Can a law firm that defends an insurance company's insureds represent a new client suing a different party insured by that same company?

Plain-English summary

The Committee considered a law firm that had defended clients insured by an insurance company, had decided to stop accepting new cases from the company, and had withdrawn from most but still had a few cases to finish. The firm was then hired to sue a party who turned out to be insured by that same company. The question was whether the firm could take the new representation.

The opinion proceeded on three assumed facts: the firm had ended its ongoing relationship with the insurer and would not represent it in the future; the firm did not represent the insurer directly, only parties the insurer insured in pending cases; and the insurer would not be a named defendant in the new suit. It explained that only the latter two facts were germane. Drawing on Hartford Accident & Indemnity Co. v. Foster (an insurer-retained defense lawyer has both the insurer and the insured as clients) and its own Formal Interpretative Opinion No. 211 (the insurer cannot supplant the defense lawyer's independent judgment), the opinion stressed that the firm's primary obligations in the pending defense cases ran to the insureds.

Turning to Rule 1.7, the opinion framed the issue as which subpart governed: 1.7(a) if the new representation was directly adverse to the insurer, or 1.7(b) if it only might be materially limited by the firm's responsibilities to the insurer. Because the insurer would not be a named party (Mississippi does not allow direct actions against insurers), the firm did not represent the insurer directly, and the firm's duties in the pending cases ran to the insureds, the Board of Bar Commissioners concluded the new representation was not directly adverse to the insurer. The opinion concluded the firm may undertake or continue the new representation if it concludes the representation will not be adversely affected by its responsibilities to the insureds in the unrelated matters and the new client gives knowing, informed consent after consultation explaining the implications, advantages, and risks.

Currency note

This opinion was issued in 1995, interpreting the Mississippi Rules of Professional Conduct (adopted effective June 22, 1994, and amended February 5, 1999). Mississippi did not adopt the ABA's 2002 Ethics 2000 revisions wholesale, but 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, deadline, or requirement mentioned here.

Common questions

Q: Can a firm that defends an insurer's insureds sue another party insured by the same insurer?

A: The opinion concluded it may, because the new suit is not directly adverse to the insurer, provided the firm reasonably believes it will not be adversely affected and the new client gives knowing, informed consent after consultation (Rule 1.7).

Q: Why was the representation treated as not directly adverse to the insurer?

A: Per the opinion, the insurer would not be a named party (Mississippi does not allow direct actions against insurers), the firm did not represent the insurer directly, and in the pending defense cases the firm's primary obligations ran to the insureds.

Q: Does the insurer's role in the defense cases change the analysis?

A: The opinion concluded that any input the insurer has into the pending cases must not run afoul of the defense lawyers' obligations to the insureds, whom the firm was retained to defend; citing Hartford and its Opinion No. 211, the firm's primary duty is to the insured.

Background and rules framework

The opinion turns on Mississippi Rule of Professional Conduct 1.7 (conflicts of interest), distinguishing subpart (a) (directly adverse representation) from subpart (b) (material limitation), corresponding to Model Rule 1.7. It reads Rule 1.7 in light of Hartford Accident & Indemnity Co. v. Foster and the bar's Formal Interpretative Opinion No. 211 on the duties owed by insurer-retained defense counsel.

Citations and references

Rules of Professional Conduct (Mississippi; cf. Model Rules):

• MRPC 1.7(a), (b) (conflicts of interest; directly adverse vs. materially limited) (cf. Model Rule 1.7)

Cases:

• Hartford Accident & Indemnity Co. v. Foster, 528 So. 2d 255 (Miss. 1988), an attorney retained by an insurer to defend its insured has both the insurer and the insured as clients

Other opinions cited:

• Mississippi Formal Interpretative Opinion No. 211 (insurer may not supplant the independent legal judgment of insurer-selected defense counsel)

See also

• MS Bar Ethics Op. 246: Insurer Litigation Guidelines and Third-Party Billing Audits
• MS Bar Ethics Op. 231: Taking Sides Among Partners
• AL Ethics Op. 1991-42: Suing a Former Client

Source

• Landing page: https://www.msbar.org/ethics-discipline/ethics-opinions/formal-opinions/229/
• Original PDF: https://www.msbar.org/media/1472/35a_et_op_229.pdf

Original opinion text

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

ETHICS OPINION NO. 229

OF THE MISSISSIPPI BAR

RENDERED November 16, 1995

CONFLICT OF INTEREST - A law firm which is defending insureds of an insurance company may represent a client suing a party insured by that company if that client gives knowing and informed consent to the representation after consultation explaining the implications of the representation and the advantages and risks involved.

