Can one lawyer represent the at-fault driver, the liability insurer, and the same insurer in its underinsured-motorist capacity in the same accident case?

Plain-English summary

A passenger injured by an at-fault driver carried $200,000 in underinsured-motorist (UIM) coverage with the same insurer that provided the driver's $25,000/$50,000 liability coverage. The passenger sued the driver for more than all available coverage, and the insurer hired one lawyer to represent the driver, the insurer under the liability policy, and the insurer under the UIM policy. The first question was whether the lawyer had a disqualifying conflict.

The opinion concluded that he did. Under G.S. §20-279.21(4), a UIM insurer has subrogation or assignment rights against the owner, operator, or maintainer of an underinsured vehicle, which makes the interests of the driver and the insurer's UIM side likely materially different and adverse. Representing both would make the lawyer's representation of one client directly adverse to the other in violation of Rule 5.1(b): advising the insurer to pay a settlement in a way that preserved its UIM subrogation against the driver would be adverse to the driver, while declining to so advise the insurer would be adverse to the insurer.

On the second question, the opinion found the conflict confirmed and an additional conflict. When the driver asked the insurer to pay the liability limits and accept the passenger's covenant not to execute, but the insurer refused (reserving primary coverage for two other injured parties) and instead offered $75,000 without tendering the $25,000 limits, the insurer's interest in allocating its primary coverage to benefit its UIM obligations could raise the driver's personal exposure to the other claimants, again materially impairing the lawyer's ability to represent both under Rule 5.1(b).

Currency note

This opinion was issued in 1993, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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 one lawyer represent the at-fault driver and the insurer's UIM side at once?

A: No. The opinion held that the UIM carrier's subrogation rights against the driver make their interests materially adverse, so representing both violates Rule 5.1(b).

Q: Why does UIM subrogation create the conflict?

A: The opinion reasoned that advising the insurer to settle in a way that preserves UIM subrogation against the driver is adverse to the driver, while not so advising the insurer is adverse to the insurer.

Q: Did the refusal to tender the liability limits add a conflict?

A: Yes. The opinion held that the insurer's interest in allocating its primary coverage to benefit its UIM exposure could raise the driver's personal exposure to other claimants, a further conflict under Rule 5.1(b).

Background and rules framework

The opinion applied North Carolina Rule 5.1(b), the direct-adversity conflict provision corresponding to Model Rule 1.7. The conflict arose from the UIM subrogation and assignment rights created by G.S. §20-279.21(4), which set the at-fault driver's interests against the insurer's UIM interests in the same matter.

Citations and references

Rules of Professional Conduct:

• MR 1.7 (conflict of interest; current clients)
• North Carolina Rule 5.1(b)

Statutes:

• N.C. Gen. Stat. §20-279.21(4) (UIM subrogation and assignment rights)

See also

• NC Ethics Op. RPC 177: representing the insured, insurer, and UIM carrier
• NC Ethics Op. RPC 156: informing the client when the insurer's defense ends
• NC Ethics Op. RPC 170: joint representation of injured party and subrogated carrier

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-154/

Original opinion text

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

Inquiry #1:

Passenger A was injured in an automobile accident as a result of the admitted negligence of Driver B, who rented a room in A's home. Two other people were injured in another vehicle hit by B. A has underinsured motorist coverage (UIM) of $200,000 with Insurance Company X. B has a policy of liability insurance of $25,000/$50,000 also with Insurance Company X. A sued B and asserted a claim in excess of all insurance coverage. Insurance Company X hired Attorney Y. Attorney Y undertook representation of B, Insurance Company X under the liability policy, and Insurance Company X under the UIM policy.

Does Attorney Y have a disqualifying conflict of interest in representing B, Insurance Company X under the liability policy, and Insurance Company X under the UIM policy?

Opinion #1:

Yes. The provisions of G.S. §20-279.21(4) provide for certain subrogation or assignment rights by a UIM insurer against the owner, operator or maintainer of an underinsured vehicle. This would cause the interests of Driver B and Insurance Company X under its UIM policy to likely be materially different and adverse. Therefore, Attorney Y's representation of both clients would cause his representation of one client to be directly adverse to that of the other in violation of Rule 5.1(b). For example, Attorney Y's advice to Insurance Company X to pay a proposed settlement with Passenger A in such a manner as to enable Insurance Company X to proceed against Driver B under the subrogation rights provided in G.S. §20-279.21(4) would necessarily be adverse to Driver B. Conversely, for Attorney Y not to so advise Insurance Company X would be potentially adverse to that client.

Inquiry #2:

Prior to suit, B requested Insurance Company X to pay the liability limits to A but Insurance Company X refused to do so. Insurance Company X stated it had reserved the primary coverage for the two other injured parties. A offered a Covenant Not to Execute Judgment in excess of insurance coverage in return for immediate payment of the liability coverage of $25,000. Attorney Y offered to settle the case for $75,000 but refused to tender the $25,000 liability limits and accept the Covenant from A.

Does Attorney Y have a disqualifying conflict of interest in light of these circumstances?

Opinion #2:

Yes. See answer to Inquiry #1. Additionally, the circumstances set out in Inquiry #2 reveal a further conflict of interest between Insurance Company X and Driver B. It would appear that Insurance Company X's interest might be best served by allocating Insurance Company X's primary insurance policy in such a manner as to best benefit its financial obligations under its UIM policy, and such allocation might adversely affect Driver B's interest by raising her personal exposure to the other claimants injured in the accident. Attorney Y would once again be likely to have his ability to represent both clients materially impaired in violation of Rule 5.1(b).