Ethics: Conflicts for Insurance Counsel

Cincinnati Bar Association
Ethics & Professional Responsibility Committee
Opinion 2008-2009-001

QUESTION: The Inquiring Attorney has asked about factual scenarios at his law firm and the application of Rule 1.7.

Scenario One
The first scenario is as follows:

Our firm's Cincinnati office now represents XYZ Company in a case venued in Cincinnati against ABC Insurance Company (they are actually a party, as opposed to being merely the insurer for a party). Our firm's Cleveland office has been asked by ABC Insurance Company to represent it (again, not one of its insureds) in a wholly unrelated case in Arizona.

The question posed is whether or not the inquiring attorney must obtain informed consent from both ABC Insurance Company and XYZ Company.

Scenario Two
The second scenario is as follows:

Our firm's Cincinnati office is defending XYZ Company through its liability insurer, ABC Insurance Company (which is neither a party to the suit nor our "client"). Our Cleveland office has been asked to sue another insured of ABC Insurance Company in a wholly unrelated case.

The question posed is whether there is a conflict between the clients and ABC Insurance Company for which informed consent must be obtained.

Answer:
Rule 1.7 states that a lawyer's representation of a client creates a conflict of interest if either: 1) the representation of that client will be directly adverse to another current client, or 2) if there is a substantial risk that the lawyer's ability to carry out the representation will be materially limited by the lawyer's responsibilities to another client.

If a conflict of interest exists, the lawyer may still undertake the representation as long as the lawyer is able to provide competent and diligent representation to each affected client and each affected client gives informed consent in writing.

Scenario One - Suing and Defending The Same Insurer
The issue at hand involves a law firm's Cincinnati office's representation of XYZ in a case against ABC, and the firm's Cleveland offices representation of ABC in an unrelated case.

Is Geographic Separation of the Attorneys a Defense against conflict of interest?

Under Rule 1.10, it does not matter that the individual attorney suing ABC is different from the attorney defending it. They are associated in the same firm. Rule 1.10(a) states:

While lawyers are associated in a firm, none of them shall represent a client when the lawyer knows or reasonably should know that any one of them practicing alone would be prohibited from doing so by Rule 1.7 or 1.9 . . ..

There is an exception where the prohibition is based on a "personal interest" of the conflicted attorney and does not present a significant risk of materially limiting representation by other attorneys in the firm. For purposes of this scenario, that is irrelevant.

In Rule 1.0(c), the definition of a "firm" includes lawyers associated in a law partnership without reference to the geographical location of the attorneys. Therefore, the law firm at hand, while comprising offices in several cities, is still considered a single "firm," and its attorneys are restricted by each other's representations according to the conflicts rules.

Is There a Conflict?
Rule 1.7, which governs conflicts between current clients, provides in subsection (a):

(a) A lawyer's acceptance or continuation of representation of a client creates a conflict of interest if either of the following applies:

(1) the representation of that client will be directly adverse to another current client;
(2) there is a substantial risk that the lawyer's ability to consider, recommend, or carry out an appropriate course of action for that client will be materially limited by the lawyer's responsibilities to another client, a former client, or a third person or by the lawyer's own personal interests.

It is important to recognize there is a conflict either if the attorney's representation is directly adverse to a current client, or if there is a substantial risk that his ability to advise his client or advocate the client's interest will be materially limited by the external factors listed. In this case, the firm is asked to represent a client that the firm is simultaneously suing, albeit in a different city, with different attorneys. It is unnecessary to consider whether there is a "substantial risk" of inadequate representation as contemplated by 1.7(a)(2). The rule clearly proscribes the representation, unless the exception outlined in 1.7(b)(1)-(3) applies:

(b) A lawyer shall not accept or continue the representation of a client if a conflict of interest would be created pursuant to division (a) of this rule, unless all of the following apply:

(1) the lawyer will be able to provide competent and diligent representation to each affected client;
(2) each affected client gives informed consent, confirmed in writing;
(3) the representation is not precluded by division (c) of this rule.

(c) Even if each affected client consents, the lawyer shall not accept or continue the representation if either of the following applies:

(1) the representation is prohibited by law;
(2) the representation would involve the assertion of a claim by one client against another client represented by the lawyer in the same proceeding.


