The Florida Bar
In light of the potential adverse consequences for a physician of settlement of a malpractice action, and of the insurance carrier's right to settle without the physician's consent, a lawyer asked to represent both the physician and the carrier must, before accepting the employment, consult with both about the issue of settlement. The attorney may not participate in settlement negotiations on behalf of the carrier if the physician is opposed to settlement, nor may the attorney represent either the physician or the carrier in any dispute between them over settlement.
May 1, 1987
May 1, 1987
RPC: 4-1.4, 4-1.7, 4-1.7(a), 4-1.7(b)
Statutes: F.S. §458.331(1)(t) (1985), F.S. §627.4147(1)(b) (1985)
The Committee has been asked for guidance in resolving the ethical dilemma created for attorneys by the Comprehensive Medical Malpractice Reform Act of 1985. The Act requires that all medical malpractice insurance policies issued or renewed after October 1, 1985, include a clause that authorizes the insurance company to settle claims within the policy limits without the consent of the physician/insured. Section 627.4147(1)(b), Florida Statutes (1985).
It is not unusual for physicians to oppose settlement, as three settlements exceeding $10,000 each in a five-year period automatically subjects physicians to investigation and possibly discipline by the Department of Professional Regulation. Section 458.331(1)(t), Florida Statutes (1985).
Traditionally the insurance company retains an attorney to represent both the company and the insured in the malpractice action. The settlement clause, in combination with the potential consequences of settlement for the physician, presents a potential, if not actual, conflict of interests for an attorney retained to represent both the physician and the insurer. The attorney may undertake the dual representation only if the requirements of Rule 4-1.7, Rules Regulating The Florida Bar, are met. Rule 4-1.7 provides in pertinent part:
4-1.7 Conflict of interest; general rule.
(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to the interests of another client, unless:
(1) The lawyer reasonably believes the representation will not adversely affect the lawyer's responsibilities to and relationship with other client; and
(2) Each client consents after consultation.
(b) A lawyer shall not represent a client if the exercise of independent professional judgment in the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person or by the lawyer's own interest, unless:
(1) The lawyer reasonably believes the representation will not be adversely affected; and
(2) The client consents after consultation.
(c) When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.
Under this rule a lawyer may not undertake to represent both the physician and the insurer if there is a possibility that the lawyer's exercise of independent professional judgment on behalf of either will be materially limited by the lawyer's responsibilities to the other unless the conditions stated in the rule are met: the lawyer must reasonably believe that fulfilling his professional obligations to one of the clients will not adversely affect the representation of the other client, and both clients consent to the dual representation after consultation. The consultation must include an explanation of the implications of the common representation and the advantages and risks involved.
The consultation required by Rule 4-1.7 must occur before the lawyer undertakes the dual representation. The consultation with the physician must include disclosure of the existence and effect of the settlement clause and of the potential consequences of a settlement exceeding $10,000.
As discussed below, the attorney also must explain to both the physician and the insurer the ethical limitations on the lawyer's involvement in settlement negotiations or in any dispute that might develop between the physician and the insurer with regard to settlement. Whether or not the dual representation proposed by the insurer would include involvement in settlement negotiations, the attorney must explain to both the physician and the insurer that the attorney is ethically precluded from being involved on behalf of either in any dispute that may arise between them on the question of settlement.
If the dual representation is to include involvement in settlement negotiations, it is necessary for the attorney to ascertain at the initiation of the employment whether an actual conflict of interests already exists with respect to settlement. An actual conflict does exist if the physician is unyieldingly opposed at the outset to settlement of the claim regardless of what may develop in the case. In these circumstances the attorney may not represent either physician or the insurance company in their dispute over settlement, nor may the attorney participate on behalf of the insurer in settlement negotiations with the plaintiff. Representation of either the physician or the insurer in the dispute between them while the lawyer purports to represent both of them in the underlying malpractice action clearly is prohibited by Rule 4-1.7(a). To participate on behalf of the insurer in negotiating a settlement when the physician adamantly opposes settlement clearly would violate Rule 4-1.7(b) because the lawyer's duty to the insurer to achieve a favorable settlement would be in direct conflict with his duty to the physician not to settle.
Thus if an actual disagreement concerning settlement exists at the outset, the attorney's consultation with the physician and the insurance company should include disclosure that the attorney may not and will not participate in any way in the settlement controversy on behalf of either, that each may need independent counsel for settlement matters, and that the dual representation will be limited to defending the malpractice claim. The attorney likewise should advise both of the clients that each has the right to have independent counsel. The attorney should disclose to the physician that although the attorney will not be involved in any settlement negotiations that may be undertaken or in any dispute between the physician and the insurer, the dual representation of the physician and the insurer in the defense of the malpractice claim necessarily includes evaluating the case and making a recommendation to both on the likely outcome if the case should be tried and on the settlement value of the claim (unless the insurer chooses to waive its right to such evaluation and advice). Advisory Opinion 81-5. See Rule 4-1.4.
If the physician has not yet made a decision on the issue of settlement or is willing to defer to the insurer, the attorney may participate, with the consent of both the physician and the insurer, in the consideration and negotiation of settlement until such time, if ever, the insurer and the physician reach a disagreement on the matter of settlement. If such a disagreement ever developed, the attorney would be obligated to withdraw from any involvement on behalf of either on the matter of settlement. These facts should be disclosed to the two clients.