Can a lawyer who represents a corporation in bankruptcy also file a workers' compensation claim for a former employee injured working for that corporation?

Plain-English summary

An attorney representing a corporation in bankruptcy proceedings was asked by a former employee of the corporation to file a workers' compensation claim for injuries suffered on the job. The attorney intended to proceed directly against the employer's workers' compensation insurance carrier, without naming the corporation as a party. The committee was asked whether the attorney could ethically represent the former employee under those circumstances.

The committee first addressed the legal premise. It found that the attorney could not, as proposed, proceed directly against the carrier without first or concurrently proceeding against the former employer. Section 138.4(g) of the Workmen's Compensation Act makes the carrier primarily liable only after the employer's liability is established and the employer refuses to pay (citing Equitable Casualty Underwriters v. Industrial Commission), so an action against the insurer alone, bypassing the employer, would be premature. That meant the attorney would be representing both parties to the compensation claim, in clear violation of Rule 5-105(a) (citing Opinion 581).

The committee added that the answer would be the same even if the Act permitted suing the carrier without naming the employer. The corporation would still be a party in interest, like any insured whose exposure is covered by insurance; the attorney might be put at odds with the corporation he represented in trying to establish the corporation's liability to support the claim; and he might use confidential information learned during the corporate representation on the claimant's behalf. The committee also noted that, depending on the section of the Bankruptcy Act involved, the corporation might have further life after bankruptcy and could be adversely affected by increased insurance rates or the insurer's subrogation rights. Under any of these circumstances, the individual claimant's interests were so at odds with the corporation's as to prohibit the dual representation under Rule 5-105(a).

Currency note

This opinion was issued in 1983, under the former Illinois Code of Professional Responsibility and before Illinois adopted the 2010 Rules of Professional Conduct. The ISBA Board of Governors affirmed the opinion in July 2010 as generally consistent with the 2010 Rule (Rule 1.7), while cautioning that the specific standards referenced may differ from the 2010 Rules. Subsequent rule amendments or later opinions may have changed the analysis, including the workers' compensation statute cited. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer for a corporation handle a workers' comp claim by a former employee against that corporation?

A: The opinion concluded no; the claimant's interests are too adverse to the corporate client's, so Rule 5-105(a) prohibits the dual representation.

Q: Does suing only the insurance carrier avoid the conflict?

A: No. The committee said the carrier could not be sued without first establishing the employer's liability, putting the lawyer on both sides; and even if it could, the corporation would remain a party in interest affected by the claim.

Q: Why does the pending bankruptcy not remove the conflict?

A: Per the opinion, depending on the section of the Bankruptcy Act, the corporation might survive the bankruptcy and could still be harmed by increased insurance rates or the insurer's subrogation rights.

Background and rules framework

The opinion applied former Illinois Code Rule 5-105(a) (declining employment where independent judgment for an existing client would be adversely affected), against the backdrop of the Workmen's Compensation Act. The Board's 2010 affirmation maps the analysis to current Illinois Rule of Professional Conduct 1.7 (concurrent conflicts), corresponding to ABA Model Rule 1.7.

Citations and references

Rules of Professional Conduct:

• Illinois Code Rule 5-105(a) (applied in the opinion)
• Illinois RPC 1.7 (2010 equivalent per the Board's affirmation)
• MR 1.7 (concurrent conflicts)

Statutes:

• Workmen's Compensation Act, Ill. Rev. Stat. 1981, ch. 48, par. 138.4(g)

Cases:

• Equitable Casualty Underwriters v. Industrial Commission, 322 Ill. 462, 153 N.E. 685 (Ill. 1926) (carrier's liability presupposes the employer's established liability and refusal to pay)

Other opinions cited:

• ISBA Opinion 581: a lawyer may not represent both sides of a workers' compensation claim

See also

• ISBA Ethics Op. 829: Firm Conflict Over a Sole Owner
• ISBA Ethics Op. 790: Suing a Former Joint Client
• ISBA Ethics Op. 803: Lawyer-Commissioner Repping the Body

Source

• Landing page: https://www.isba.org/ethics/opinions/851