The Florida Bar
(May 1, 1997)
(May 1, 1997)
An attorney who has been hired by an insurance company to represent an insured owes his primary duty to the insured. An attorney may not ethically continue the representation of the insured under instructions from the insurance carrier that the lawyer file for summary judgment where the attorney has determined that such a motion would be against the insured's interest.
RPC: Rule 4-1.8(f), Rule 4-1.6, Rule 4-1.7, Rule 4-1.7(b), Rule 4-5.4(d)
Opinions: 70-58, 81-5
A member of the Florida Bar requested an advisory ethics opinion. The operative facts presented by the inquirer are as follows:
An attorney is hired by an insurance company to represent its insured. The insurance policy provides a defense for negligent acts of the insured. A complaint has been filed against the insured alleging negligence and breach of contract. The insurance company has already paid damages to the plaintiff relating to damage caused by the insured's negligence. Accordingly, the insurer instructs the attorney to file a motion for partial summary judgment on the negligence claim.
The attorney believes that, although he may reduce potential damages in the lawsuit if the motion for summary judgment is granted, the complaint would no longer contain allegations to support the insurance company's duty to defend the insured. It is the opinion of the attorney that the insured would have little to gain by winning the motion and that it would be in the insured's best interest to have continued representation.
The attorney asks whether it would be proper to continue to represent the insured as long as the insurance company does not affect the attorney's exercise of independent professional judgment on behalf of the insured. Accordingly, the inquirer proposes to inform the insurance company that a motion for summary judgment would not be in the best interest of the insured and will not be filed.
The Rules of Professional Conduct contemplate the potential conflict of interests that can
arise when an attorney is paid by a third party to represent a client. A common scenario under which a third party pays the legal fees of a client is when an insurance company pays an attorney to defend one of its insureds. Rule 4-1.8(f) prohibits a third party payment of an attorney's fee unless certain conditions are met. The rule provides:
(f) Compensation by Third Party. A lawyer shall not accept compensation for representing a client from one other than the client unless:
(1) the client consents after consultation;
(2) there is no interference with the lawyer's independence of professional judgment or with the client-lawyer relationship; and
(3) information relating to representation of a client is protected as required by rule 4-1.6.
The comment to Rule 4-1.7 specifically addresses instances where a conflict arises between insurer and insured. The comment, in pertinent part, states:
A lawyer may be paid from a source other than the client, if the client is informed of that fact and consents and the arrangement does not compromise the lawyer's duty of loyalty to the client. See rule 4-1.8(f). For example, when an insurer and its insured have conflicting interests in a matter arising from a liability insurance agreement and the insurer is required to provide special counsel for the insured, the arrangement should assure the special counsel's professional independence . [Emphasis added.]
As indicated, an attorney who undertakes representation when being compensated by a third party must ensure that his or her independent professional judgment is not affected by the fact that someone other than the client is paying the attorney's fees. In other words, the attorney should make a division between economic interests and professional loyalties.
Although the interests of the third party paying the attorney's fees and the interests of the attorney's client often are aligned, there also are times when the interests diverge -- such as when a dispute arises over insurance coverage. If the divergence in interests would adversely affect the attorney's representation of the client insured, the attorney must withdraw from the representation. Florida Ethics Opinion 70-58. See also Rule 4-1.7(b) and Rule 4-5.4(d).
This Committee has previously published an advisory opinion addressing a situation in which an attorney who was hired by an insurance company to represent an insured was instructed by the insurer to withhold any opinion as to the settlement value of the case from the insured client. The Committee advised the attorney to seek to have the insurer voluntarily remove the restraint and, if that attempt was unsuccessful, to withdraw from the representation. Florida Ethics Opinion 81-5. It is the opinion of the Committee that the attorney in the instant inquiry should follow the guidance provided in our earlier opinions. As long as the representation continues, the attorney's primary duty is to the insured. The duty of communication to the insured also continues as long as the representation continues. Once the insured is informed and with the insured's consent, the inquiring attorney should inform the insurer that, when he has been retained to represent an insured, he may only act in the bes t interests of the insured and, accordingly, the attorney should ask the insurer to withdraw its request that he file a motion for partial summary judgment. If the insurer refuses, the attorney should advise the insured of the circumstances surrounding the controversy and act only in the best interests of the insured. The attorney's ability to continue in the representation will be dependent upon whether he can comply with the requirements of Rules 4-1.8(f), 4-1.7(b), and 4-5.4(d), as previously discussed.