In North Carolina, what can an insurance defense lawyer do when the insured will not cooperate and wants the plaintiffs to win?

Plain-English summary

Injured in-laws sued their daughter-in-law after a car accident, and the insurer assigned a defense lawyer to her. The policy gave the insurer the right to control and settle the defense and required the insured to cooperate, but the insured did not want a defense that would jeopardize the in-laws' recovery. The committee addressed, in five parts, what the lawyer could and could not do.

The opinion held that a lawyer retained by an insurer to defend an insured (or third-party beneficiary) represents both the insurer and the insured (RPC 91, 103, 172). Because the insured had contractually surrendered control of the defense and settlement, the lawyer was generally obliged to follow the insurer's instructions on those matters. The lawyer had to advise the insured of the policy conditions, encourage her to consult independent counsel about the consequences of not cooperating, and tell her he could not represent her in any coverage dispute because that would be a conflict under Rule 1.7(a). If the insured's lack of cooperation would interfere with the lawyer's independent professional judgment, he could seek to withdraw from representing both parties (Rule 1.7(b)).

On the conduct of the defense, the lawyer could offer evidence and arguments consistent with an effective defense but could not act harmfully toward the insured: he could not treat her as an adverse witness, publicly attack her credibility, or humiliate her (Rule 1.7). He could not disclose to the insurer information about the insured's desire to offer no defense, because the insurer might use it to deny coverage (Rule 1.6(a)); he could only tell the insurer that the insured wanted a substantially different approach and that he could not represent the insurer in a coverage dispute. Finally, if he withdrew and the insurer defended in its own name, he could represent only the insurer if doing so did not require tactics materially adverse to the former-client insured: he could not cross-examine her to attack her credibility or show bias, and could not use her confidential information without consent (Rule 1.9(a), Rule 1.6(d)). The committee added that ethics opinions guide State Bar members and are not designed to create civil liability or a litigation weapon.

Currency note

This opinion was issued in 2000, before North Carolina's adoption of the 2003 revisions to the Rules of Professional Conduct, and it cites the conflict and confidentiality rules under the numbering then in effect (Rule 1.7(a), (b); Rule 1.6(a), (d); Rule 1.9(a)). 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 requirement mentioned here.

Common questions

Q: Who does an insurance defense lawyer represent in North Carolina?

A: The opinion held the lawyer represents both the insurer and the insured (or third-party beneficiary), citing RPC 91, 103, and 172.

Q: Must the lawyer follow the insurer's instructions over the insured's objection?

A: Generally yes, on defense and settlement, where the insured contractually surrendered that control to the insurer; but the lawyer must advise the insured of the policy conditions and that he cannot represent her in a coverage dispute (Rule 1.7(a)).

Q: Can the lawyer tell the insurer the insured secretly wants the plaintiffs to win?

A: No. The opinion held that disclosure could let the insurer deny coverage and would harm the insured (Rule 1.6(a)); the lawyer may only report that the insured wants a substantially different defense and advise the insurer to get its own coverage counsel.

Q: After withdrawing, can the lawyer keep representing only the insurer?

A: Only if doing so does not require tactics materially adverse to the former-client insured. The opinion barred cross-examining her to attack credibility or show bias, and barred using her confidences without consent (Rule 1.9(a), Rule 1.6(d)).

Background and rules framework

The opinion applied North Carolina Rule 1.7 (concurrent conflicts of interest), Rule 1.6 (confidentiality), and Rule 1.9 (duties to former clients), the analogues to Model Rules 1.7, 1.6, and 1.9, in the tripartite insurance-defense setting. It relied on RPC 91, RPC 103, and RPC 172 for the dual-client nature of the relationship and for the lawyer's obligations when the insured surrenders control of the defense.

Citations and references

Rules of Professional Conduct:

• MR 1.7 (concurrent conflicts of interest) / NC Rule 1.7(a), (b)
• MR 1.6 (confidentiality of information) / NC Rule 1.6(a), (d)
• MR 1.9 (duties to former clients) / NC Rule 1.9(a)

Other opinions cited:

• NC RPC 91, RPC 103, RPC 172: a lawyer retained by an insurer represents both insurer and insured, and follows the insurer where the insured has surrendered control

See also

• ABA Formal Op. 01-421: Lawyer Under Insurance Company Guidelines
• ABA Formal Op. 96-403: Insured Objecting to Settlement
• ABA Formal Op. 05-435: Lawyer Against the Insured of a Client Insurer

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/99-formal-ethics-opinion-14/

Original opinion text

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

Inquiry #1:

Mr. and Ms. Inlaw were passengers in an automobile being driven by their daughter-in-law, Defendant, when an accident occurred. Mr. and Ms. Inlaw were both injured and brought an action against Defendant for their damages. Insurance Company assigned Attorney D to represent Defendant in the action. Defendant is either an insured under Insurance Company's liability insurance policy or is a third-party beneficiary of the policy.

