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Advising Insured and Insurance Company on Settlement Value of Case

Adopted: October 21, 2004

Opinion rules that an insurance defense lawyer may give the insured and the insurance carrier an evaluation of a pending case, including settlement prospects, but may not recommend that the carrier decline to settle and go to trial if this recommendation is contrary to the wishes of the insured.

Inquiry #1:

Attorney is retained by Insurance Company to represent Physician in medical malpractice lawsuit involving significant injuries to the plaintiff. Physician has a professional liability policy with a limit of $1,000,000 per claim. Plaintiff is seeking $5,000,000 in damages. After discovery, Attorney is of the opinion that Physician has a 60% chance of prevailing on the merits. However, if Physician loses the case, Attorney believes that the jury verdict will be between $1,250,000.00 and $1,500,000.00, resulting in personal exposure for the Physician. Physician has advised Attorney that she wants to avoid personal exposure and has made a demand on the insurance company that the case be settled for an amount at or less than the policy limit.

Insurance Company requests Attorney's advice on (1) his evaluation of the likelihood of an adverse verdict on liability; (2) his evaluation of the likely verdict range if the jury returns a liability verdict against Physician; and (3) the amount it should pay in settlement. Attorney believes that the case could be settled for an amount between $500,000 and $750,000. If Attorney recommends settlement in this range, he recognizes that the Insurance Company may refuse to offer up to the policy limit to settle the claim, as demanded by Physician.

May Attorney provide Insurance Company with a letter stating his evaluation of the likelihood of a verdict adverse to Physician on liability, the likely amount of the verdict if the jury reaches the damages issue, and the amount he believes the plaintiff's counsel would accept to settle the case?

Opinion #1:


Prior ethics opinions have firmly established that a lawyer defending an insured at the request of an insurer represents both clients. Rule 1.7, cmt. [29] to [33]; see also RPC 56, 92, 118. The lawyer's primary duty of loyalty, however, is to the insured. RPC 56, 92, 118.

Because both the Physician and Insurance Company are Attorney's clients, they are each entitled to Attorney's full, candid evaluation of all aspects of the claim, including but not limited to (1) the probability of an adverse liability verdict, (2) the range of potential verdicts, and (3) probable settlement amounts. See Rule 1.4(b), Rule 1.7, cmt. [31], and RPC 91. Prior opinions established that "the attorney should keep the insured informed of his or her evaluation of the case as well as the assessment of the insurance company." RPC 92. RPC 92 envisioned that this work product would be shared with the insurance company so that both clients are fully informed of their lawyer's opinion on this central issue of the representation. Id.

Inquiry # 2:

If the plaintiff does not accept a settlement within the estimated range, may Attorney recommend to Insurance Company that it decline to settle the case?

Opinion # 2:


Because of the potential conflict between Insurance Company, which might prefer to press for a lower settlement, and Physician, who has clearly expressed her desire to avoid personal exposure and for a settlement up to Insurance Company's policy limits, Attorney cannot recommend an upper limit as the amount Insurance Company should offer short of proceeding to trial. In this situation, Attorney should advise Insurance Company of Physician's wishes regarding settlement. RPC 91. Then, after advising both clients of Attorney's evaluation of liability, damages, and likely settlement prospects, Attorney should advise Physician and Insurance Company to consider employing separate counsel to represent them on issues concerning whether the case should be settled within Insurance Company's policy limits. See RPC 91, RPC 92, RPC 111. This opinion is not intended to preclude Attorney from suggesting settlement strategies or negotiating a settlement that benefits both clients.

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