Can a lawyer represent an insured under an insurer's instruction not to give the insured any opinion on the settlement value of the case?

Plain-English summary

A lawyer regularly retained by a liability insurer to defend its insureds was instructed not to form or express, to either the insurer or the insured, any opinion on the settlement value of a case, and asked whether he could ethically accept or continue the representation under that restraint. The committee concluded he could not. It explained that both insured and insurer are real parties in interest whose interests may differ, and that the rules apply whether the lawyer is engaged to represent the insured alone or both jointly.

The committee anchored the duty in DR 5-107(B), which forbids a lawyer from permitting a person who recommends, employs, or pays him to direct or regulate his professional judgment, and in DR 5-105, which bars multiple representation where independent judgment is or is likely to be adversely affected. It cited EC 5-17 and EC 5-23 on the pressures an employer can exert, and EC 7-5, EC 7-7, and EC 7-8 on the lawyer's duty to give the client his professional evaluation and to recognize that the decision whether to settle belongs to the client. The committee reasoned that evaluation is integral to defense representation and the insured is entitled to the lawyer's opinion on likely outcome; a lawyer cannot fulfill this duty under a "gag order" on settlement value.

The committee directed that a lawyer facing such a restraint should ask the insurer to remove it. If the insurer does so voluntarily, the lawyer may proceed. If the insurer refuses, the lawyer should decline the employment under DR 5-105, or, if representation has begun, decline to continue subject to the restraint, with full disclosure to the insured. Whether the lawyer may then continue for the insured or insurer alone, or must withdraw from both, requires careful, case-by-case assessment under DR 4-101, Canon 9, and EC 9-2; while full withdrawal will most often be required, rare circumstances might allow continued representation of one. Any required withdrawal must comply with DR 2-110(A).

Currency note

This opinion was issued in 1981, before The Florida Bar's adoption of the 2006 revisions to the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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 an insurer forbid defense counsel from advising the insured on settlement value?

A: The opinion concluded a lawyer may not accept or continue the representation under such an instruction, because the insured is entitled to the lawyer's evaluation and advice on settlement.

Q: What should the lawyer do when given that instruction?

A: The opinion concluded the lawyer should ask the insurer to remove the restraint; if the insurer refuses, the lawyer should decline the employment, or decline to continue with full disclosure to the insured.

Q: Does the insurer's payment let it direct the lawyer's judgment?

A: The opinion concluded that under DR 5-107(B) a lawyer may not permit the person who employs or pays him to direct or regulate his professional judgment.

Background and rules framework

The opinion interprets the rules protecting a lawyer's independent professional judgment when a third party pays for the representation: CPR DR 5-107(B) and DR 5-105, with EC 5-14 through EC 5-23 and EC 7-5 through EC 7-8. These correspond to Model Rule 1.7 (conflicts), Model Rule 1.8(f) (compensation from a third party), Model Rule 2.1 (independent advice), and Model Rule 5.4(c) (no direction by the payer). Withdrawal is governed by DR 2-110(A) (Model Rule 1.16).

Citations and references

Rules of Professional Conduct:

• CPR DR 5-107(B); DR 5-105; DR 4-101; DR 2-110(A); EC 5-14 through EC 5-23; EC 7-5, 7-7, 7-8; EC 9-2; Canon 9

Cases:

• American Employers Ins. Co. v. Globe Aircraft Specialties, 250 Misc. 1066, 131 N.Y.S.2d 393 (1954), motion to withdraw appeal granted, 1 A.D.2d 1008, 154 N.Y.S.2d 835 (1956)

See also

• FL Bar Ethics Op. 97-1: Insurer Instructions on Summary Judgment
• FL Bar Ethics Op. 02-7: Insured Clients' Rights in Employment-Discrimination Defense
• FL Bar Ethics Op. 86-6: Representing a Physician and Insurer on Settlement

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-81-5/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-81-5-1.pdf

Original opinion text

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

FLORIDA BAR ETHICS OPINION
OPINION 81-5
March 13, 1981
Advisory ethics opinions are not binding.

A lawyer may not ethically accept or continue the representation of either the insured or both the insurance carrier and the insured under instructions from the insurance carrier that the lawyer is not to express any opinion as to settlement value of the cases to the insured.

CPR: EC 5-14, EC 5-15, EC 5-16, EC 5-17, EC 5-19, EC 5-23, EC 7-5, EC 7-7, EC 7-8, EC 9-2, DR 2-110(A), DR 4-101, DR 5-105, DR 5-107(B), Canon 9
Cases: American Employers Ins. Co. v. Globle Aircraft Specialities, 250 Misc. 1066, 1075, 131 N.Y.S.2d 393, 401 (1954), Motion to withdraw appeal granted, 1 A.D.2d 1008, 154 N.Y.S.2d 835 (1956)

Vice Chairman Livingston stated the opinion of the committee:

A Florida lawyer's services are regularly engaged by a liability insurance carrier to defend claims against the carrier's insureds. The insurance carrier has instructed that in such cases the lawyer is not to form or express to either the insurer or the insured any opinion as to settlement value of the case.

The lawyer asks whether he may ethically accept or continue the representation of an insured under such restraint. The Committee is of the opinion that he cannot.

Under Florida law both the insured and the insurer are real parties in interest in such matters. As such, their interests may coincide or differ in varying degrees. Typically, the insurer is contractually obligated to defend its insured as to claims. The insurer may choose to proceed by employment of counsel for the insured alone, and separate counsel for the insurer, or by employment of counsel jointly for the insurer and the insured. While the former course of action (separate counsel) may lend greater clarity to the ethical obligations of counsel, both courses of action require consideration herein.

