Ethics Opinions

Representation of Insured, Insurer, and UIM Carrier

 

Opinion rules that an attorney may not represent the insured, her liability insurer and the same insurer relative to underinsured motorist coverage carried by the plaintiff.

 

Inquiry #1:

 

Passenger A was injured in an automobile accident as a result of the admitted negligence of Driver B, who rented a room in A's home. Two other people were injured in another vehicle hit by B. A has underinsured motorist coverage (UIM) of $200,000 with Insurance Company X. B has a policy of liability insurance of $25,000/$50,000 also with Insurance Company X. A sued B and asserted a claim in excess of all insurance coverage. Insurance Company X hired Attorney Y. Attorney Y undertook representation of B, Insurance Company X under the liability policy, and Insurance Company X under the UIM policy.

 

Does Attorney Y have a disqualifying conflict of interest in representing B, Insurance Company X under the liability policy, and Insurance Company X under the UIM policy?

 

Opinion #1:

 

Yes. The provisions of G.S. §20-279.21(4) provide for certain subrogation or assignment rights by a UIM insurer against the owner, operator or maintainer of an underinsured vehicle. This would cause the interests of Driver B and Insurance Company X under its UIM policy to likely be materially different and adverse. Therefore, Attorney Y's representation of both clients would cause his representation of one client to be directly adverse to that of the other in violation of Rule 5.1(b). For example, Attorney Y's advice to Insurance Company X to pay a proposed settlement with Passenger A in such a manner as to enable Insurance Company X to proceed against Driver B under the subrogation rights provided in G.S. §20-279.21(4) would necessarily be adverse to Driver B. Conversely, for Attorney Y not to so advise Insurance Company X would be potentially adverse to that client.

 

Inquiry #2:

 

Prior to suit, B requested Insurance Company X to pay the liability limits to A but Insurance Company X refused to do so. Insurance Company X stated it had reserved the primary coverage for the two other injured parties. A offered a Covenant Not to Execute Judgment in excess of insurance coverage in return for immediate payment of the liability coverage of $25,000. Attorney Y offered to settle the case for $75,000 but refused to tender the $25,000 liability limits and accept the Covenant from A.

 

Does Attorney Y have a disqualifying conflict of interest in light of these circumstances?

 

Opinion #2:

 

Yes. See answer to Inquiry #1. Additionally, the circumstances set out in Inquiry #2 reveal a further conflict of interest between Insurance Company X and Driver B. It would appear that Insurance Company X's interest might be best served by allocating Insurance Company X's primary insurance policy in such a manner as to best benefit its financial obligations under its UIM policy, and such allocation might adversely affect Driver B's interest by raising her personal exposure to the other claimants injured in the accident. Attorney Y would once again be likely to have his ability to represent both clients materially impaired in violation of Rule 5.1(b).