Can the plaintiff's lawyer later represent the defendant insured in a Stowers bad-faith suit against the insured's own carrier?

Plain-English summary

A and B collided; A sued B, who was defended by his liability carrier. A offered to settle within policy limits, B asked the carrier to settle, the carrier refused, and a jury returned a verdict above the policy limits. B then wanted to bring a Stowers suit against the carrier for its negligent refusal to settle, and wanted A's attorney (who had won the underlying case against B) to represent him. The question was whether A's attorney was disqualified from B's Stowers case.

The Committee analyzed the facts under Canons 6 and 16. Under Canon 6, if A's judgment (including the excess over policy limits) had been satisfied, it saw no conflict between A's and B's interests, and the attorney could accept B's case. But if A's judgment had not been satisfied, a conflict was likely: the attorney would be representing A (and possibly himself) in collecting the judgment while representing B in trying to pass the excess liability to the carrier; B would be best served by a release of the judgment at no cost to himself, while A would be best served by collecting it. The Committee concluded the conflict would likely disqualify the attorney unless the judgment had been satisfied or both A and B expressly consented after full disclosure, which would require the attorney to explain the possible conflict and consequences in detail and satisfy himself that both understood.

Under Canon 16, the Committee said it is unethical to accept a case when the lawyer knows he will be a material witness. In the Stowers case the attorney might be a witness about the settlement offer he made for A and about facts bearing on the negligent refusal to settle; if he had reason to believe his testimony would be admissible and necessary or desirable to the plaintiff, or that the defendant would call him, he should not accept the employment. The ruling was 9-0.

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 Treat this page as historical context, not current guidance.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 the plaintiff's lawyer later represent the defendant insured against the insured's own carrier?

A: The Committee said yes if the plaintiff's judgment has already been satisfied, because it saw no conflict then; but not if the judgment is unsatisfied, absent both clients' informed consent.

Q: Why is an unsatisfied judgment a conflict?

A: Because the lawyer would be collecting the judgment for A (and possibly himself) while helping B shift the excess liability to the carrier; A wants the judgment paid, while B wants it released at no cost, so their interests diverge.

Q: What does "full disclosure" require here?

A: The Committee said the lawyer would have to explain to both A and B, in detail, the fact of his employment, the possible conflict, and its consequences, and satisfy himself that they fully understand the effect of consenting.

Q: What if the lawyer will be a witness in the Stowers case?

A: Under Canon 16, the Committee said he should not accept the case if he knows he will be a material witness, for example about the settlement offer or the carrier's refusal to settle.

Background and rules framework

The opinion interprets former Texas Canon 6 (representing conflicting interests) and Canon 16 (a lawyer accepting a case when he knows he will be a material witness). The modern analogs are ABA Model Rule 1.7 (concurrent conflicts of interest) and Model Rule 3.7 (lawyer as witness).

Citations and references

Rules of Professional Conduct:

• MR 1.7 (concurrent conflicts of interest), as the modern analog
• MR 3.7 (lawyer as witness), as the modern analog
• Texas Canons 6 and 16 (former canons)

Cases:

• Stowers doctrine (a carrier's liability for negligent refusal to settle within policy limits), referenced as the basis of the proposed suit

See also

• TX Ethics Op. 317: Conflicts From the Same Collision and a Former Associate Switching Sides
• TX Ethics Op. 363: A Firm Accepting a Case When a Partner Could Be a Witness
• TX Ethics Op. 326: Defending a Damage Suit After a Workers' Comp Defense in the Same Accident

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-308/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_308.pdf

Original opinion text

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

QUESTION PRESENTED

A and B are involved in a motor vehicle collision. A sues B, and B is defended by his liability insurance carrier. Prior to final judgment A offers to settle within the limits of the liability insurance policy. B, after consulting an attorney of his own choosing, calls upon his liability insurance carrier to settle the case. The insurance company refuses so settle. The case is tried to a jury, and a verdict in excess of the policy limits is rendered. B would now like to file a Stowers case against the liability insurance carrier as a result of their negligent refusal to settle the case and has indicated that he would like the attorney who represented A in the negligent collision case to represent him in the Stowers case against the insurance company. Is A's attorney prohibited and disqualified from handling B's Stowers case?

23 Baylor L. Rev. 827 (1972)

The hypothetical facts stated involve possible violations of Canons 6 and 16.

Canon 6 makes it unethical to represent conflicting interests, "except by express consent of all concerned given after a full disclosure of the facts." Assuming that A's judgment (including the excess over policy limits) has been satisfied, we see no possibility of conflict between the interests of A and B, and the attorney's acceptance of employment by B in the Stowers case would not violate Canon 6. However, we do see a possible conflict of interests if A's judgment has not been fully satisfied. In that case, A's attorney would be representing A (and possibly himself) in attempting to collect the judgment and, at the same time, would be representing B in attempting to pass the excess liability on to the insurance carrier. B's interest would be best served by a release of the judgment at no cost to himself, regardless of the settlement value of his claim against the carrier. A's interest would be best served by collection of the judgment, whether from B or from the carrier. In our opinion, conflict of interest would be likely enough to disqualify the attorney, unless A's judgment had already been satisfied, or unless both A and B expressly consent to such representation after full disclosure of the facts. In our opinion, "full disclosure" would require the attorney to explain in detail to both A and B, not only the fact of his employment, but the possible conflict and consequences thereof, and to satisfy himself that they fully understand the effect of such consent.

Canon 16 makes it unethical for an attorney to accept a case when he knows that he will be a material witness. In the Stowers case, the attorney might be a witness as to the settlement offer made on behalf of A and as to facts bearing upon negligent refusal to settle. If the attorney has reason to believe that his testimony would be admissible and necessary or desirable to the plaintiff, or if he knows or has reasonable grounds to believe that he will be called as a witness by the defendant, he should not accept employment in the case. (9-0.)

CONFLICT OF INTERESTS - REPRESENTING INSURED IN STOWERS CASE AFTER REPRESENTING PLAINTIFF IN COLLISION CASE AGAINST INSURED - ATTORNEY AS WITNESS
An attorney may ethically represent the insured in a Stowers case against the insurance carrier after having represented the plaintiff in a collision case against the insured if the judgment against the insured has been satisfied; but, because of the likelihood of conflict of interests, if would be unethical for the attorney to represent the insured in the Stowers case if the judgment has not been satisfied, unless both clients consent after full disclosure. It would also be unethical for an attorney who knows he will be a material witness to accept employment in the case.

Canons 6, 16.

Tex. Comm. On Professional Ethics, Op. 308 (1965)