MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2000-23
Insurance Company Staff Attorney-Conflict of Interest between Insurer and Insured
In your letter of November 10, 1999, you indicated that you are employed as a staff attorney for a major insurance company. In that capacity, you are paid a salary by the insurance company to represent the carrier's insureds in the defense of personal injury actions. Staff counsel work in a separately maintained office which bears the name of the supervising lawyer along with the words "and Associates." You are but one of the associates assigned to the office. The front door of the office, all letterhead, and all business cards state that the attorneys are "employees" of the insurance company. Further, at the initiation of the engagement, you, as the assigned attorney, write to the insured advising that although you are the carrier's employee, you represent the insured "and not the insurance company in the suit." As a preliminary matter, the Committee notes that your engagement letter does not correctly describe the representation. Under the Brohawn case noted below, you represent both the insurer and insured.
The focus of your inquiry, however, relates to the written directives that you recently received from the insurance carrier. These directives govern the conduct of representation for insureds of the company. A portion of the directives which are entitled "Tactical Considerations" include the following:
Each and every decision made with reference to a file must be discussed fully and completely with Claim Management, and, where appropriate, with the client. There will not be a tactical decision that will be made independent of the Claim Management Consultation. The discussion with claims must also be made when the decision could be implemented. Once a full and complete discussion on the file handing has taken place, it is necessary that same be documented in the file via letter, memo or a detailed summary of the phone conversation.
You have expressed concern that the directives: (1) may require the disclosure of confidential information from the insured client in violation of Rule 1.6; (2) may impinge on your independent professional judgment in representing insureds; (3) may interfere with the attorney/client relationship, and (4) may require you to disclose confidential information which is harmful to the insured in violation of Rule 1.8(b).
Your inquiry does not provide the Committee with the precise language of the liability policy issued by your employer to the various insureds. The Committee will
assume for the purpose of this opinion that the policy language is similar to that contained in policies routinely issued by carriers providing coverage to insureds involved in personal injury accidents and claims. Thus, we will assume that this typical policy includes a provision which provides that the insurer has a duty to defend the insured and has a right to control the defense.
See,
e.g. Brohawn v. Transamerica Ins. Co., 276 Md. 396 (1975). It is well recognized that where an insurer and insured will conflict,
See, e.g. Hazard & Hodes, The Law of Lawyering, (1998 Supplement) § 1.7:303; ABA, Annotated Model Rules of Professional Conduct (3
rd ed. 1996), pp. 132-133. Your letter of inquiry seems to assume that the "Tactical Considerations" automatically creates a conflict of interest requiring your refusal to follow the insurer's direction. However, the facts presented do not necessarily support such a position.
This Committee has previously stated that:
An attorney who has been engaged by an insurance carrier to represent its insured is required "to represent the insured with complete fidelity and may not advance the interests of the insurer to the prejudice of the rights of the insured." Brohawn v. Transamerica Ins. Co., 276 Md. 396, 411 (1975). Brohawn describes the representation created by a typical insurance contract as "dual representation" which the Court determined is authorized impliedly by the insurance contract.
However, the Court recognized that there can be times when the interests of insured and insurer diverge. When this occurs, the lawyer must withdraw entirely from the case to represent one of the clients only. See Ethics Docket 91-45.
Rule 1.2(a) provides, in pertinent part:
A lawyer shall abide by a client's decisions concerning the objectives of representation, subject to paragraphs (c), (d) and (e), by which they are to be pursued. A lawyer shall abide by a client's decision whether to accept an offer of settlement of a matter….
The Comment to Rule 1.2 states:
Scope of representation. - Both lawyer and client have authority and responsibility in the objectives and means of representation.
The client has ultimate authority to determine the purposes to be served by legal representation.
í í í
In questions of means, the lawyer should assume responsibility for technical and legal tactical issues, but should defer to the client regarding such questions as the expense to be incurred and concern for third persons who might be adversely affected. Law defining the lawyer's scope of authority in litigation varies among jurisdictions.
In the dual representation situation, the attorney must follow the dictates of the insurance agreement concerning the need to defend and the right to control the defense.
See, e.g., The Law of Lawyering, supra, p. 256.8;
Restatement of the Law Governing Lawyers, § 215, Proposed Final Draft No. 2 (1998).
You have expressed the concern that the "Tactical Considerations" did not explicitly state exceptions where (1) confidences of the client are involved; (2) theexercise of the lawyer's independence of professional judgment is involved, or (3) the potential interference with the client/attorney relationship is involved. However, the directives do not suggest that you are not bound to comply with the Rules of Professional Conduct. The Committee has previously recognized that, for example, that some confidential information can be disclosed to an insurer by counsel retained by the insurance company. In Ethics Docket 99-7, we state:
The retaining of counsel is typically done pursuant to the terms of the insurance contract (policy) entered into by and between the insured and insurer. Typically, the policy will provide that the insurer has the right to investigate, negotiate and settle the claim or suit. The insurer must be provided with sufficient information in order to properly evaluate the claim. The disclosure of this information would be impliedly authorized under Rule 1.6. This does not authorize the attorney to divulge information to the insurer which would be to the disadvantage of the client unless the client consents after consultation. See Md. Rule of Professional Conduct 1.8(b).
Thus, the disclosure of some confidential information may have been consented to by implication under the terms of the insurance contract; whereas, other information would require specific consent pursuant to Rule 1.8(b). Similarly, with respect to conflicts which develop between the insured and the insurer during the course of representation, the Committee, on a case-by-case basis, based on specific factual situations has decided whether or not those conflicts require counsel to withdraw entirely from the case or continue to represent one of the clients only. We believe our opinions in Ethics Dockets 90-42 and 91-41 are illustrative.
References: Ethics Docket 90-42, 91-41 and 91-45