When an insurance company hires a New Hampshire lawyer to defend its insured, who is the lawyer's client, and what should the lawyer do about the uncertainty?

Plain-English summary

The Committee was asked to reconcile two earlier opinions that addressed the relationship between an insurance company and the lawyer it hires to defend its insured, and that reached inconsistent results because they rested on an unsettled question of insurance law. The opinion explains the three schools of thought: the "single-client" model (the lawyer represents only the insured, with the insurer a third-party payor); the "dual-client" model (the lawyer always represents both); and the Restatement approach (the lawyer always represents the insured and may also represent the insurer in appropriate situations by agreement).

The opinion states the general rule that the insured is always the lawyer's client, but concludes that whether the insurer is also a client is unsettled in New Hampshire and is a question of insurance law outside the Committee's purview. On that basis, it withdraws Formal Opinion 1993/94-15 (which had allowed plaintiff's counsel to contact an insurance adjuster without defense counsel's approval) as incorrect, and concludes that Advisory Opinion 2001-01/05 (barring release of billing information to third-party auditors) reached the correct result but on reasoning that must be modified.

Until the New Hampshire Supreme Court resolves the underlying insurance-law question, the opinion advises lawyers to be clear, in engagement letters and in communications with the insurer, about whom they represent. It adds that if an insurer insists on an attorney-client relationship with defense counsel, potential conflicts under Rule 1.7 may require the lawyer to withdraw in some situations.

In practice

The opinion concludes that, under New Hampshire's Rules, defense counsel's client is always the insured, while the insurer's status as a client remains legally unsettled. It treats the question as one of insurance law beyond the Committee's role, withdraws the inconsistent 1993/94-15 opinion, modifies the reasoning of 2001-01/05, and directs lawyers to clarify the representation in writing. It flags that an insurer's insistence on an attorney-client relationship can create Rule 1.7 conflicts that may compel withdrawal in some cases.

Common questions

Q: When an insurer hires a New Hampshire lawyer to defend its insured, who is the client?

A: The opinion states the general rule that the insured is always the lawyer's client; whether the insurer is also a client is unsettled in New Hampshire.

Q: Did this opinion change earlier New Hampshire guidance?

A: Yes. The opinion withdraws Formal Opinion 1993/94-15 as incorrect and concludes that Advisory Opinion 2001-01/05 reached the correct result but on reasoning that must be modified.

Q: What should defense counsel do given the uncertainty?

A: The opinion advises lawyers to be clear in their engagement letters and in communications with the insurance company about whom they represent until the Supreme Court resolves the question.

Q: What if the insurer insists on being a client too?

A: The opinion notes that if an insurer insists on an attorney-client relationship with the lawyer it hires, potential conflicts under Rule 1.7 may require the lawyer to withdraw in some situations.

Background and rules framework

The opinion interprets New Hampshire Rule 1.7 (conflicts of interest) and Rule 1.6 (confidentiality) in the tripartite insurance-defense setting, while declining to decide the underlying insurance-law question of whether the insurer is a client. It surveys the single-client, dual-client, and Restatement models and reconciles two prior New Hampshire opinions, withdrawing one and modifying the reasoning of the other.

Citations and references

Rules of Professional Conduct:

• MR 1.7 / NH Rule 1.7 (conflicts of interest)
• MR 1.6 / NH Rule 1.6 (confidentiality of information)

Other opinions cited:

• NHBA Formal Op. 1993/94-15 (withdrawn): contact with an insurance adjuster
• NHBA Advisory Op. 2001-01/05 (reasoning modified): release of billing statements to third-party auditors

See also

• ABA Formal Op. 01-421: Lawyer Working Under Insurance Company Guidelines
• ABA Formal Op. 96-403: Insured Objecting to a Settlement Within Policy Limits
• ABA Formal Op. 03-430: Insurance Staff Counsel Representing the Company and Its Insureds

Source

• Landing page: https://www.nhbar.org/ethics/opinion-2018-19-02
• Original PDF: https://nhba.s3.amazonaws.com/wp-content/uploads/2023/01/12140833/EO-2018-19-02-Relationship-Between-Insurance-Company-and-the-Lawyer-Hired-to-Represent.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.
NEW HAMPSHIRE BAR ASSOCIATION

