Inquiry: Law firm does insurance defense work on a regular basis for certain insurance companies such that there is always at least one active file at the firm for those insurers. Other insurance companies occasionally refer cases involving their insureds to the firm so that there will often but not always be an active file at the firm for those companies. By virtue of these long-term relationships, the firm is generally familiar with settlement policies and personnel at the insurance companies. Now considering taking more plaintiff's cases, the firm is concerned with the ethical problems raised by those cases in which a defendant, in a plaintiff's suit, is insured by one of the companies from which the firm has either regularly or occasionally received business.
1. Given the control exercised by an insurer over the disposition of cases involving its insureds under the terms of its policies, including the payment of attorney's fees, is there an attorney/client relationship between the law firm and the insured involved in a case referred to the firm by the insurer, as well as between the law firm and the insurer?
Opinion: Yes. If conflicts of interest develop between the insured and insurer, such conflicts should be frankly discussed with both, and each should be advised he/it has the right to seek advice from other, independent counsel. EC 5-14 through EC 5-19.
2. Can the firm represent a plaintiff seeking to recover from a defendant who is insured by an insurance company for which the firm has, or has had and will have active files without that insurer's consent?
Opinion: Yes. The firm may wish, however, to notify the insurer. Further, the proposed representation should not be undertaken without the plaintiff's informed consent concerning the relationship between the firm and the defendant's insurer.
3. If the firm were to abandon all insurance defense work, would the general knowledge that the law firm has of an insurance company's settlement practices and its familiarity with insurance company personnel bar it from taking cases in which a defendant or potential defendant is insured by that former client?