Can a firm that defends a town for its insurer also appear before the town's boards or file tax appeals against the town?

Plain-English summary

The Committee was asked whether a firm retained by a municipality's insurance carrier to defend liability actions may appear before that municipality's boards (such as the zoning board) or prosecute tax appeals against the municipality, and whether the answer changes if the municipality is self-insured through a joint insurance fund.

On appearances before municipal boards, the Committee followed Opinion 428: an attorney chosen by an insurance company to represent a municipal body in a particular matter is not truly a municipal attorney in the official-family sense, so the public is unlikely to associate the attorney with the municipal government, and such appearances are permitted. On tax appeals, however, the Committee reached the opposite result: prosecuting a tax appeal against the municipality places the attorney in direct confrontation with the town (unlike presenting a matter for a board's approval), creating both a conflict of interest and an appearance of impropriety, so it is improper.

The Committee held that a self-insured municipality participating in a joint insurance fund is treated the same way. Because the fund operates much like a liability carrier (it assigns matters to available defense attorneys who are paid through the fund, not the individual municipality), the public is unlikely to associate such an attorney closely with the municipal government, and the Committee's conclusions about insurer-retained attorneys apply with equal force to firms retained by self-insured municipalities through such funds.

Currency note

This opinion was issued in 1990, before New Jersey's adoption of the 2004 revisions to the Rules of Professional Conduct; the appearance-of-impropriety standard the opinion applied was eliminated from the New Jersey Rules effective January 1, 2004. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.

Common questions

Q: Can insurer-retained defense counsel for a town appear before that town's zoning or planning board?

A: Per the opinion, yes. Following Opinion 428, the Committee found such an attorney is not a municipal attorney in the official-family sense, so the public is unlikely to perceive a conflict, and the appearance before municipal boards is permitted.

Q: Can the same firm prosecute tax appeals against the municipality?

A: No. The Committee held that prosecuting tax appeals against the municipality is a direct confrontation with the town, creating both a conflict of interest and an appearance of impropriety, and is therefore improper.

Q: Does it matter if the municipality is self-insured through a joint insurance fund?

A: No. The Committee found a joint insurance fund operates much like a liability carrier (it assigns and pays defense counsel), so its determinations about insurer-retained attorneys apply with equal force to firms retained by self-insured municipalities through such funds.

Background and rules framework

The opinion applied the conflict-of-interest and then-existing appearance-of-impropriety standard (NJ RPC 1.7(c)(2); Model Rule 1.7) and the official-family distinction drawn in Opinion 428, set against the statutory joint-insurance-fund framework (N.J.S.A. 40A:10-36 et seq.). It cited Goldberg v. Atlantic City on tax-appeal adversity.

Citations and references

Rules of Professional Conduct:

• MR 1.7 / NJ RPC 1.7(c)(2) (conflict; appearance of impropriety, since eliminated)

Statutes:

• N.J.S.A. 40A:10-36 et seq. (municipal joint insurance funds)

Cases:

• Goldberg v. Atlantic City, 4 N.J. Tax 195 (Tax Ct. 1982), adversity in tax appeals against a municipality

Other opinions cited:

• NJ ACPE Op. 428 (104 N.J.L.J. 1), insurer-chosen attorney not part of the official family

See also

• NJ ACPE Op. 646: Board-of-Adjustment Member as Ad Hoc Town Attorney
• NJ ACPE Op. 641: Library Board Counsel's Private Practice
• NJ ACPE Op. 662: Municipal Attorney Serving as Municipal Prosecutor

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp640-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

125 N.J.L.J. 894, April 5, 1990

OPINION 640

Conflict of Interest: Law Firm Retained By Insurance Carrier for Municipality or Self-Insured Municipality Representing Private Clients Before Municipal Boards

The following questions concerning the municipal practice of a law firm representing a municipality in tort litigation have been asked: 1. Whether a law firm which has been retained by the insurance carrier for a municipal entity to represent that entity in the defense of one or more liability actions brought against it may appear before municipal boards, such as the zoning board, or prosecute tax appeals against that municipality? 2. Whether law firm may undertake the activity set forth in Question 1, supra, if the municipality is self-insured through a joint insurance fund?

The portion of Question 1 concerning the law firm's appearance before municipal boards is governed and controlled by Opinion 428, 104 N.J.L.J. 1 (1979). In said opinion, we determined that an attorney chosen by an insurance company for the purpose of representing a municipal body in a particular matter is not truly a municipal attorney in the sense of being a member of the official family appointed to a position by the governing body. Thus, there is little likelihood that the general public would associate the attorney with the municipal government so as to give any appearance of a conflict of interest. Consequently, we held that the attorney in question could appear before various boards in the municipality.

The portion of Question 1 concerning the law firm's prosecution of tax appeals against the municipality presents a different problem. In those instances, the attorney representing the appealing taxpayer is in direct confrontation with the municipality, as distinguished from the earlier situations where the attorney is presenting a matter for approval by a planning board or zoning board of adjustment. Therefore, a conflict of interest as well as an appearance of impropriety arises and prosecution of tax appeals against the municipality would be improper. Cf. Goldberg v. Atlantic City, 4 N.J. Tax 195 (Tax Ct. 1982).

The second question concerns the municipal practice of a law firm representing a self-insured municipality. This question differs from the first and is discussed separately because many municipalities have chosen not to carry liability insurance policies, opting instead to associate themselves in a joint insurance fund. N.J.S.A. 40A:10-36 et seq.; N.J.A.C. 11:15-2.1, et seq.

Inquirer advises that a joint insurance fund is, in many respects, operated in a manner similar to that of a liability insurance carrier. Of particular relevance to this inquiry is the fact that in the event a municipality needs representation, the fund assigns the matter to one of a number of available defense attorneys. The attorney, in turn, receives compensation through the fund, not from the individual municipality. Therefore, as in the situation where an attorney has been retained by an insurance company, there is little likelihood that the public would associate such an attorney so closely with the municipal government as to give rise to any appearance of a conflict of interest insofar as the attorney's municipal practice is concerned. The Committee's determinations concerning attorneys or law firms retained by insurance companies apply with equal force to such lawyers and law firms as are retained by self-insured municipalities through a joint insurance fund.