Can a lawyer who won an excess judgment for an estate also represent the defendant in a bad-faith action against the insurer, and stay on if the lawyer may be called as a witness?

Plain-English summary

The opinion arose from a wrongful-death case in which the estate's lawyer obtained a jury verdict against the defendant well in excess of the defendant's liability coverage, after the insurer had declined to settle within policy limits and then offered the limits too late. The defendant assigned his rights against the insurer to the estate, acknowledged he was liable as a judgment debtor, and agreed that his actions in the bad-faith case would follow the estate administrator's directions. The same lawyer then proposed to represent both the estate and the defendant in a bad-faith action against the insurer.

The opinion concluded that the lawyer may undertake the joint representation, with the consent of both clients after full disclosure. It applied Rule 5.1(b), which permits representation that might be materially limited by responsibilities to another client if the lawyer reasonably believes the representation will not be adversely affected and each client consents after full disclosure of the implications, advantages, and risks. Because the interests of the defendant and the estate were allied in pursuing the bad-faith claim, the lawyer could reasonably conclude the joint representation would not adversely affect either client. The required disclosure had to include that, if the two clients came into conflict on a matter, the lawyer could not advocate for one against the other despite their agreement, and that in such a conflict the lawyer would have to withdraw from representing both unless one client consented to continued representation of the other. The opinion expressed no view on the validity or enforceability of an assignment of a bad-faith claim. On the witness questions, the opinion concluded the lawyer may continue representing the defendant even though the insurer's lawyer intended to depose and possibly call the lawyer as a witness, because Rule 5.2(c) permits a lawyer who learns he may be called as a witness by the opposing party to continue until it is apparent that his testimony is or may be prejudicial to his client. The opinion took no position on the propriety of the deposition itself and noted the lawyer might appropriately decline to answer deposition questions on confidentiality grounds.

Currency note

This opinion was issued in 1995, 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 both the claimant estate and the insured in a bad-faith action against the insurer?

A: Yes, with both clients' consent after full disclosure. The opinion concluded that because their interests against the insurer were aligned, the lawyer could reasonably conclude under Rule 5.1(b) that joint representation would not adversely affect either client.

Q: What must the disclosure cover before the clients consent?

A: The implications and risks of the joint representation, including that if the clients conflict the lawyer cannot advocate for one against the other and would have to withdraw from both unless one consented to continued representation of the other.

Q: Can the lawyer stay on if the insurer's counsel intends to call the lawyer as a witness?

A: Yes, for now. The opinion concluded that under Rule 5.2(c) the lawyer may continue until it is apparent that the testimony is or may be prejudicial to the client.

Q: Did the opinion decide whether the bad-faith assignment was valid?

A: No. The opinion expressly declined to opine on the validity or enforceability of an assignment of a bad-faith claim against an insurer.

Background and rules framework

The opinion applied North Carolina's then-current Rule 5.1(b), the conflict provision allowing a materially-limited representation with informed consent (corresponding to Model Rule 1.7), and Rule 5.2(c), the lawyer-as-witness provision allowing continued representation when the lawyer may be called by the opposing party until the testimony becomes prejudicial (corresponding to Model Rule 3.7).

Citations and references

Rules of Professional Conduct:

• MR 1.7 (conflict of interest; current clients)
• MR 3.7 (lawyer as witness)
• North Carolina Rule 5.1(b), Rule 5.2(c)

See also

• NC Ethics Op. RPC 91: conflict between insured and insurer
• NC Ethics Op. RPC 92: representation of insured and insurer; work product
• NC Ethics Op. RPC 213: lawyer's employee as witness

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-207/

Original opinion text

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

Inquiry #1:

Pedestrian Y was killed when he was struck by a vehicle operated by X. Administratrix, the personal representative of the estate of Y, retained Attorney A to represent the estate in a wrongful death action against X. Attorney A made a settlement demand on X's automobile liability insurance carrier, Insurer, for the limits of X's policy. Insurer declined to pay the limits. Attorney A filed suit against X for the wrongful death of Y. Insurer later offered to settle the claim against X for the policy limits. Administratrix refused this offer and the case was tried. The jury verdict against X was well in excess of X's liability insurance coverage limits.

Attorney A is now representing the Estate of Y and X in a bad faith action against Insurer. X has signed an assignment of all of his rights and privileges against Insurer to the Estate of Y. The assignment states that X acknowledges that he is liable to the estate as a judgment debtor and that all actions taken by X in the bad faith action must be done in accordance with the directions of Administratrix. May Attorney A represent X in the bad faith action against Insurer?

Opinion #1:

Yes, with the consent of both Administratrix and X after full disclosure.

Rule 5.1(b) permits a lawyer to represent a client even though the representation of the client might be materially limited by the lawyer's responsibilities to another client if (1) the lawyer reasonably believes the representation will not be adversely affected, and (2) the client consents after full disclosure which includes an explanation of the implications of the common representation and the advantages and risks involved.

In the present situation, the interest of X and the Estate of Y appear to be allied with regard to the pursuit of the bad faith action against Insurer. Attorney A could reasonably conclude that the joint representation of the two clients will not adversely affect the representation of either client individually. Full disclosure to both clients, in order to obtain the consent to the joint representation, should include the disclosure by Attorney A of the fact that if X and Administratrix are in conflict with regard to a particular matter relating to the representation, Attorney A may not advocate for one client as against the other despite the agreement between X and Administratrix. In the event of such a dispute or conflict between the interests of the two clients, Attorney A must withdraw from the representation of both unless one of the clients consents to his continued representation of the other client.

No opinion is expressed as to the validity or enforceability of an assignment of a bad faith claim against an insurance carrier.

Inquiry #2:

Attorney B represents Insurer in the bad faith action. Attorney B believes that a factual dispute concerning the negotiations in the underlying wrongful death action exists and intends to take Attorney A's deposition and possibly call Attorney A as a witness at trial. May Attorney A continue to represent X in the bad faith action?

Opinion #2:

Yes. Rule 5.2(c) provides that if, after undertaking employment in contemplated or pending litigation, a lawyer learns that he may be called as a witness by the opposing party, he may continue the representation until it is apparent that his testimony is or may be prejudicial to his client.

Inquiry #3:

May Attorney B depose Attorney A while Attorney A remains attorney of record for X?

Opinion #3:

Yes. See opinion #2 above. No opinion is expressed as to the propriety of such a deposition. Moreover, it may be appropriate for Attorney A to refuse to answer deposition questions on the grounds of client confidentiality.

Inquiry #4:

May Attorney A continue to represent X and also be called as a witness by Attorney B in the trial?

Opinion #4:

Yes. See opinion #2 above.