In Kentucky, can a lawyer the insurer hires to defend an insured also represent the insurer on bad-faith (UCSPA) claims brought in the same action?

Plain-English summary

The opinion addressed a fact pattern in which a personal injury action included both tort claims against the insured and UCSPA claims against the insurer, and the insurer wanted one lawyer to represent both. The Committee began with the principle it had stated many times: defense counsel represents the insured, not the insurer, and that duty arises from the attorney-client relationship governed by the Rules of Professional Conduct, not the insurance contract.

The Committee concluded that representing both would place the lawyer on the "horns of a dilemma." The carrier has a strong interest in securing dismissal of both the UCSPA and tort claims, while the insured's interest is in dismissal of the tort claims alone. The handling of the defense could itself become relevant to the insurer's liability, and confidential information bearing on coverage that the insured shared would, if the insured were the only client, be protected under KRPC 1.6 and 1.7. The Committee reasoned that the act of advising the insured whether to consent to dual representation would itself be materially affected by the lawyer's responsibilities to the insurer and the lawyer's own interests, so consent could not cure the conflict (KRPC 1.7(b)). It added that conflicting interests could also arise during the litigation, for example over settlement, undermining the lawyer's independent judgment and the relationship with the insured.

Currency note

This opinion was issued in 1995 and predates the Kentucky Supreme Court's substantial 2009 revisions to the Rules of Professional Conduct (SCR 3.130), as the opinion's own prefatory note states. Rules 1.2 and 1.7 were substantially amended after this opinion issued. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Could one lawyer represent both the insured and the insurer when the suit included UCSPA claims against the insurer?

A: No. The Committee concluded the arrangement created conflicting loyalties because defense counsel's duty runs to the insured, not the insurer, and the two clients' settlement interests diverged.

Q: Could the insured's consent fix the conflict?

A: Per the opinion, no. The Committee reasoned that the very act of advising the insured whether to consent would be materially affected by the lawyer's duties to the insurer and the lawyer's own interests, so the consent could not be sound under KRPC 1.7(b).

Q: Why did the opinion treat the insured, rather than the insurer, as the client?

A: The Committee restated its long-held view that defense counsel's duty arises from the attorney-client relationship with the insured and is governed by the Rules of Professional Conduct, not by the insurance contract that pays the bill.

Background and rules framework

The opinion interprets KRPC 1.7 (conflicts of interest; Model Rule 1.7), drawing on KRPC 1.2 (scope of representation and the client's authority over settlement; Model Rule 1.2), KRPC 1.6 (confidentiality; Model Rule 1.6), and KRPC 1.8 (Model Rule 1.8). The analysis turns on the principle that the lawyer the insurer retains owes loyalty and confidentiality to the insured.

Citations and references

Rules of Professional Conduct:

• MR 1.7 / KRPC 1.7 (conflict of interest)
• MR 1.2 / KRPC 1.2 (scope of representation; client's settlement authority)
• MR 1.6 / KRPC 1.6 (confidentiality)
• MR 1.8 / KRPC 1.8 (conflicts; specific rules)

Other opinions cited:

• KBA E-331: the insured is entitled to representation not adversely affected by prohibited conflicts
• KBA E-340; KBA E-368

See also

• KBA Ethics Op. E-410: Insurance Defense, Reservation of Rights, and Coverage Conflicts
• KBA Ethics Op. E-393: Contacting an Insured Tortfeasor Over the Insurer's Objection

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-378.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-378
Issued: March 1995

Since the adoption of the Rules of Professional Conduct in 1990, the Kentucky Supreme
Court has adopted various amendments, and made substantial revisions in 2009. For
example, this opinion refers to Rules 1.2 and 1.7, which were substantially amended.
Lawyers should consult the current version of the rules and comments, SCR 3.130,
(available at http://www.kybar.org), before relying on this opinion.

Question:

May a lawyer paid by insurer to defend an insured in a personal injury action in
which claims are also made against the insurer under the UCSPA represent both
the insured and the insurer?

