Can an insurance company's salaried attorney also represent the insured for his deductible and his counterclaim in the same suit, and what conditions apply?

Plain-English summary

M, a salaried attorney for an insurance company, filed and handled subrogation suits for the company and defended liability cases in the insured's name up to policy limits. Three questions were posed: whether M may represent an insured in subrogation suits for the insured's deductible; whether the insured may sign pleadings and represent himself for the deductible while M carries the burden of trial; and whether M may continue as counsel where the insured, sued and supplied with M as defense counsel, files a counterclaim he intends to prosecute himself, given that M appears as attorney of record.

The Committee found the questions abstract but concluded there was nothing improper per se. It said a salaried attorney for one plaintiff (the insurer) may also represent the other plaintiff (the insured) who is a part owner of the single cause of action, citing Opinions 89 and 167 and ABA Opinion 282, while noting situations that could become unethical, such as the insurer acting as an intermediary by suggesting M to the insured, M making that suggestion, the interests of the two becoming adverse, or the company claiming part of M's fee from the insured. On the pro se question, the Committee said a litigant may represent himself, a non-lawyer appearing pro se is not subject to the canons, and M's carrying the burden to represent his own client, the company, is not made unethical by incidentally benefiting the insured; but if M is really the insured's attorney and misrepresents to the judge that the insured has no attorney, Canon 19 is violated, and a pro se appearance in form only would not solve a conflict between the company and the insured.

On the counterclaim, the Committee said the company generally has both the duty and the right to supply defense counsel and defend without its connection being called to the jury's attention, so M represents both the insured and the company in the defense. M may ethically either represent the insured on the counterclaim or give the appearance of doing so if the insured wants to handle it himself. Two ethics problems appear: the solicitation provision of Canon 24 would prevent M from using the situation's inherent coercion to require the insured to pay him a fee for the counterclaim, though M could, without additional fee, represent the insured on it if M did not stir up the litigation and it is reasonably necessary to defend the original suit properly (Opinion 179); and because defending the suit and prosecuting the counterclaim can present conflicting interests, the possibility of conflict does not require M to refrain, but it does require M, if he offers to handle the counterclaim as part of his defense duties, to explain fully the potential conflicts and obtain the consent of both the insured and the company. The Committee ruled 9-0.

Currency note

This opinion was issued in 1963, under the former Texas Canons of Ethics, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. 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 an insurer's salaried lawyer also represent the insured for the deductible?

A: Under this opinion, on the bare facts there is nothing improper per se about the salaried attorney for the insurer also representing the insured, who is a part owner of the single cause of action.

Q: Can the lawyer carry the trial while the insured appears pro se for his deductible?

A: The Committee said yes in principle, but if M is really the insured's attorney and tells the judge the insured has no attorney, that violates Canon 19, and a pro se appearance in form only would not cure a conflict between the company and the insured.

Q: Can the lawyer charge the insured a fee for handling his counterclaim?

A: The Committee said the solicitation provision of Canon 24 prevents M from using the situation's coercion to require a fee; M may handle the counterclaim without additional fee if he did not stir up the litigation and it is reasonably necessary to defend the original suit.

Q: What must the lawyer do about the potential conflict on the counterclaim?

A: If M offers to handle the counterclaim as part of his defense duties, he must fully explain the potential conflicting interests and obtain the consent of both the insured and the company.

Background and rules framework

The opinion interprets former Texas Canons 6, on conflicting interests, 19, on candor and appearances before a tribunal, 24, on solicitation, and 32, on the lawyer's responsibility where an intermediary is involved, in the insurance-defense setting. The modern analogs are ABA Model Rule 1.7, on concurrent conflicts of interest, Model Rule 1.8(f), on compensation from someone other than the client, and Model Rule 3.3, on candor toward the tribunal.

Citations and references

Rules of Professional Conduct:

• MR 1.7 (concurrent conflicts of interest), as the modern analog
• MR 1.8 (compensation from one other than the client, MR 1.8(f)), as the modern analog
• MR 3.3 (candor toward the tribunal), as the modern analog
• Texas Canons 6, 19, 24, and 32 (former canons)

Other opinions cited:

• Texas Opinions 89, 167, 179, 202, 240, and 76: salaried-counsel representation and related conflict questions
• ABA Opinion 282: most nearly on point for insurer counsel representing the insured

Other authorities:

• Keeton, 13 Vanderbilt Law Review 837, at 857-8, on conflicting interests in defense and counterclaim

See also

• TX Ethics Op. 297: Direct Settlement Talks With an Adjuster and the Insurer's Consent
• TX Ethics Op. 298: Insurer's Attorney Defending the Insured and Suing Him on Coverage
• TX Ethics Op. 299: Suing a Client the Firm Represents in a Comp Claim

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-260/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_260.pdf

Original opinion text

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

QUESTION PRESENTED

M is a licensed attorney and an employee of and on the salary of an insurance company. He files and handles subrogation suits on behalf of said company as well as the defending of liability cases in behalf of the company, in the name of its insured, up to the company's limits of liability.
Is it a violation of the Canons of Ethics for M to represent an insured in such subrogation suits for his deductible?
Under the same situation can the insured sign the pleadings and represent himself for his deductible with the burden of trial being carried by Attorney M?
Insured files a cross action in action pending against him, intending to represent himself on such cross action. Is it a violation of the Canons of Ethics for Attorney M to continue as counsel in such suit since, in truth and in fact, he will be representing the insured on his cross action since he appears as attorney of record for the insured?