Relationship Between Insurance Company and the Lawyer Hired to Represent an Insured

                   Ethics Committee Advisory Opinion #2018-19/02

ABSTRACT

The Ethics Committee previously issued two opinions addressing the relationship between an
insurance company and the lawyer hired by the company to represent its insured. These opinions,
which turned on a preliminary question of insurance law that remains unsettled in New
Hampshire, are inconsistent with one another. Because it is not within the Committee’s purview
to decide this question of insurance law, after review, the Committee withdraws one of the
opinions and modifies the reasoning of the other. Lawyers are further advised that until this
question is resolved by the New Hampshire Supreme Court, they should be clear whom they
represent in their engagement letters and in communications with the insurance company.

ANNOTATIONS

There are three schools of thought on the relationship between an insurance company and the
lawyer hired by the company to represent its insured: 1. The lawyer always represents the
insured alone, while the company is only a third party payor (the “single-client” model); 2. The
lawyer always represents both the insured and the company (the “dual-client” model); or 3. The
lawyer always represents the insured and may represent the insurance company as well, in
appropriate situation, based on agreement of the parties (the Restatement approach).

Ethics Committee Formal Opinion #1993/94-15 (Communication with Insurance Representative
Without Consent of Defense Counsel) (N.H. 1993), which concluded that plaintiff’s counsel may
contact an insurance adjustor without the approval of defense counsel, is incorrect and is
withdrawn.

N.H. Bar Ethics Committee Advisory Opinion #2001-01/05 (Release of Billing Statements to
Third Party Auditors), (N.H. 2000), which concluded that it was unethical for a lawyer hired to
defend an insured to release billing information to third-party auditors hired by the insurance
company, is correct, but its reasoning must be modified.

The general rule is that, in the tripartite relationship between an insurance company, its insured,
and the lawyer the company hires to defend the insured, the insured is always the lawyer’s client.

New Hampshire law is unsettled as to whether, in the tripartite relationship between an insurance
company, its insured, and the lawyer that the company hires to defend the insured, the insurance
company is also the lawyer’s client.
It is not within the purview of the Ethics Committee to determine the nature of the tripartite
relationship between an insurance company, its insured, and the lawyer that the company hires to
defend the insured.
Until the nature of the tripartite relationship between an insurance company, its insured, and the
lawyer that the company hires to defend the insured is resolved by our Supreme Court, lawyers
should be clear whom they represent in their engagement letters and in communication with the
insurance company.

If an insurance company insists that it must have an attorney-client relationship with the lawyer
it hires to defend its insured, then potential conflicts under NH RPC Rule 1.7 may require the
lawyer to withdraw in some situations.

Role of Insurance Defense Lawyer

The Committee has been asked to clarify two inconsistent ethics opinions addressing the role of
insurance defense counsel. The opinions, described below, although addressing different factual
questions, turn on the relationship between the insurance company and the lawyer hired by the
company to represent its insured. Courts and Ethics Committees across the country have
grappled with this issue, and it continues to generate much controversy and commentary. See
e.g., Restatement (Third) of the Law Governing Lawyers, § 134, cmt. f.

Three schools of thought have emerged on the question: 1. The lawyer always represents the
insured alone, while the company is only a third party payor (“single-client” model); 2. The
lawyer always represents both the insured and the company (“dual-client” model); or 3. The
lawyer always represents the insured and may represent the insurance company as well, in
appropriate situation, based on agreement of the parties (the Restatement approach). Id.

1993 Opinion

In a 1993 opinion, Ethics Committee Formal Opinion #1993/94-15 (Communication with
Insurance Representative Without Consent of Defense Counsel) (N.H. 1993), we concluded that
plaintiff’s counsel may contact an insurance adjustor without the approval of defense counsel.
We believe this opinion is incorrect and withdraw the opinion, for the reasons discussed below.

In the 1993 opinion, the Committee stated that a lawyer for a plaintiff is permitted to contact an
insurance adjustor directly without violating the no-contact rule for represented clients (NHRPC
4.2). This conclusion was based on a decision of the Federal District Court for the District of
New Hampshire finding that the lawyer retained by an insurance company to provide a defense
under a liability policy represents only the insured, and not the insurer. See Gibbs v. Lappies, 828
F.Supp. 6, 7 (D.NH 1993). Based on this case, the Committee concluded that New Hampshire
was a single-client state.

