RI-89

June 10, 1991

SYLLABUS

When an insurer retains a lawyer to defend an insured, the insured is the lawyer's client and the lawyer must advocate the insured's position even if it is adverse to the insurer.

If a lawyer represents the insured and the insurer in a matter, and one client later wishes the lawyer to assert a factually sustainable theory that serves that client's interest but is adverse to the other, the lawyer must withdraw from representation of both clients.

References: MRPC 1.2(a), 1.2(c), 1.4, 1.7(a), 1.7(b), 1.8(f), 3.3(a)(1), 3.9, 8.4(c); CI-876, CI-1146; ABA i783, i822, i1476.

TEXT

Employer is insured by the Insurance Company A in year one. Employee suffers a compensable injury during year one. Insurance Company A pays the employee's claim. The employee eventually returns to work for Employer in year two. Employer switches to Insurance Company B in year two. Employee in year two terminates employment with Employer and claims the right to ongoing worker's compensation benefits as the result of the year one injury and also alleges worsening of that condition caused while working in year two. Insurance Company A hires Lawyer A to defend the year one claim. Insurance Company B hires Lawyer B to defend the year two claim. Both lawyers deny that the injury resulted from employment and also deny that the employee continues to be disabled. Lawyer B denies that any covered injury occurred in year two.

The lawyers ask, if the Worker's Compensation Appeals Board ultimately decides that the employee is disabled from a work related injury and assuming Employer will incur worker's compensation higher insurance premiums from Insurance Company B if the injury occurred or was aggravated in year two, whether Lawyer A may deny the injury occurred in year one and assert that any injury was a new injury in year two or a year two aggravation of the old injury and thus occurred while Insurance Company B was on the risk, while Lawyer B simultaneously asserts that any injury causing a current disability was solely the result of the injury in year one, while Insurance Company A was on the risk?

In the alternative, if Employer cancels coverage with Insurance Company A in year two and does not purchase substitute insurance, resulting in Lawyer A defending the year one claim and Employer is uninsured on the year two claim for a new injury or an aggravation, may Lawyer A argue as an alternative defense that the employee's current claim is the result of a new injury in year two that caused the employee's current condition or aggravated the employee's prior injury?

When an insurer retains a lawyer to defend an insured, the insured is the lawyer's client. CI-876; ABA i783, ABA i822 and ABA i1476. MRPC 1.8(f) prohibits a lawyer being paid by a third party unless the client consents and there is no interference with the lawyer-client relationship, with the lawyer's independent professional judgment, or with lawyer-client confidentiality. Even when the same lawyer represents the insurance company and the insured, dual representation is ethically permitted only if the interests of the insurer and the insured do not conflict. CI-1146; MRPC 1.7.

Regarding whether the lawyer for the insured can assert that the injury occurred in year one or year two, a resolution of this question initially requires an analysis of the specific facts of the case to determine whether a bona fide argument can be made that the disabling injury or aggravation of that injury occurred in either year. If the lawyer is reasonably certain that the facts do not support a claim that the disabling injury occurred in year one, then the lawyer cannot assert that position. MRPC 3.1. Similarly, if the facts will not support a claim that the disabling injury occurred in year two, that claim cannot be asserted.

MRPC 3.3(a)(1) prohibits a lawyer from knowingly making a false statement of material fact or law to a tribunal. This rule would include an adjudicative tribunal such as one handling worker's compensation cases. [Note: MRPC 3.9 makes clear that MRPC 3.3(a)(1) also applies to non-adjudicative tribunals and agencies.] If a lawyer were to assert a position not supported by the facts, the lawyer would be engaging in conduct "prejudicial to the administration of justice" in violation of MRPC 8.4(c) and would be assisting a client in fraudulent conduct in violation of MRPC 1.2(c); R-9.

Assuming that the specific facts of the case will reasonably support a claim that the injury occurred in either years one or two, then the lawyer is professionally obliged under MRPC 1.4 to counsel the client as to which legal position is in the client's best interest. The comment to MRPC 1.4 states:

"The guiding principle is that the lawyer should fulfill reasonable client expectations for information consistent with the duty to act in the client's best interests and consistent with the client's overall requirements as to the character of representation."

In the above situation, it is the right of Employer to make the ultimate choice on the objectives of the representation and to be consulted about the means. MRPC 1.2(a) and Comment, state:

"(a) A lawyer shall seek the lawful objectives of a client through reasonably available means permitted by law and these rules."

"[Comment] The client has ultimate authority to determine the purposes to be served by legal representation, within the limits imposed by law and the lawyer's professional obligations . . . . In questions of means, the lawyer should assume responsibility for technical and legal tactical issues, but should defer to the client regarding such questions as . . . concern for third persons who might be adversely affected."

Whether to claim the injury occurred in year one or year two is not merely a "technical" or "legal tactical issue." Assuming Employer has as one of its objectives of legal representation minimizing future insurance premiums in situation one and assuring insurance coverage in situation two, then it is in Employer's interest to assert that the disabling injury occurred in year one. While this position may "adversely affect" the interests of one or the other insurance carriers, the lawyer must defer to the client's decision in this regard. Thus, if Employer, after being fully advised of all relevant considerations, chooses to assert that the injury occurred in year one, then the lawyers are professionally required to assert that if a disabling injury occurred, and if it was work related, it occurred in year one.

If either insurance company seeks to interfere with the retained lawyers' duties of loyalty to Employer, the lawyers must clarify for the insurance companies their duties to Employer.

If the lawyers are not merely retained by the insurance carrier to Employer, but actually represent both Employer and an insurer, then a conflict exists under MRPC 1.7(a), and the lawyer may only continue the representation if the lawyer's relationship with the clients will not be adversely affected, and both the insurer and the Employer consent after consultation. MRPC 1.7(a)(2).