If the lawyer is engaged by the insurer to represent only the insured, then the commands of DR 5-107(B) are applicable. That subsection provides:

A lawyer shall not permit a person who recommends, employs, or pays him to render legal services for another to direct or regulate his professional judgment in rendering such legal services.

If the lawyer is engaged by the insurer to represent both the insurer and the insured, DR 5-107(B) continues to be applicable and the provisions of DR 5-105 also come into play. That rule prohibits acceptance or continuation of multiple representation if the exercise of the lawyer's independent professional judgment in behalf of a client "is or is like to be adversely affected." Consent of each client will not override this factor of adverse effect unless, in addition, "it is obvious that he can adequately represent the interest of each."

In addition, EC 5-17 specifically recognizes the insured and insurer as a recurring instance of potentially differing interests, and EC 5-23 provides, as to employers of attorneys, in pertinent part that:

A person or organization that pays or furnishes lawyers to represent others possesses a potential power to exert strong pressures against the independent judgment of those lawyers. Some employers may be interested in furthering their own economic, political, or social goals without regard to the professional responsibility of the lawyer to his individual client. Others may be far more concerned with establishment or extension of legal principles than in the immediate protection of the rights of the lawyer's individual client. . . . Similarly, an employer may seek, consciously or unconsciously, to further its own economic interests through the actions of the lawyers employed by it. Since a lawyer must always be free to exercise his professional judgment without regard to the interests or motives of a third person, the lawyer who is employed by one to represent another must constantly guard against erosion of his professional freedom.

See also EC 5-14, EC 5-15, EC 5-16 and EC 5-19.

The duty of the lawyer to accept or continue representation of an insured only where the insured may have the full benefit of the lawyer's independent professional judgment is clear. The standards and responsibilities of counsel retained by a carrier for such purpose are not waived or relaxed by virtue of the source of employment. See American Employers Ins. Co. v. Globle Aircraft Specialties, 250 Misc. 1066, 1075, 131 N.Y.S.2d 393, 401 (1954), Motion to Withdraw Appeal Granted, 1 A.D.2d 1008, 154 N.Y.S. 2d 835 (1956).

It is equally clear that evaluation of a lawsuit is an integral part of defense representation. Defense counsel ordinarily possesses expertise in the evaluation of likely outcome as a product of counsel's training, experience and greater objectivity. If the lawyer is to represent the client-insured adequately, then the insured is entitled to the benefit and assistance of the lawyer's evaluation and opinion as to likely outcome of the case. The lawyer's duty under Canon 7 to represent his client zealously within the bounds of the law entitles the client to a full loaf, not one with several slices missing.

In this vein, EC 7-5 states that the lawyer furthers the interests of his client by giving his professional opinion as to what he believes would be the decision of the courts on the matter at hand, and EC 7-7 specifically identifies whether or not to settle as a decision which is for the client. EC 7-8 provides as to the role of the lawyer in this decision-making process that:

A lawyer should exert his best efforts to insure that decisions of his client are made only after the client has been informed of relevant considerations. A lawyer ought to initiate this decision-making process if the client does not do so. Advice of a lawyer to his client need not be confined to purely legal considerations. A lawyer should advise his client of the possible effect of each legal alternative. A lawyer should bring to bear upon this decision-making process the fullness of his experience as well as his objective viewpoint. In assisting his client to reach a proper decision, it is often desirable for a lawyer to point out those factors which may lead to a decision that is morally just as well as legally permissible. He may emphasize the possibility of harsh consequences that might result from assertion of legally permissible positions. In the final analysis, however, the lawyer should always remember that the decision whether to forego legally available objectives or methods because of nonlegal factors is ultimately for the client and not for himself. . . . (Emphasis supplied.)

Whether the subject restraint upon counsel's services to the insured would constitute a breach of the insurer's contractual duty to defend is not a matter upon which this Committee may express any opinion. Whether the lawyer may ethically undertake or continue representation under such restraint is. While the insurer may be entitled to waive its own right to evaluation and advice of counsel, it cannot in the opinion of this Committee relieve a lawyer of the corresponding duty to the insured as a client. The lawyer cannot fulfill this duty under a "gag order" as to evaluation of settlement value of the case.

It is the opinion of the Committee that a lawyer confronted with the imposition of such a restraint on the exercise of his professional judgment should seek to have the employing insurer relieve him of that restraint. If the insurer does so voluntarily, then the lawyer may proceed with the representation with due and continuing consideration of the requirements of the Florida Code of Professional Responsibility referred to above.

If the insurer declines to remove such restraint, then it is the opinion of the Committee that, pursuant to DR 5-105, the lawyer should decline to accept the employment. If the representation has already been undertaken and commenced when the restraint is imposed, then it is the opinion of the Committee that the attorney should decline to continue to represent the insured subject to the restraint, with full disclosure to the insured of the conditions and circumstances which require this action.

Whether the attorney may thereafter ethically continue in the representation of either the insured or insurer, or is required to withdraw from representation of both, requires careful consideration of the commands of DR 4-101 and related ethical considerations, as well as Canon 9 and EC 9-2. Obviously, contractual provisions, applicable law, and other circumstances must also be weighed in determining whether the interests of the insured, or insurer, would in fact be served or disserved by continued representation of either. While full withdrawal may be most frequently required, there may exist circumstances (albeit, rare) wherein representation of one or the other, but not both, could ethically continue. This determination cannot be made in the abstract. It must be made by the individual lawyer based upon his careful assessment of circumstances presented and of his professional responsibility under those circumstances.

If withdrawal from employment is required pursuant to DR 5-105, then that withdrawal should be effected in accordance with the commands of DR 2-110(A).