Answer:

No.

References:

RPC 1.2, RPC 1.6, RPC 1.7, RPC 1.8, KBA E-331, KBA E-340, KBA E-368.
OPINION

We begin with a restatement of the firm view we have expressed numerous times in the
past that defense counsel represents the insured, not the insurer; that defense counsel’s duty to
the insured arises from the attorney-client relationship and is governed by the Rules of
Professional Conduct, not the contract of insurance.
Rule 1.2 provides,
A lawyer shall abide by a client’s decision concerning the
objectives of representation, subject to paragraphs (c), (d) and (e),
and shall consult with the client as to the means by which they are
to be pursued. A lawyer shall abide by a client’s decision whether
to accept an offer of settlement of a matter. In a criminal case, the
lawyer shall abide by the client’s decision, after consultation with
the lawyer, as to a plea to be entered, whether to waive jury trial
and whether the client will testify.
The lawyer’s duty to abide by the client’s decisions regarding settlement places the
lawyer on the horns of a dilemma in the fact pattern set out above. The carrier has a strong
interest in securing a dismissal of the UCSPA claims and the tort claims. The insured has a
strong interest in dismissal of the tort claims alone, but may not be able to do so if the carrier
insists upon dismissal of the UCSPA claims as a condition of dismissal of the underlying tort. If
that cannot be accomplished, the handling of the defense by the lawyer may become pertinent to
the liability of the company. It also is obvious that the lawyer would face conflicting duties by

representing both the insured and the insurer if facts bearing upon coverage were revealed by the
insured. If the insured is the lawyer’s only client, this information would be considered
confidential. See RPC 1.7 Comment #9. Loyalty is an essential element in the lawyer’s
relationship with the client. RPC 1.7 Comment #1. We have previously held that the insured is
entitled to competent and zealous representation that is not adversely affected by prohibited
conflicts of interest. KBA E-331.
While directly adverse interests may not be presented by every case, and in fact, in many
cases the UCSPA claims are bifurcated out and held in abeyance until conclusion of the
underlying tort action, nevertheless, counsel will in each case be required to determine whether
the representation of either the insured of the insurer may be materially affected by the lawyer’s
responsibilities to the other. Even if the lawyer reasonably believes that the representation will
not be materially affected, the client must have the benefit of an explanation of the implications
of the common representations and the advantages and risks involved before consent can be
obtained.
If the lawyer seeks the insured’s consent to an arrangement whereby the lawyer would be
paid by the insurer to represent the insurer on the UCSPA claims and also paid by the insurer to
represent the insured on the underlying tort action, it seems that the act of advising the insured,
whether to consent or not, would be materially affected by the lawyer’s responsibilities to the
insurer (who would presumably be in favor of dual representation) or the lawyer’s own interests.
The mere act of urging the insured to consent, as part of the representation of the insured, would
be affected by the desires of the insurer to cut down on defense costs by using one lawyer. RPC
1.7(b). It is easy to see where dual representation would be to the insurer’s advantage, but
difficult to see where such an arrangement would be recommended to the insured as being in the
insured’s best interest.
Furthermore, conflicting interests may arise in the conduct of the litigation. The lawyer
may find himself/herself acquiescing the insurer’s position regarding settlement in order to
justify their prior conduct as opposed to recommending settlement while acting as an advocate
for the insured. These problems of dual representation interfere with the lawyer’s independence
of professional judgment and may undermine the lawyer-client relationship with the insured.
It is the Committee’s position that defense counsel should be free to abide by the
insured’s decisions concerning the objectives of the litigation and settlement, should be not
subjected to competing loyalties that may compromise the lawyer’s ethical obligation to hold
inviolate confidential information of the client, and should not be required by an insurer to seek
the consent of the insured to dual representation.

Note to Reader
This ethics opinion has been formally adopted by the Board of Governors of the Kentucky
Bar Association under the provisions of Kentucky Supreme Court Rule 3.530 (or its predecessor
rule). The Rule provides that formal opinions are advisory only.