.4 (c) have been met. Of course, at such times as such a conflict emerges, it would appear that the attorney can no longer represent both parties, and it appears to be common practice in this situation that the insured and insurer are instructed to obtain independent counsel.
If the insured has not limited the scope of representation pursuant to Rule 1.2, then Rule 1.8. (f) and Rule 5.4 (c) would appear to be violated.