When an insurer hires a lawyer to defend its insured, can the lawyer just leave out a compulsory counterclaim and tell the insured to hire separate counsel to bring it?

Plain-English summary

A motor-vehicle liability carrier retained defense counsel to defend its insured, A, in a negligence suit. A could have asserted a compulsory counterclaim. The inquiry asked whether counsel could simply answer the complaint, omit the counterclaim, and tell A to retain separate counsel within the 30-day amendment period to bring it.

The opinion concluded that counsel could not just leave A to discover the problem. It separated the matter into two parts: the defense of A, governed by the insurance agreement and the Rules of Professional Conduct, and the prosecution of A's counterclaim. By paying premiums, A bought indemnity coverage and a defense, not a right to have an affirmative claim prosecuted. Whether counsel would represent A on the counterclaim was for A to negotiate with counsel of A's choice, and counsel could take that representation only if no conflict of interest was reasonably foreseeable. Counsel had no ethical obligation to assert the counterclaim, but, having been retained to defend A, counsel had to take reasonable steps to apprise A of the counterclaim's compulsory nature before filing the answer and in time for A to negotiate its prosecution with counsel or retain separate counsel to pursue it alongside the defense.

On the second question, the opinion concluded that counsel may satisfy that obligation by drafting the counterclaim and including it in the answer for A to sign as a pro se counterclaimant, with the understanding that counsel will not represent A on the counterclaim, where counsel does not wish to take that representation and A cannot find separate counsel.

Currency note

This opinion was issued in 1994, 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 Treat this page as historical context, not current guidance.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: Does insurer-paid defense counsel have to bring the insured's compulsory counterclaim?

A: No. The opinion concluded that counsel is under no ethical obligation to assert a compulsory counterclaim for the insured, because the insurance purchase covered defense and indemnity, not prosecution of the insured's affirmative claim.

Q: Can counsel just omit the counterclaim and let the insured sort it out?

A: Not silently. The opinion held that counsel must take reasonable steps to apprise the insured of the counterclaim's compulsory nature before filing the answer and in time for the insured to negotiate its prosecution or retain separate counsel.

Q: Can defense counsel draft the counterclaim for the insured to file pro se?

A: Yes. The opinion concluded that counsel may draft the counterclaim and include it in the answer for the insured to sign as a pro se counterclaimant, where counsel does not wish to represent the insured on it and the insured cannot find separate counsel.

Q: Can defense counsel agree to handle the counterclaim too?

A: Only if no conflict is reasonably foreseeable. The opinion said the insured may negotiate with defense counsel to represent the insured on the counterclaim, and counsel may accept if counsel reasonably foresees no conflict of interest.

Background and rules framework

The opinion addressed the tripartite insurance-defense relationship without citing a numbered Rule of Professional Conduct. It distinguished the scope of the representation the insurer purchased (defense and indemnity) from the prosecution of the insured's own claim, and grounded counsel's duty to warn the insured in counsel's having been retained to defend. The 30-day window referenced is the amendment period under Rule 15 of the North Carolina Rules of Civil Procedure, a procedural rule rather than a rule of professional conduct.

Citations and references

Rules of Professional Conduct:

• The opinion did not cite a specific numbered rule; it applied general principles governing the insurance-defense representation.

Other authority referenced:

• N.C. R. Civ. P. 15 (30-day amendment period; cited for the timing of the counterclaim, not as an ethics rule)

See also

• NC Ethics Op. RPC 177: representing the insured, insurer, and UIM carrier
• NC Ethics Op. 2010 Formal Op. 1: representing the carrier of a missing insured
• NC Ethics Op. RPC 207: claimant and insured against an insurer for bad faith

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-172/

Original opinion text

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

Inquiry #1:

Motor vehicle liability insurance carrier hires Defense Counsel to represent its insured, A, who has been sued for motor vehicle negligence. There is a compulsory counterclaim which could be made on behalf of A. Is it ethical for Defense Counsel to answer the complaint, omit the compulsory counterclaim and advise A of the need to retain separate counsel at A's expense in order to prosecute the claim within the 30 day amendment period provided by Rule 15 of the Rules of Civil Procedure?

Opinion #1:

No. There are two separate aspects of the representation of A in this fact situation. One is the defense of A and the other is the representation of A on the counterclaim. The defense of A is governed by the insurance agreement, the Rules of Professional Conduct, and the ethics opinions adopted by the State Bar. By paying premiums for insurance, A purchased indemnity coverage for liability claims and a legal defense. A did not contractually acquire a right to have a claim prosecuted on his or her behalf. That is a matter which is up to A to negotiate with counsel of A's choice. A may negotiate with Defense Counsel to represent A on the counterclaim and Defense Counsel may choose to represent A on the counterclaim if Defense Counsel reasonably foresees no conflict of interest. Defense Counsel is under no ethical obligation to assert a compulsory counterclaim on behalf of A. Having been retained to defend A, however, it is incumbent upon Defense Counsel to take reasonable steps to apprise A of the compulsory nature of the counterclaim prior to the filing of the answer to the complaint and in sufficient time for A to negotiate the prosecution of the counterclaim with Defense Counsel or for A to retain separate counsel to prosecute the counterclaim in concert with Defense Counsel's defense of the claim.

Inquiry #2:

May Defense Counsel fulfill his ethical obligations to A by drafting the counterclaim and including it in the answer on the condition that A sign the pleading as "pro secounterclaimant" and with the understanding that Defense Counsel will not represent A on the counterclaim?

Opinion #2:

Yes, if Defense Counsel does not wish to represent A on the counterclaim and A cannot find separate counsel to prosecute the counterclaim.