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The Florida Bar
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PROFESSIONAL ETHICS OF THE FLORIDA BAR

OPINION 70-58
March 1, 1971

An attorney may represent the insured in litigation against the insurer despite the fact that the insurer is paying the fee. If the arrangement would prevent the attorney from exercising independent judgment for his client, he should withdraw.

CPR: EC 5-23, DR 5-105, 5-105(B), 5-107(B)
Case: Spadaro v. Palmisano, 109 So.2d 418 (Fla. 3d DCA 1959)

Chairman Massey stated the opinion of the committee:

The inquiring attorney was employed by an insurance carrier to represent its owner and driver as defendants in a litigated case. A conflict appeared between owner and driver over permissive use of the vehicle with the result that the inquirer continued to represent the owner of the vehicle and, of course, the insurance carrier while other counsel was retained for the driver. Later, the driver on deposition testified so as to bring about a conflict between the owner and the insurance carrier, with the inquirer then representing the owner and the carrier obtaining counsel of its own. Apparently the insurance carrier is paying all of the counsel. The inquirer, however, has found out from his “client,” the owner, information detrimental to the owner's interests and perhaps to the coverage to be afforded by the insurance carrier. Additional investigation is necessary to evaluate the applicability of such information. At the inquirer's request, the owner obtained separate counsel to actively pursue the investigation, it being the inquirer's belief he would be violating his duty to the insurance carrier paying his fee to try to prove coverage exists for the owner when the insurance carrier has denied the same. He asks what steps should be taken.

Of concern to the inquirer is the case of Spadaro v. Palmisano, 109 So.2d 418 (Fla. 3d DCA 1959), in which it was held that when counsel employed by a carrier to represent its insured has reason to believe there is collusion (i.e., he does not believe the insured), it is not proper for counsel to continue to represent the carrier and the insured. The case further held counsel's successful impeachment of the insured to be reversible error.

In most cases, the insurance carrier's and owner's (insured) interests coincide and there is no conflict. In the event the carrier determines to deny coverage by reason of the insured's conduct or facts ascertained while engaged in the defense of a claim, the conflict arises between the carrier and the owner. At that point, the carrier may deny coverage and withdraw all representation of the owner, defending the claim under a reservation of rights. Assuming this latter course, however, it seems clear the attorney representing the owner, although provided by the carrier, does not and must not owe the carrier any duty as respects the issue of coverage.

EC 5-23 should be reviewed, as well as DR 5-107(B), which provides:

A lawyer shall not permit a person who recommends, employs or pays him to render legal services for another to direct or regulate his professional judgment in rendering such legal services.

Since in the instant inquiry the inquirer has been retained to represent the owner, albeit by the carrier, and the carrier does have other counsel to protect its interests on coverage, the Committee conceives of no impediment ethically for the inquirer to continue representing the owner as to the liability action itself or any matter affecting coverage unless the inquirer is swayed in his professional judgment as contemplated in DR 5-105.

However, assuming the attorney believes himself to be violating his duty to the insurance carrier because it is paying his fee, he should withdraw from representing any party to the litigation, as his conception of his ethical duties would prevent his exercising independent professional judgment for his client, the owner. DR 5-105(B) is directly applicable.

Ethical considerations here stated cannot be varied by contractual provisions of the insurance policy. Assuming a coverage question to exist, if the insurance carrier employing the attorney who is representing the insured under a reservation of rights insists on controlling the attorney in his defense of the owner, or otherwise influences the attorney's conduct in defense of the owner, then it is manifestly unethical for that attorney to represent the owner on behalf of the carrier. In this inquiry, the attorney does not owe any duty to the carrier which would prevent his continued representation of the owner. He is not subject to the carrier's control and is not required to disclose confidences or information from the owner or others involved in the matter to the carrier.

[Revised: 08-24-2011]