"Informed Consent, Confirmed in Writing" merges two terms separately defined under the Rules:
Rule 1.0(f):

(f) "Informed consent" denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.

Rule 1.0 (b):

(b) "Confirmed in writing," when used in reference to the informed consent of a person, denotes informed consent that is given in writing by the person or a writing that a lawyer promptly transmits to the person confirming an oral informed consent…. If it is not feasible to obtain or transmit the writing at the time the person gives informed consent, then the lawyer must obtain or transmit it within a reasonable time thereafter.

Accordingly, the firm may not represent both the insurance company in one case and its adversary in another unless each attorney involved will be able to provide "competent and diligent representation" and "informed consent, confirmed in writing" is obtained from both clients and the other requirements of the rule are met.

Scenario Two - Suing the Insured of an Insurer who Retains the Attorney
In the second scenario, the law firm is asked to defend an insured of ABC in one suit, and to sue an insured of ABC in a wholly unrelated matter.

The first question is whether ABC is a client. The Rules of Professional Conduct answer this question in the negative by describing the attorney's duties to his client when another party has agreed to compensate the attorney. Rule 1.8(f) enjoins an attorney from accepting compensation from someone other than his client unless the following criteria are met: (1) the client gives informed consent, (2) there is no interference with the attorney's professional judgment or the attorney-client relationship, and (3) the confidentiality requirements of Rule 1.6 are met. When an insurer is compensating an attorney for the representation of its insured, Rule 1.8 requires the attorney to provide in writing to the client - i.e. the insured - a comprehensive boilerplate description of the client's rights. Were the insurance company a client, none of these requirements would be necessary or appropriate.

There is authority the attorney represents the insured and not the insurer. In Advisory Opinion 2008-03, the Board of Commissioners for Grievances and Discipline considered whether a liability insurer could properly restrict the activities of defense counsel to control billing. The Board found no Ohio authority supporting the existence of a "tripartite relationship," frequently cited as the source of defense counsel's obligations to the insurer.1 The opinion quoted Cincinnati Bar Association Ethics Opinion 98-99-02: "This Board supports the view expressed by the Cincinnati Bar Association that ‘[t]he insured, not the insurance company, is the client' of defense counsel."2 Swiss Reinsurance v. Roetzel and Andress held that a liability insurer had no claim against the attorney it had retained to represent its insured when there had been an active conflict between the insurer and the insured relative to the insured's representation.3

Accordingly, in scenario two, ABC is not a client, and the law firm is not disqualified from bringing lawsuits against ABC's insureds.

This may not end the inquiry. Under rule 1.7(a)(2), an attorney can be disqualified from representation if "there is a substantial risk that the lawyer's ability to consider, recommend, or carry out an appropriate course of action for that client will be materially limited by the lawyer's responsibilities to another client, a former client, or a third person or by the lawyer's own personal interests." If there exist other factors in the attorney-ABC relationship that would create such a 'substantial risk' - e.g., reluctance on the part of the attorney to challenge a referral source - the attorney may not be able to proceed. "The inherent danger in tripartite relationships is that defense counsel 'may be tempted to help the client [the insurer] who pays the bills, who will send further business, and with whom long-standing personal relationships have developed."4 In the event that the attorney elects to proceed despite such a determination of 'substantial risk' that his abilities as counselor or advocate will be impaired, it is likely that disclosure of his firm's existing relationship with the insurer is necessary as part of obtaining the "informed consent, confirmed in writing" of his client. Technically, however, this must be evaluated on a case- by- case basis.


  1. Traditionally, the relationship between an insurer, its insured under a liability policy, and the attorney retained to represent its insured has been described as "tripartite", implying that the attorney owes a duty to both the insured and the insurer. U.S.F. & G. v. Pietrykowski,(6th Dist. Ct. App.; Feb. 11, 2000) 2000 Ohio App. LEXIS 460. At least one treatise proposes that both the insurer and the client are "clients" of the attorney in this relationship. Windt, Insurance Claims and Disputes, Section 4.19(2001).
  2. Board of Commissioners on Grievances and Discipline Advisory Opinion 2000-03.
  3. Swiss Reinsurance v. Roetzel and Andress (9th Dist. Ct. App. 2005)163 Ohio App. 3d 336; 2005 Ohio 4799; 837 N.E.2d 1215; 2005 Ohio App. LEXIS 4332.
  4. Id.
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