When a lawyer jointly represents a workers' comp carrier and the employer, can the lawyer withhold claim evaluations from the employer at the carrier's direction?

Plain-English summary

A defense lawyer retained by a workers' compensation insurer represents both the carrier and the employer. The carrier, which under most policies controls the litigation and can settle without the employer's approval, routinely instructs the lawyer not to send the employer correspondence that evaluates the claim or discusses strategy. The inquiry lists situations that sharpen the dilemma: where the employer's representative is the plaintiff, is related to or close with the plaintiff, or will likely forward the lawyer's evaluation to an adverse co-carrier.

The opinion concludes that because the lawyer represents both clients, the lawyer has a duty to keep each informed about the status of the matter. It relies on Comment [31] to Rule 1.7, which states that common representation will almost certainly be inadequate if one client asks the lawyer not to disclose to the other information relevant to the representation, because the lawyer owes an equal duty of loyalty to each and each client is entitled to be informed of anything bearing on the representation. The opinion notes that loyalty is impaired when a lawyer cannot keep a client reasonably informed or promptly respond to reasonable requests for information under Rule 1.4(a), citing RPC 153 and 2003 FEO 12, and states that both the employer and the carrier are entitled to the lawyer's full, candid evaluation of all aspects of the claim.

The result follows from the conflict. If the carrier will not consent to the lawyer providing the same information to the employer, or the employer will not agree that certain information will be withheld, the lawyer has a conflict and must withdraw from representing both the employer and the carrier. If the carrier then hires separate counsel to represent only the employer, the lawyer may, with the employer's consent, continue to represent the carrier alone and withhold evaluation and litigation strategy information from the employer.

In practice

Under the North Carolina rules as they stood at the time of the opinion, conduct in which a lawyer jointly representing the carrier and the employer withholds claim evaluations or litigation strategy from the employer at the carrier's instruction is not permitted; the opinion holds that common representation requires sharing information relevant to the representation with both clients. Per the opinion, the analysis turns on the equal duty of loyalty and the Rule 1.4(a) duty to keep each client informed: where one client demands secrecy the other will not accept, the lawyer faces a conflict and the opinion directs withdrawal from the joint representation.

The opinion identifies one path to lawful withholding: after the lawyer withdraws and separate counsel takes over the employer, the lawyer may, with the employer's consent, continue to represent only the carrier and then withhold evaluation and strategy information from the employer.

Common questions

Q: Can a lawyer jointly representing a workers' comp carrier and employer keep claim evaluations from the employer because the carrier says so?

A: No, not while representing both. The opinion concludes that both clients are entitled to the lawyer's full, candid evaluation, and relying on Comment [31] to Rule 1.7 it treats one client's demand for secrecy as making common representation inadequate.

Q: What must the lawyer do if the carrier and employer cannot agree on sharing information?

A: Withdraw from the joint representation. The opinion says that if the carrier will not consent to sharing or the employer will not agree to withholding, the lawyer has a conflict and must withdraw from representing both the carrier and the employer.

Q: Is there any way the lawyer can keep representing the carrier and withhold information?

A: Yes, after restructuring. The opinion says that if the carrier hires separate counsel to represent only the employer, the lawyer may, with the employer's consent, continue to represent the carrier alone and withhold evaluation and strategy information from the employer.

Q: Does it matter that the employer's representative might leak the evaluation to the plaintiff or an adverse co-carrier?

A: The opinion treats those as the situations that create the dilemma, but it resolves them the same way: the duty to keep both joint clients informed governs, so the answer is to withdraw rather than to withhold from one joint client.

Background and rules framework

The opinion applies North Carolina Rule 1.7 (conflict of interest: current clients, the analogue of Model Rule 1.7), and in particular Comment [31], which addresses common representation and the lawyer's equal duty of loyalty to each jointly represented client. It reads Rule 1.4 (communication, the analogue of Model Rule 1.4), specifically Rule 1.4(a), to require keeping each client reasonably informed and promptly complying with reasonable requests for information.

