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Simultaneous Representation of Claimant and Insured Against Insurer in Bad Faith Action

Adopted: October 20, 1995

Opinion rules that a lawyer may represent an insured in a bad faith action against his insurer for failure to pay a liability claim brought by a claimant who is represented by the same lawyer.

Inquiry #1:

Pedestrian Y was killed when he was struck by a vehicle operated by X. Administratrix, the personal representative of the estate of Y, retained Attorney A to represent the estate in a wrongful death action against X. Attorney A made a settlement demand on X's automobile liability insurance carrier, Insurer, for the limits of X's policy. Insurer declined to pay the limits. Attorney A filed suit against X for the wrongful death of Y. Insurer later offered to settle the claim against X for the policy limits. Administratrix refused this offer and the case was tried. The jury verdict against X was well in excess of X's liability insurance coverage limits.

Attorney A is now representing the Estate of Y and X in a bad faith action against Insurer. X has signed an assignment of all of his rights and privileges against Insurer to the Estate of Y. The assignment states that X acknowledges that he is liable to the estate as a judgment debtor and that all actions taken by X in the bad faith action must be done in accordance with the directions of Administratrix. May Attorney A represent X in the bad faith action against Insurer?

Opinion #1:

Yes, with the consent of both Administratrix and X after full disclosure.

Rule 5.1(b) permits a lawyer to represent a client even though the representation of the client might be materially limited by the lawyer's responsibilities to another client if (1) the lawyer reasonably believes the representation will not be adversely affected, and (2) the client consents after full disclosure which includes an explanation of the implications of the common representation and the advantages and risks involved.

In the present situation, the interest of X and the Estate of Y appear to be allied with regard to the pursuit of the bad faith action against Insurer. Attorney A could reasonably conclude that the joint representation of the two clients will not adversely affect the representation of either client individually. Full disclosure to both clients, in order to obtain the consent to the joint representation, should include the disclosure by Attorney A of the fact that if X and Administratrix are in conflict with regard to a particular matter relating to the representation, Attorney A may not advocate for one client as against the other despite the agreement between X and Administratrix. In the event of such a dispute or conflict between the interests of the two clients, Attorney A must withdraw from the representation of both unless one of the clients consents to his continued representation of the other client.

No opinion is expressed as to the validity or enforceability of an assignment of a bad faith claim against an insurance carrier.

Inquiry #2:

Attorney B represents Insurer in the bad faith action. Attorney B believes that a factual dispute concerning the negotiations in the underlying wrongful death action exists and intends to take Attorney A's deposition and possibly call Attorney A as a witness at trial. May Attorney A continue to represent X in the bad faith action?

Opinion #2:

Yes. Rule 5.2(c) provides that if, after undertaking employment in contemplated or pending litigation, a lawyer learns that he may be called as a witness by the opposing party, he may continue the representation until it is apparent that his testimony is or may be prejudicial to his client.

Inquiry #3:

May Attorney B depose Attorney A while Attorney A remains attorney of record for X?

Opinion #3:

Yes. See opinion #2 above. No opinion is expressed as to the propriety of such a deposition. Moreover, it may be appropriate for Attorney A to refuse to answer deposition questions on the grounds of client confidentiality.

Inquiry #4:

May Attorney A continue to represent X and also be called as a witness by Attorney B in the trial?

Opinion #4:

Yes. See opinion #2 above.

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