If an insured revokes his earlier consent to dismiss his counterclaim so the insurer can settle, can the defense lawyer dismiss it anyway?

Plain-English summary

Attorney A was retained by an insurer to defend the named insured in an auto-accident case. Because liability was questionable on both sides, the parties wanted to file a counterclaim for the defendant, and Attorney A explained the potential conflict and had the defendant sign an agreement authorizing Attorney A to file a voluntary dismissal with prejudice of the counterclaim if the insurer decided to settle. When the insurer and Attorney A later decided to settle, the defendant changed his mind, withdrew his consent, and wished to proceed on his counterclaim; the plaintiff would not settle unless the counterclaim was dismissed with prejudice. The inquiry asked whether Attorney A could dismiss the counterclaim or had to seek to withdraw, and how to proceed if the court refused withdrawal.

The opinion concluded that Attorney A could not dismiss the defendant's counterclaim with prejudice once authority to do so had been revoked, citing Rule 7.1(a)(1), (2), (3) and Rule 7.1(c)(1). It concluded that Attorney A should seek to withdraw from representing both the insured and the insurer because of the conflict engendered by the clients' competing desires about the counterclaim, citing Rule 5.1(b). If the court refused permission to withdraw just before or during trial, the opinion concluded that Attorney A would be obligated to zealously defend the case on behalf of the insured and the insurer and to zealously prosecute the insured's counterclaim, citing Rule 7.1(a)(1) and (2).

Currency note

This opinion was issued in 1991, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct. The provisions it applies (Rules 7.1 and 5.1(b)) have since been renumbered and revised. 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 Treat this page as historical context, not current guidance.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 lawyer rely on an advance agreement to dismiss a client's counterclaim after the client revokes consent?

A: No. The opinion concluded that the lawyer may not dismiss the counterclaim with prejudice once the insured has revoked authority, citing Rule 7.1.

Q: What should the lawyer do about the conflict?

A: The opinion concluded that the lawyer should seek to withdraw from representing both the insured and the insurer because of their competing desires about the counterclaim, citing Rule 5.1(b).

Q: What if the court will not let the lawyer withdraw mid-trial?

A: The opinion concluded that the lawyer would then be obligated to zealously defend the case for both clients and to zealously prosecute the insured's counterclaim.

Background and rules framework

The opinion applied North Carolina Rule 7.1 (pursuing the client's lawful objectives and abiding by the client's decisions, corresponding to Model Rule 1.2) and Rule 5.1(b) (conflicts of interest, corresponding to Model Rule 1.7), and treated withdrawal (the principle of Model Rule 1.16) as the lawyer's response to the conflict, subject to the court's permission. The analysis turns on the revocation of the insured's consent, which stripped the lawyer of authority to dismiss the counterclaim.

Citations and references

Rules of Professional Conduct:

• North Carolina Rule 7.1(a), (c) (pursuing the client's objectives; abiding by the client's decisions)
• North Carolina Rule 5.1(b) (conflicts of interest)
• MR 1.2 (scope; client's decisions); MR 1.7 (conflict of interest); MR 1.16 (declining or terminating representation)

See also

• NC Ethics Op. RPC 112: representation of insured and insurer
• NC Ethics Op. RPC 91: conflict between insured and insurer
• NC Ethics Op. RPC 118: waiver of affirmative defense

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-103/

Original opinion text

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

Inquiry:

Attorney A is retained by an insurance carrier to defend the named insured on a claim arising out of an automobile accident. The insurance carrier, the defendant or both wish to file a counterclaim on behalf of the defendant because liability is questionable on both sides. Attorney A explains to the defendant that a conflict of interest could arise if Attorney A represents the defendant on his counterclaim and the defendant signs an agreement authorizing Attorney A to file a voluntary dismissal with prejudice of the counterclaim in the event the insurance carrier decides to settle the plaintiff's claim before or during trial. Just before or during trial the insurance carrier and Attorney A decide to settle and the defendant changes his mind and wishes to proceed on his counterclaim, withdrawing his consent to have his counterclaim dismissed with prejudice. The plaintiff will not settle unless the defendant dismisses his counterclaim with prejudice.

Can Attorney A proceed to voluntarily dismiss the defendant's counterclaim with prejudice or should he seek to withdraw as counsel, based upon the conflict of interest? If the court refuses to allow Attorney A to withdraw just before or during trial, how should Attorney A proceed?

Opinion:

Attorney A may not dismiss the defendant's counterclaim with prejudice if authority to do so has been revoked. Rules 7.1(a)(1),(2) and (3) and 7.1 (c)(1). Attorney A should seek to withdraw from the representation of both the insured and insurer under the circumstances because of the conflict of interest engendered by his clients' competing desires in regard to the counterclaim. Rule 5.1(b). If the court refuses to grant permission to withdraw, Attorney A would be obligated to zealously defend the case on behalf of the insured and the insurer and to zealously prosecute the insured's counterclaim. Rule 7.1(a)(1) and (2).