2000 Opinion

In the second opinion, N.H. Bar Ethics Committee Advisory Opinion #2001-01/05 (Release of
Billing Statements to Third Party Auditors), (N.H. 2000) we found it unethical for a lawyer hired
to defend an insured to release billing information to third-party auditors hired by the insurance
company. After reviewing that opinion, we believe that conclusion still to be correct. We find it
necessary, however, to modify our reasoning as discussed below.

In the 2000 opinion, the Committee stated that a lawyer retained by an insurance company to
defend its insured generally could not disclose detailed billing statements to third-party auditors
hired by the insurer without the insured’s informed consent. This conclusion was based on
Dumas v. State Farm Automobile Insurance, 111 N.H. 43, 49 (1971). In the ethics opinion, we
stated that the Dumas holding was “consistent with the traditional view that the tripartite
relationship between insurer, insurance defense counsel and insured involves dual representation
of ‘co-clients.’” In other words, the Committee concluded that New Hampshire was a dual-client
state.

Analysis

These opinions are inconsistent. The ethical issue in each case turns on a preliminary question of
insurance law that remains largely unsettled in New Hampshire: Whether an attorney hired by an
insurance company to represent an insured represents only the insured or represents both the
company and the insured. We believe that in the 1993 ethics opinion, we may have relied too
strongly on the dicta in the Gibbs case. Similarly, upon further review, we believe we may have
overstated the reach of the holding in the Dumas matter in the 2000 opinion.
In Gibbs, the issue was whether a law firm could withdraw from its representation of the insured
when the hiring insurance company stopped paying for the lawyer’s services, due to insolvency.
The Court ruled that the primary client in insurance defense is the insured and declined to allow
the withdrawal. This is certainly consistent with the general rule that the insured is always the
client in such situations. See Restatement (Third) of the Law Governing Lawyers, § 134, cmt. f
(“[A] lawyer designated to defend the insured has a client-lawyer relationship with the
insured”); Gibbs, 828 F.Supp. at 7.
In so ruling, however, the Gibbs Court also remarked that the insurer was not the attorney’s
client, an observation that was not essential to the district court’s holding (and therefore dicta).
We believe that the Committee in its 1993 opinion relied too heavily on this dicta to decide that
the governing rule in New Hampshire was the single-client rule and thus that the insurance
company could never be a client. Were such a broad ruling to be made in a diversity case such
as this, the Court would have needed to address the Supreme Court’s Dumas decision, which it
did not.
We note, however, that where the defense lawyer and company agree that the lawyer will
represent only the insured, the conclusion of the 1993 opinion that the plaintiff’s lawyer may
contact the adjustor without permission of defense counsel is correct. However, we withdraw the
opinion since the broad reasoning on which that opinion is premised is incorrect.
Upon reconsideration, we also believe this Committee in the 2000 opinion may have read the
Dumas decision in an overly broad manner. Dumas dealt with whether, in a subsequent action
between the insured and the insurance company over the failure to settle, the file of the defense
lawyer was privileged. The Supreme Court found, as a factual matter, that the lawyer represented
both the company and the insured. Dumas, 111 N.H. at 49; see also Baker v. CNA Ins. Co., 123
F.R.D. 322, 325 (1988) (finding that the defense lawyer had confidential discussions with both
the company and the insured and relying on these conversations in finding dual representation).
Despite this, the Court allowed the discovery because of the rule that there is no privilege
between co-clients in a subsequent action between the two parties. In its 2000 opinion, the
Ethics Committee read Dumas to have “adopted the ‘dual-client’ model.” In reviewing the 2000
opinion, we believe the Committee may have overreached.
Based on Dumas, we believe that the seemingly contradictory conclusion in our 2000 opinion
stating that there is “no definitive answer to the nature of the tripartite relationship” is correct and
that we should not have proceeded to predict the insurance relationship rule that the New
Hampshire Supreme Court would adopt. We also note that Dumas, which permitted the insured
and insurer to both be clients of the defense lawyer, seems to eliminate the possibility that New
Hampshire is a mandatory single-client state. Despite this modification, we believe the rule of
the 2000 opinion to be sound since the confidentiality duty on which the opinion was based is the
duty to the insured, who will under any test always be a client.
After careful review of the court decisions and committee opinions, we are unable to determine if
the New Hampshire Supreme Court, when confronted with the question in the future, would
adopt the dual client rule or would follow the Restatement. The Restatement quite sensibly, we
think, concludes that in an insurance situation “…a lawyer designated to defend the insured has a
client-lawyer relationship with the insured.” Restatement (Third) of the Law Governing Lawyers,
§ 134, cmt. f. The comment goes on to conclude that the lawyer can also create a client-lawyer
relationship with the company, unless a potential conflict situation is presented. Id. Of course the
lawyer for the insured even if not representing the company, must remain mindful of the
contractual obligation of the insured to cooperate with the insurance company. It is not within
our purview, however, to decide this question of insurance law.
Conflict Between Clients – Insured and Insurer
While neither of the opinions in question addressed the following factual issue, we believe it
might make this opinion more useful if we highlight the context in which this dilemma most
commonly arises and the conflict of interest it can cause. In our experience, this controversy
most often presents itself when the insured, often just before a mediation or deposition, reveals to
the lawyer facts that would render the insured ineligible for insurance coverage, such as that the
defendant engaged in intentional conduct. Whether the lawyer may or must reveal this
information to the company, and whether the lawyer must withdraw from the matter depend on
the resolution of the relational issue.