18 Baylor L. Rev. 336 (1966)

INSURANCE - SALARIED ATTORNEY - CONFLICTING INTERESTS - CANDOR - INTERMEDIARY - SOLICITATION
Though many situations can be visualized which could involve unethical conduct, it is not, per se, unethical for:
An attorney, who is employed by an insurance company and who files and handles subrogation suits for said company as well as defending liability cases in behalf of the company in the name of the insured up to the company's limits of liability, to represent an insured in such subrogation suits for his deductible.
The attorney for the insurance company to carry the burden of the trial, when the insured signs pleadings and represents himself for his deductible amount.
The attorney, though insured has filed a cross action in action pending against him and intends to represent himself in such cross action, to continue as counsel in such suit when, in fact, said attorney will represent insured on his cross action since he appears as attorney of record for the insured.
Canons 6, 19, 24, 32.

The committee feels that, in the present inquiry, the questions are so abstract and devoid of facts that they are difficult to answer specifically.
The committee thinks that there is nothing improper per se about a salaried attorney for one plaintiff (insurer, or Company) also representing the other plaintiff (insured or N) who is a part owner of the one cause of action which is being asserted. See Opinions 89 and 167, and ABA Opinion 282. There could be situations in which such representation would involve unethical conduct: e.g., the insurer might act as an intermediary by suggesting to N that M would represent him, or M might make this suggestion (cf. Opinion 202), or the interests of Company and N might be adverse to one another, or Company might claim part of the fee charged N by M. See ABA Opinion 282. However, on the bare facts submitted here, the committee thinks there is no impropriety.

A litigant may represent himself, and a non-lawyer party appearing pro se is not subject to the Canons of Ethics. Therefore, we are not concerned with the ethics of N, assuming he is not a lawyer, and the committee sees little ethical complications. M may be worried about carrying the burden of the case, but he must do this to represent his own client, Company, and the fact that this incidentally is of great benefit to N does not make it unethical. If M is really the attorney for N but is misrepresenting the situation to the judge by falsely claiming that N has no attorney, Canon 19 is violated; also, this apparent pro se situation if in form only would not solve a problem of conflicting interest between Company and N.

Suit is against N, and M has been supplied as defense counsel by Company pursuant to the terms of the liability policy. N himself prepared and filed a counterclaim, intending to continue to represent himself in the case. M is concerned whether he must withdraw since to remain in the case indicates that he is representing N on the counterclaim as well as in the defense of the original suit.

Generally speaking, and recognizing that the particular liability policy involved could change the respective rights and duties of the parties, the company has both the duty and the right to supply the defense counsel and to defend the case without the connection of Company being called to the jury's attention. So M is representing both N and the Company, in defending the original case. N has a duty of cooperation with Company under the cooperation clause of the policy. Probably filing the counter-claim does not violate that duty for it may well be that the counterclaim is a mandatory one which N must file or the claim will be lost.

M's duty to clients N and the Company as to the defense of the original suit is such that M may ethically either represent N on the counter-claim or give the appearance that he is representing N if N wants to handle the counterclaim himself, although the latter may result in a difficult situation for the Company. From the standpoint of M's ethics, two problems appear: First, the solicitation provision of Canon 24 would seem to prevent M's using the inherent coercion of the situation to require N to pay him a fee for handling the counterclaim. This would not keep M, without additional fee, from representing N on the counter-claim if M did not stir up this additional litigation and if it is reasonably necessary for M so to represent N in order to defend the original suit properly. See Opinion 179. There would seem to be no harm in a suggestion by M to N that he will handle the counterclaim with fee if M needs to do so in order to defend the case properly. Secondly, in defending the suit and in prosecuting the counterclaim, M may be confronted with conflicting interests (e.g., in defending the suit it matters little whether N is found negligent so long as the original plaintiff is found to be guilty of negligence which proximately caused the collision, but negligence of N would be fatal to the counterclaim). Generally see Keeton, 13 Vanderbilt Law Review 837, at 857-8. The possibility of conflicting interest problems arising in this situation does not require M to refrain from taking over the cross action, but it does require M, if he suggests to N that he will handle the counterclaim as part of his defense duties, to explain fully the potential conflicting interests and to obtain consent of both N and Company. See Canon

Little authority has been found on this exact question. Opinions 240 and 76 are slightly analogous, and ABA Opinion 282 is most nearly on point. (9-0)

Tex. Comm. On Professional Ethics, Op. 260 (1963)