We have been requested to render an opinion involving the following facts:

A law firm has represented clients insured by an insurance company. The law firm has decided to stop accepting cases from the company and has withdrawn from most of the cases it was handling for the company, but still has a few cases which it must finish for the company. Recently, the firm was hired to represent a party in a lawsuit and the firm has discovered that the prospective defendant is insured by that same insurance company.

The question posed is:

May a law firm which has stopped accepting new cases from an insurance company, but which is still defending some cases insured by the company, represent a client in a suit against a party insured by that same insurance company?

We assume that three facts are present in this situation:

1. That the law firm has ended its ongoing relationship with the insurance company and does not plan to represent the company in the future;

2. That the law firm does not represent the insurance company directly in any matter, but only represents parties insured by the company in pending cases; and 3. That the insurance company will not be a named defendant in the suit to be filed by the law firm.(As will become apparent, of these facts assumed, only the latter two are germane.)

One aspect of the ethical minefield confronting attorneys hired by insurance companies to defend their insureds has been examined at length by the Supreme Court of Mississippi in Hartford Accident & Indemnity Company v. Foster, 528 So.2d 255 (Miss. 1988). In Hartford, the Supreme Court noted that an attorney hired by an insurance company to defend its insured has both the company and the insured as its clients. Hartford addresses the direct conflict arising when the plaintiff's judicial demand exceeds policy limits, creating potential exposure to the insured, and the plaintiff offers to settle the suit within policy limits.

Although instructive, Hartford does not answer the question posed here. We affirm here what was said earlier in Ethics Opinion No. 211 about Hartford and the various obligations it imposes:

We are mindful of the recent decision of the Mississippi Supreme Court regarding the duties of defense counsel to the insurer and insured . . . . We agree and adhere to the finding that "[t]he fact that the insurance contract authorizes the insurance company to employ an attorney to handle the defense of a case in no way impairs or diminishes the duty of the lawyer to the insured client. Hartford, 528 So.2d at 268.

Insurers are rightfully concerned with the quality and economy of performance of the counsel they select to fulfill their promise of defense to an insured. The selection of counsel, however, once made, does not further empower the insurer to supplant the independent legal judgment of selected counsel or to interfere, alter or deter the decisions of such counsel in exercise of the attorney's duty to the [insured] client.(In Ethics Opinion No. 211, we held ethically impermissible an attorney's agreement with an insurance company to defend lawsuits against the company's insureds on the condition that the attorney's legal judgment regarding the conduct of the litigation could be implemented solely upon approval by the insurer.)

We must construe the facts presented us in light of Hartford's guidance as well as the provisions of the Mississippi Rules of Professional Conduct, particularly Rule 1.7:

(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless the lawyer reasonably believes:

(1) the representation will not adversely affect the relationship with the other client; and

(2) each client has given knowing and informed consent after consultation. The consultation shall include

explanation of the implications of the adverse representation and the advantages and risks involved.

(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless the lawyer reasonably believes:

(1) the representation will not be adversely affected: and

(2) the client has given knowing and informed consent after consultation. The consultation shall include explanation of the implications of the adverse representation and the advantages and risks involved.

The question is not whether Rule 1.7 applies - clearly it does - but which subpart, (a) or (b), governs the situation we confront. Stated differently, is the representation of the new client directly adverse to the insurance company so that 1.7(a) applies, or is it only such that the lawyer's representation of the new client may be materially limited by the lawyer's responsibilities to another client, the insurance company?

The insurer will not be a named party in the suit to be filed by the law firm; indeed, our Mississippi practice does not provide for direct actions against the insurer as do many other jurisdiction. Likewise, the law firm does not represent the insurer directly in any matter; in the suits in which the law firm still is defending insureds of the company, the insurer is not a party. Depending upon the provisions of the insurance contract, the insurer may have some input into the conduct of those cases so long as that input does not run afoul of the defense lawyers' obligations to the insured. Nonetheless, it is clear both from Hartford and our recent F.I.O. 211 that the lawyers' primary obligations in those matters are to the insureds whom the lawyer has been retained to defend. Based upon the facts presented us, our view of Hartford, and the provisions of Rule 1.7, the Board of Bar Commissioners concludes that the new representation proposed here is not a representation directly adverse to the insurance company. Accordingly, the law firm may ethically undertake or continue that representation if it concludes that the representation will not be adversely affected by the lawyer's responsibilities to the insureds of the insurance company in the other, unrelated matters and if the new client has given knowing and informed consent after consultation. The consultation must include explanation of the implications of the adverse representation and the advantages and risks involved.