If the single-client rule were to be followed in the above factual situation, the lawyer would be
barred from disclosing the harmful facts to the insurance company and, unless faced with perjury
or other similar ethical issue, could continue defending the insured. However, if New Hampshire
were a dual-client state, the lawyer in the example would have duties of communication to the
company. Since those duties would conflict with his or her duty of confidentiality to the insured,
the lawyer would, at least, need to withdraw from the case since there would be two clients with
differing interests. If the state were to adopt the Restatement position, the resolution would
depend on what the parties had agreed to.
The Committee wishes it could resolve this issue to provide certainty for the Bar. In light of the
holding in Dumas, however, we can only suggest that, until this issue is resolved by our Supreme
Court, lawyers be clear whom they represent in their engagement letters and in communication
with the insurance company. If they want to have a relationship only with the insured, something
that will avoid possible future conflicts if the insured provides information such as in the above
example, they should make this clear to the insurance company.

The insurance company might not be willing to decline the representation (which would avoid
this potential conflicts for the lawyer) since the insurance company also then might not have a
malpractice claim if the lawyer makes significant mistakes in the defense or have a claim of
privilege for the normal, periodic communications with the insurance company necessary to
satisfy the insured’s duty to cooperate.

The Restatement recognizes these important issues and suggests that even if the lawyer has
avoided a relationship with the company, the company should be allowed to sue for malpractice
since it is the real party at interest and that all communication in the normal course of the
representation should be privileged. Restatement (Third) of the Law Governing Lawyers, § 134,
cmt. f. There is certainly no settled law supporting this reasonable resolution. See e.g., Pine
Island Farmer’s Coop v. Erstad and Reimer, 649 N.W.2d 444 (Minn. 2002). In light of this, the
Committee notes that one way to protect the privilege in single-party representation might be to
execute a joint defense agreement with the insurance company.

If the insurance company insists that it also have an attorney client relationship with the lawyer
for privilege, malpractice, and communication purposes, then the potential conflicts under NH
RPC Rule 1.7 described above may require the lawyer to withdraw in some situation. Such
withdrawal could prove costly to the company, especially if the conflict arises late in the
litigation, as the company will have to hire a new lawyer for the insured and, to protect its non-
coverage claims, one for itself as well.

NH RULES OF PROFESSIONAL CONDUCT:

Rule 1.7
Rule 4.2

NH ETHICS COMMITTEE OPINIONS AND ARTICLES:

Ethics Committee Formal Opinion #1993/94-15 (Communication with Insurance Representative
Without Consent of Defense Counsel) (N.H. 1993)

N.H. Bar Ethics Committee Advisory Opinion #2001-01/05 (Release of Billing Statements to
Third Party Auditors) (N.H. 2000)

SUBJECTS:
Conflicts of Interest
Contact with Represented Parties

• By the NHBA Ethics Committee
This opinion was submitted for publication to the NHBA Board of Governors at its May
6, 2019 meeting.