Can the insurer's lawyer defend the insured in a damage suit and at the same time sue the insured for a declaratory judgment that the policy was canceled?

Plain-English summary

A was sued by B for damages from an auto accident. A's insurer, C, contended it had canceled the policy before the accident, which A denied, but C agreed to defend subject to a non-waiver agreement. C delivered the suit papers to an attorney who regularly represented C; the attorney filed an answer for A, and then, on C's instructions, filed a separate declaratory-judgment suit for C against A and B to resolve whether the policy was canceled before the accident. The question was whether the attorney violated Canon 6 by both defending A and suing A.

The Committee answered yes. Once the attorney sued A for the declaratory judgment, an attorney-client relationship already existed between the attorney and A in the damage suit, and Canon 6 condemns representing conflicting interests. The Committee recalled its split ruling in Opinion 123 (January 1956) that a lawyer whose employment is limited to one case may take a case against that client in a wholly unrelated matter, given full disclosure and no confidential knowledge, but said it had "looked with misgivings" on such conduct. It noted that other states bar suing a client one represents elsewhere and that some have suggested exceptions for scarcity of counsel.

Here, the Committee found the two suits were not wholly unrelated: ultimate liability for the collision was at issue in both, and although A and C shared an interest in defending the damage suit, their interests in the declaratory-judgment case were in direct conflict, with the outcome determining who would pay any damages. It added that A's bargaining position against B could be weakened, that a quick coverage win for C could force the attorney to withdraw and leave A to find new counsel mid-litigation, and that laypeople generally look with misgivings on a lawyer suing his own client. The majority concluded Canon 6 was violated, 7-1.

Currency note

This opinion was issued in 1965, 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 Treat this page as historical context, not current guidance.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 insurance defense lawyer sue the insured over coverage while defending him?

A: On these facts the Committee said no. Defending A in the damage suit while suing A for a declaratory judgment that the policy was canceled violated Canon 6.

Q: Why weren't the two suits treated as "wholly unrelated"?

A: The Committee said ultimate liability for the collision was involved in both, and the declaratory-judgment outcome would decide whether A or the insurer paid any damages, so the clients' interests directly conflicted.

Q: Did full disclosure and a non-waiver agreement save the arrangement?

A: No. The Committee assumed disclosure was made but said it would be "small consolation" to A, who did not choose the attorney and could not discharge him without taking over the defense himself.

Q: Does an insured and insurer sharing some interests cure the conflict?

A: The Committee acknowledged A and C had a common interest in defending the damage suit, but found their interests in the coverage suit were in direct conflict, which is what violated Canon 6.

Background and rules framework

The opinion interprets former Texas Canon 6, which made it unethical to represent conflicting interests except by express consent after full disclosure. The modern analog is ABA Model Rule 1.7 (concurrent conflicts of interest), including its limits on a lawyer suing a current client.

Citations and references

Rules of Professional Conduct:

• MR 1.7 (concurrent conflicts of interest), as the modern analog
• Texas Canon 6 (former canon)

Cases:

• Grievance Committee v. Rottner, 203 A.2d 82 (Conn. 1964), cited for the rule that a lawyer may not represent a client in one case and sue him in another

Other opinions cited:

• Texas Opinion 179 (June 1958): the existence of the attorney-client relationship
• Texas Opinion 123 (January 1956): the split ruling on suing a client in an unrelated matter
• New York County Opinion 279 and New York Lawyers' Association Opinion 350: out-of-state authority barring the practice

See also

• TX Ethics Op. 299: Suing a Defendant the Firm Represents in a Comp Claim
• TX Ethics Op. 297: Direct Settlement Talks With an Adjuster and the Insurer's Consent
• TX Ethics Op. 317: Conflicts From the Same Collision and a Former Associate Switching Sides

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-298/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_298.pdf

Original opinion text

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

QUESTION PRESENTED

A is sued by B for damages resulting from an automobile accident. A makes demand upon C, an insurance company which had issued to A a standard automobile liability policy of insurance, to defend him (A) in accordance with the terms of said policy. C contends that it had canceled its policy prior to the occurrence of the accident. A denies knowledge of the purported cancellation. C nevertheless agrees to defend the suit subject to a Non-waiver Agreement.

C delivers the citation and petition served upon A to an attorney who regularly represents C. Pursuant to the instructions of C, the attorney files an answer in behalf of A. Then, in further pursuance of C's instructions, the attorney files a separate Suit in behalf of C against A and B for a declaratory judgment to resolve the rights of the parties under the contract of insurance (i.e. whether or not the policy was canceled prior to the accident between A and B).

Does the attorney violate Canon 6 by defending A in the damage suit and suing A in the declaratory judgment suit?

18 Baylor L. Rev. 364 (1966)

CONFLICT OF INTERESTS - SUING A CLIENT WHILE REPRESENTING HIM IN ANOTHER CASE
It is unethical for an attorney employed by an insurer, while defending the defendant (under a non-waiver agreement) in a suit for damages resulting from a collision, to file a separate suit on behalf of the insurer against the insured for a judgment declaring that the policy was canceled prior to the collision.

Yes. When the attorney, on behalf of C, sued A for declaratory judgment, an attorney-client relationship existed between the attorney and A in the damage suit. See Opinion 179 (June 1958). Canon 6 condemns representation of conflicting interests. In a split decision, this committee has held that where an attorney's employment is limited to one case, it would not be improper for him to accept employment against his client in another case, provided the second case is wholly unrelated in subject matter to the first, there has been a full disclosure of the facts, and the attorney has acquired no knowledge of the second case through his relationship in the first case; but the committee "looked with misgivings" upon such action. Opinion 123 (January 1956). In some other states, a lawyer is not permitted to represent a client in one case and sue him in another. Grievance Committee v. Rottner, 203 A. 2d 82 (Cone. 1964); New York County Opinion 279; New York Lawyers' Assn. Opinion 350. It has been suggested that exceptions should be made where there is a scarcity of available counsel by reason of geographical distribution or high specialization. See Casenote, 43 Tex. Law Rev. 585.

In the present inquiry, since it is unlikely that any communication from A to his attorney in the first suit could be involved to A's detriment in the second suit, we assume that there is no betrayal of confidential information. We further assume that the attorney has made "full disclosure of the facts," although disclosure that he is being sued by his attorney would seem to be small consolation to A since he did not select the attorney in the first place and could not discharge him without assuming responsibility for defense of the damage suit.

It does not appear to us that the subject matters of the two suits are wholly unrelated. Ultimate liability for damages resulting from the collision is involved in both cases. Although the attorney's two clients, A and C, have a common interest in defending the damage suit, their interests in the declaratory judgment case are in direct conflict, and the outcome of that case will determine whether A or C will finally pay the damages, if any, awarded in the first suit. Furthermore, A's bargaining position with the plaintiff B could be weakened by B's knowledge that A's attorney in the damage suit is suing A and B in the second suit and therefore is not wholly committed to A. In addition, conclusion of the second suit in C's favor prior to disposition of the damage suit could result in the attorney's withdrawal, thus requiring A to employ new counsel in the course of litigation. Finally, laymen generally "look with misgivings" upon a lawyer's representing a client in one case and suing him in another; and in the absence of a public-policy reason for making an exception, conduct of an attorney which causes public disfavor should not be condoned. The majority of the committee are of the opinion that Canon 6 is violated. (7-1.)

Tex. Comm. On Professional Ethics, Op. 298 (1965)