The opinion situates the workers' compensation defense relationship as one in which the lawyer has two clients, the carrier and the employer, and draws on RPC 153 and 2003 FEO 12 for the principle that both are entitled to the lawyer's candid evaluation of the claim.

Citations and references

Rules of Professional Conduct:

• MR 1.7 / NC Rule 1.7 (conflict of interest: current clients; Comment [31], common representation)
• MR 1.4 / NC Rule 1.4(a) (keeping the client reasonably informed)

Other opinions cited:

• NC RPC 153: loyalty is impaired when a lawyer cannot keep a client reasonably informed.
• NC 2003 FEO 12: both the insured and the insurer are entitled to the lawyer's candid evaluation of the case.

See also

• NC State Bar 2003 FEO 12: Advising Insured and Insurer on Settlement Value
• Alabama Bar Op. 1994-08: Insurer-Retained Counsel Also Represents the Insured
• Alabama Bar Op. 1990-99: Dual Representation When Coverage Is Questioned

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/2006-formal-ethics-opinion-1/

Original opinion text

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

Inquiry:

As a defense attorney for workers' compensation cases, Attorney A is retained by an insurance company or a third-party administrator to represent both the carrier and the employer. In most workers' compensation insurance policies, the carrier has the right to direct the litigation and to resolve the claim without approval of the employer. Attorney A frequently receives general instruction from the carrier/third-party administrator not to provide the employer with a copy of any correspondence that includes an evaluation of the claim or a discussion of the litigation strategy. In addition, the following are common situations in which a defense lawyer is faced with the dilemma of what information relative to the evaluation of the claim or the litigation strategy may or should be provided to the employer:

1. The employer's representative and the plaintiff are the same person (i.e., the plaintiff owns the business).

2. The employer's representative and the plaintiff are related or close friends. Anything Attorney A sends to the representative will be forwarded to the plaintiff.

3. Two or more insurance carriers provided coverage for the employer over different time periods and the interests of the carriers are adverse. If Attorney A sends an evaluation to the employer, it can be anticipated that it will be forwarded to the other carrier(s).

What duty does the defense lawyer have, in these situations, to provide the employer with copies of correspondence to the carrier/third-party administrator that contain evaluations of the claim or discussions of the litigation plan?

Opinion:

Attorney A represents both the employer and the carrier and therefore has a duty to keep each client informed about the status of the matter. As noted in comment [31] to Rule 1.7, "...common representation will almost certainly be inadequate if one client asks the lawyer not to disclose to the other client information relevant to the common representation." The comment continues as follows:

This is so because the lawyer has an equal duty of loyalty to each client, and each client has the right to be informed of anything bearing on the representation that might affect that client's interests and the right to expect that the lawyer will use that information to that client's benefit. See Rule 1.4. The lawyer should, at the outset of the common representation and as part of the process of obtaining each client's informed consent, advise each client that information will be shared and that the lawyer will have to withdraw if one client decides that some matter material to the representation should be kept from the other. In limited circumstances, it may be appropriate for the lawyer to proceed with the representation when the clients have agreed, after being properly informed, that the lawyer will keep certain information confidential.

Loyalty to a client is impaired when a lawyer cannot keep the client reasonably informed or promptly comply with reasonable requests for information. Rule 1.4(a); RPC 153; 03 FEO 12. The employer and the carrier are both entitled to Attorney A's full, candid evaluation of all aspects of the claim. See 03 FEO12. If the carrier will not consent to Attorney A providing the same information to employer or the employer will not agree that certain information will be withheld, then Attorney A has a conflict and must withdraw from the representation of the employer and the carrier. If the carrier hires another lawyer to represent only the employer, Attorney A may—with the employer's consent—continue to represent the carrier and withhold evaluation and litigation strategy information from the employer.