Can insurer-appointed defense counsel for uninsured motorists withdraw once the insurer settles with its own insured and wants to pursue subrogation against those same motorists?

Plain-English summary

A was injured in a parked car struck by a vehicle driven by B and owned by passenger C; that vehicle was uninsured, and A had uninsured-motorist coverage with X insurance company. A sued B and C, and X employed Attorney W to defend against A's action. A and X later settled with an uninsured-motorist release, and X wanted to pursue its subrogation claim against B and C; the action remained on the calendar, and X did not appear as a party. X suggested employing A's original counsel to pursue the action for X, and that Attorney W move to withdraw and tell B and C they could hire their own counsel or proceed unrepresented. B and C had only been told that X would pay Attorney W's expenses in the action against them; no one had told them this turn of events might occur. The inquiry asked whether Attorney W could ethically withdraw as suggested.

The opinion concluded that a lawyer undertaking to represent individuals at an insurance company's request and expense should have had a full discussion and understanding with the individual clients about the fee arrangements and the conditions of the representation (comment to Rule 2.6; Rule 5.6). Under no circumstances may Attorney W withdraw without complying with the tribunal's rules and without taking reasonable steps to avoid foreseeable prejudice to B and C (Rule 2.8(a)). Attorney W must discuss the situation with B and C to clarify their understanding of the basis on which he agreed to represent them and to determine what prejudice his withdrawal might cause. Depending on the circumstances, including potential prejudice and the terms of the agreement, Attorney W may ethically be required to continue representing B and C to ensure they do not suffer undue prejudice and to fulfill obligations created by his representations about appearing on their behalf.

Currency note

This opinion was issued in 1987, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct. The provisions it applies (Rule 2.8(a) on withdrawal, Rule 5.6 and Rule 2.6 on representation paid for by a third party and fee arrangements) have since been renumbered and revised (the corresponding Model Rules are 1.16, 1.8, and 1.5). 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 insurer-appointed counsel withdraw from the insured defendants once the insurer settles?

A: Not freely. The opinion concluded that Attorney W may not simply withdraw; he must comply with the tribunal's rules and take reasonable steps to avoid foreseeable prejudice to B and C (Rule 2.8(a)).

Q: What must the lawyer do before any withdrawal?

A: The opinion concluded he must discuss the situation with B and C to clarify the basis of the representation and to determine what prejudice withdrawal might cause.

Q: Could the lawyer be required to keep representing the defendants?

A: Yes. The opinion concluded that, depending on the prejudice and the terms of the engagement, Attorney W may be required to continue representing B and C to prevent undue prejudice.

Background and rules framework

The opinion applied North Carolina Rule 2.8(a) on withdrawal (corresponding to Model Rule 1.16), and the comment to Rule 2.6 with Rule 5.6 on fee arrangements and representation paid for by a third party (corresponding to Model Rules 1.5 and 1.8). The analysis turned on the duty to avoid prejudice to the insured clients and on the understanding established with them when the insurer-funded representation began.

Citations and references

Rules of Professional Conduct:

• North Carolina Rule 2.8(a) (withdrawal)
• North Carolina Rule 2.6 (fees); Rule 5.6 (third-party-funded representation)
• MR 1.16 (declining or terminating representation); MR 1.8 (third-party payment); MR 1.5 (fees)

See also

• NC Ethics Op. RPC 15: contacting an unrepresented party
• NC Ethics Op. RPC 39: contacting an adverse party's insurer

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-8/

Original opinion text

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

Editor's Note: This opinion was originally published as RPC 8 (Revised).

Inquiry:

A was injured while sitting in a parked automobile struck by an automobile being driven by B and owned by C, who was a passenger. There was no insurance coverage on the vehicle being operated by B. A had uninsured motorist coverage with X insurance company. A brought an action against B and C, and X company employed attorney W to defend against A's action. Eventually, A and X company settled as between them, with X company taking an uninsured motorist release. X company wished to pursue its subrogation claim against B and C. The action was not dismissed and remains on the calendar.

X company has suggested that it employ A's original counsel to pursue the action on behalf of X company. Attorney W raised the question about his obligation to defend the action for B and C since he appears as attorney of record. X company does not appear as a party to the action in any of the pleadings. X company has suggested that Attorney W file a motion to withdraw as counsel and that he advise B and C that they can employ separate counsel at their own expense or go forth without representation. At no time has anyone advised B or C that such an action might be forthcoming. B and C were merely advised that X company would pay the expenses of Attorney W in the action brought by X company's insured against them as uninsured motorists.

May Attorney W ethically withdraw as suggested, giving B and C the advice they can employ their own counsel or go forth without representation? If not, what is his obligation?

Opinion:

A lawyer undertaking to represent individuals at the request of and at the expense of an insurance company should have had full discussion and understanding with the indi- vidual client concerning the fee and arrangements and the conditions upon the lawyer's representation of the client. See comment to Rule 2.6; Rule 5.6. Under no circumstances may Attorney W withdraw without complying with any rules of the tribunal and without taking reasonable steps to avoid foreseeable prejudice to B and C. See Rule 2.8 (a). Under these circumstances, Attorney W will have to discuss the situation with B and C to clarify their understanding of the basis upon which Attorney W agreed to represent them and to determine what prejudice might result from his withdrawal. Depending on the circumstances, including the potential prejudice to the clients and the terms of the agreement between Attorney W and the clients, Attorney W may ethically be required to continue representing B and C in order to insure that they do not suffer undue prejudice and in order to fulfill any obligations created by his representations to B and C concerning his appearing on their behalf.