The insurance policy provides that Insurance Company has the right to defend the action and to settle the lawsuit as it deems appropriate. The policy specifically requires Defendant to cooperate with Insurance Company in the defense of the lawsuit.

Insurance Company wants Attorney D to defend the suit to avoid or minimize the damages paid to the Inlaws. Defendant does not want a defense of the lawsuit that will jeopardize the Inlaws' recovery from Insurance Company.

May Attorney D defend the lawsuit effectively, as requested by Insurance Company, against the explicit instructions of Defendant?

Opinion #1:

A lawyer who is hired by an insurance carrier to defend one of its insureds (or a third-party beneficiary) represents both the insurer and the insured (or third-party beneficiary). See RPC 91, RPC 103, and RPC 172. However, when the insured has contractually surrendered control of the defense and of the authority to settle the lawsuit to the insurance carrier, the defense lawyer is generally obliged to accept the instructions of the insurance carrier in these matters. RPC 91.

Attorney D should advise Defendant of the conditions of representation set forth in the insurance policy and should encourage Defendant to consult with independent legal counsel as to the legal consequences of her failure to cooperate with the defense of the lawsuit.

Attorney D should also inform Defendant that he cannot represent her in a coverage dispute with Insurance Company because it would be a conflict of interest. Rule 1.7(a). He must advise her to employ independent legal counsel to provide representation in a coverage dispute. RPC 91.

If Defendant insists that Attorney D limit his defense, Attorney D must determine whether Defendant's lack of cooperation will interfere with his independent professional judgment. If so, he may seek to withdraw from the representation of both parties. Rule 1.7(b).

Inquiry #2:

May Attorney D's defense of the lawsuit include offering evidence and arguments that are contrary to the evidence Defendant would like to provide in support of the Inlaws' claims? For example, may Attorney D examine Defendant about her credibility and sympathies if she takes the witness stand?

Opinion #2:

Attorney D may offer evidence and arguments that are consistent with an effective defense but he may not act in a manner that is harmful to the interests of Defendant. See generally Rule 1.7. This means that he may not treat her as an adverse witness, publicly question her credibility, or humiliate her. Again, if Defendant's lack of cooperation interferes with an effective defense, Attorney D may seek to withdraw.

Inquiry #3:

May Attorney D disclose to Insurance Company information relative to Defendant's desire to offer no defense including statements, actions, and conduct that indicate that Defendant would like the Inlaws to be successful in the lawsuit?

Opinion #3:

No. Disclosure of this information to Insurance Company may be harmful to the interests of Defendant because Insurance Company may use this information to deny coverage to Defendant. Rule 1.6(a). Nevertheless, Attorney D may inform Insurance Company that Defendant has instructed him to take a substantially different approach on the defense than that requested by Insurance Company. He may also inform Insurance Company that he cannot represent Insurance Company in a coverage dispute, and he may advise Insurance Company to obtain independent counsel on this matter.

Inquiry #4:

If Attorney D withdraws from the representation of Defendant, and Insurance Company is allowed to defend in its own name, may Attorney D represent only Insurance Company in the defense of the action?

Opinion #4:

No, unless Attorney D's defense of Insurance Company does not require Attorney D to engage in defense tactics that are materially adverse to the interests of Defendant. Rule 1.9(a) prohibits a lawyer from representing a client whose interests are materially adverse to those of a former client in the same or a substantially related matter without the consent of the former client. A cross examination of Defendant in which Attorney D attempts to cast doubt on Defendant's credibility and to demonstrate bias on her part is prohibited. Attorney D is also prohibited from using confidential information of Defendant in the defense of Insurance Company without Defendant's consent. Rule 1.6(d).

Inquiry #5:

Is this ethics opinion binding as a matter of law?

Opinion #5:

Ethics opinions provide guidance to the members of the State Bar. Compliance with the opinions ensures that a lawyer's conduct complies with the Revised Rules of Professional Conduct. Like the Revised Rules of Professional Conduct, ethics opinions provide a structure for the regulation of the conduct of members of the State Bar but are not designed to be a basis for civil liability, to create a procedural weapon in litigation, or to create a right of enforcement by a party other than an appropriate disciplinary authority such as the North Carolina State Bar or the courts. See Comment [6] of Rule .02, "Scope."