CI-768

April 20, 1982

SYLLABUS

When lawyer A represents a client in a civil claim who is a joint plaintiff with a subrogee insurance carrier, represented by lawyer B, according to DR 7-104(A)(1), if there is potential adversity between the claimant and the insurer, related go the present suit, lawyer A should not communicate or cause to communicate on the subject of the representation with the insurer he or she knows to be represented by a lawyer in that matter unless he or she has the prior consent of the lawyer representing the insurer to do so.

References: DR 7-104(A)(1); CI-377.

TEXT

The factual situation involves a lawyer's representation of a client in a pending suit for damages against corporation "x," for its alleged negligence in causing a fire that destroyed the client's property. The client's insurance carrier (insurer) paid off the client, the insured, pursuant to the insurer's fire policy which covered a portion of the loss, and took the usual subrogation receipt. The insurer than exercised its privilege to engage another lawyer (lawyer B) from another county, and joined as a plaintiff in the suit for damages against corporation "x."

The locale of the fire loss, and the majority of the investigation, trial preparation and actual conduct of the trial by jury is in lawyer A's county (not in that of lawyer B). Therefore, the client is complaining about having to bear expenses as well as attorney lees, which are directly related to the insurer's recovery of monies it paid out as subrogee, and the client asked lawyer A to take this matter up with the insurer. Consequently, the inquirer called the insurer's subrogation department, voiced the client's dissatisfaction, and asked if it would advice as to its usual practice in such a situation and offers any other suggestions. The inquirer reported this telephone call to the insurer's subrogation department to lawyer B, who responded that any such contact with the insurer should be through his/her office, as lawyer B regards this point as a part of the suit against corporation "x."

Disagreeing with lawyer B's opinion (in that you and your client view this as a separate matter between your client and the insurer, which you do not feel lawyer B could effectively present to the insurer), you wrote lawyer B, suggesting that he or she further consider the matter and perhaps come up with an equitable solution. You also forwarded an information copy to the insurer, advising it not to contact you directly in this regard.

The question posed is whether it is ethical, if the need continues and your client so desires, for you to pursue this matter directly with the insurer and not through lawyer B.

Regarding any future actions contemplated by lawyer A on behalf of the client and the insurer are currently in a subrogation relationship, with both parties joined as plaintiffs in a single suit, the situation described could potentially result in the client and the insurer becoming adverse parties in further proceedings relative to cost, fees and expense distribution arising out of this present suit. DR 7-104(A)(1) states:

"(A) During the course of his or her representation of a client a lawyer shall not:

"(1) Communicate or cause another to communicate on the subject of the representation with a party he/she knows to be represented by a lawyer in that matter unless he or she has the prior consent of the lawyer representing such other party to do so."

There are two previous opinions of the Committee which although they are not totally analogous to your present situation, represent somewhat similar issues, and clarify the significance of DR 7-104(A)(1).

In CI-377, a lawyer retained by a client to collect damages for injuries incurred by the client's son in an accident with an uninsured motorist, after obtaining necessary proofs, received a check from the insurance company as no-fault payment of hospital bills related to the accident. The lawyer forwarded the check to the hospital but the hospital lawyer refused to follow the lawyer's instructions of endorsing the check, and returning it so that the claimant's lawyer could send the hospital the amount of the check less the lawyer's fee. Claimant's lawyer also offered to permit the hospital lawyer to join in the civil suit pending in the uninsured motorist matter and offered the hospital a lien for any recovery for the balance of the bill. The hospital lawyer then wrote directly to the claimant, with a copy of the letter to claimant's lawyer, in which the hospital lawyer outlined the dispute concerning payment of the hospital bill and the insurance check, and requested the claimant's cooperation in resolving the matter with the hope that litigation would not be necessary . DR 7-104 was deemed applicable in that situation, though the hospital lawyer claimed that the claimant was represented by claimant's lawyer only in the uninsured motorist claim and not in the no-fault payment of hospital bills. The opinion stated that since the hospital lawyer was aware that the claimant's lawyer represented the claimant in all matters dealing with the claims of the claimant's son for injuries and that the lawyer was to receive a one-third contingency fee of anything collected, the hospital lawyer acted improperly be contacting the claimant directly and outlining his/her version of the dispute and seeking cooperation to resolve the matter. For support, the opinion cited C-187 and Canon 7 as specifically prohibiting any encroachment of an established relationship between a lawyer and client.

The Annotated Code of Professional Responsibility, of the American Bar Foundation states that the term "a party . . . represented by a lawyer" has been broadly construed by courts that have interpreted it for the purpose of applying DR 7-104(A)(1), and states:

"One court held that the phrase included a party who had counsel of record, whether or not counsel was in fact authorized to act on behalf of the party in that matter. See Abeles v. State Bar, 9 Cal3d 603, 108 Cal Rptr 359, 363, n.7 (1973), in which the court held that determination of counsel's authority to act for a party was an issue to raise in the trial court and not one to be resolved unilaterally by the opposing attorney. Even when another individual or entity has become the real party in interest, the attorney may not be permitted to contact the original party to the action. "

In CI-390, claimant's lawyer threatened to contact the insurance company, who had hired lawyer B to defend against the claim against its insured, accusing B of neglecting the matter in that he or she did not respond to the written settlement offer for over seven months (after B filed an answer and pre-trial discovery was complete). This opinion also applied DR 7-104(A)(1) and deemed it improper for the claimant's lawyer to communicate directly with the insurance carrier concerning a proposed settlement without lawyer's B consent.

ABA Informal Opinion 1348 found it impermissible for lawyer A to send a copy of the settlement offer to lawyer B's client, even though he/she believed lawyer B was not relaying settlement offers. Although Dr 7-104(A)(1) does not permit the lawyer to send copies of settlement offers directly to the adverse party, it does permit the lawyer to send them to court, at a time and place of which the declining lawyer is advised. Informal Opinion 1190 advises that even if opposing counsel consents to direct contact with the adverse party, the lawyer should obtain the consent in writing before undertaking negotiations.

In light of the above opinions and interpretations of DR 7-104(A)(1) it would appear that any future actions on the client's behalf in pursuing this matter should go through the insurance company's lawyer. If you do not feel that he is the proper attorney who should be representing the insurer in this matter, or if you do not feel that the lawyer is effectively presenting your position to the insurer, then these issues should more appropriately be raised by presenting them in court, rather than by contacting the insurer directly.