Can a lawyer who advises an insurer on coverage prosecute a subrogation claim against that insurer's policyholder for a different insurer?

Plain-English summary

A lawyer represented several insurance companies on contested coverage questions and also represented some of them in subrogation litigation. From time to time, subrogation claims for one insurer client were asserted against persons indemnified by another insurer the lawyer also represented. The lawyer had assumed no conflict arose so long as the subrogation cases involved incidents unrelated to the coverage matters, and asked whether that practice created a conflict.

The opinion concluded the facts presented a prima facie conflict of interest because the lawyer was, in effect, asserting claims against current clients. The committee reasoned that the lawyer's prior coverage advice could affect a defendant insurer's reaction to a subrogation claim, that the lawyer had acquired information about the defendant insurer's business practices useful in settlement negotiations, and that Rule 1.9's protections against acting adversely to former clients apply with equal force to current clients. It also noted the risk that the lawyer's diligence in a subrogation matter could be compromised by an unwillingness to strain the relationship with the defendant insurer (citing ISBA Opinion 829), and that doubts about an asserted conflict where an opponent is also a client are resolved in favor of disqualification (Westinghouse Electric Corp. v. Gulf Oil Corp.; Analytica, Inc. v. NPD Research, Inc.).

The opinion concluded the conflict can be waived by the informed consent of a competent client where the circumstances justify the lawyer's belief that the representation will not be adversely affected (citing ISBA Opinions 90-30 and 90-31). Because the lawyer's clients here were sophisticated business organizations with ample alternative access to legal advice, the committee concluded that obtaining the required informed consent, communicating information sufficient for the client to appreciate the significance of the matter, should present only a minimal challenge.

Currency note

This opinion was issued in 1992, before Illinois adopted the 2010 Illinois Rules of Professional Conduct. The ISBA Board of Governors affirmed the opinion in May 2010 as generally consistent with the 2010 Rules (Rules 1.7 and 1.9), while cautioning that the specific standards referenced may differ from the 2010 Rules. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Is it a conflict to sue, in subrogation, a policyholder of an insurer you also represent?

A: The opinion concluded it is a prima facie conflict because the lawyer is asserting claims against a current client, even where the subrogation incident is unrelated to the coverage work.

Q: Can the conflict be cured by consent?

A: The opinion concluded it can be waived by the informed consent of all affected clients where the lawyer reasonably believes the representation will not be adversely affected; here, the clients were sophisticated insurers for whom that disclosure should be straightforward.

Q: Why does Rule 1.9 matter if these are current clients?

A: The opinion concluded that Rule 1.9's prohibition on acting adversely to former clients applies with equal effect to current clients, particularly because the lawyer had gained information about the defendant insurer useful in negotiating the subrogation claim.

Background and rules framework

The opinion interpreted Rule 1.7(a)-(c) (concurrent conflicts and the disclosure required for waiver) together with Rule 1.9 (duties to former clients, applied here to current clients), reasoning that asserting a claim against a current client requires informed consent (Model Rules 1.7, 1.9).

Citations and references

Rules of Professional Conduct:

• Model Rule 1.7 (conflict of interest; concurrent clients) / Illinois Rule 1.7(a)-(c)
• Model Rule 1.9 (duties to former clients) / Illinois Rule 1.9

Cases:

• Westinghouse Electric Corp. v. Gulf Oil Corp., 588 F.2d 221 (7th Cir. 1978), doubts about a conflict where an opponent is also a client resolved toward disqualification
• Analytica, Inc. v. NPD Research, Inc., 708 F.2d 1263 (7th Cir. 1983), use of a former client's information presumed

Other opinions cited:

• ISBA Opinion Nos. 829, 90-3, 90-30, 90-31

See also

• ISBA Ethics Op. 16-04: Of Counsel, Fees and Conflicts
• ISBA Ethics Op. 93-14: Contacting an Insured Party

Source

• Landing page: https://www.isba.org/ethics/opinions/9126