When the same insurer covers both the plaintiff and the defendant, can the defense lawyer use the plaintiff's statement to the insurer against the plaintiff at trial?

Plain-English summary

Several judges brought to the Committee a recurring problem in automobile negligence trials: both the plaintiff and the defendant hold policies with the same insurance company, and each has given the company a statement about the accident. When one party sues, the company furnishes its defense lawyer the file, including the other party's statement (and any medical report), and at trial the lawyer uses those statements to defeat or mitigate the plaintiff's claim. The question was whether the lawyer (ostensibly representing the defendant but actually representing the company) should be barred on ethical grounds from using the statements.

The Committee reasoned that Canon 37 requires a lawyer to preserve his client's confidences, a duty that outlasts the employment. Although ordinarily the plaintiff would not be the defense lawyer's client, the Committee relied on State v. Kociolek and the general rule (22 A.L.R.2d 660) that a communication from an insured to his liability insurer about an occurrence that may give rise to a claim is privileged as one between attorney and client where the policy obliges the insurer to defend through its own attorney. On that basis, the plaintiff's statement to his company (and the medical report) carried the attorney-client privilege when passed to the company's attorney. If giving a statement to the company is in effect giving it to any attorney who represents the company, then no insured could be free from fear that the statement could be used against him.

The Committee cited State Farm Mutual v. Walker, where a court criticized a lawyer who, representing a defendant through the insurer, developed and forwarded harmful information after learning his client's statement was false, contravening the duty to preserve the client's secrets. It found the lawyer here confronted by the interests of multiple clients (both plaintiff and defendant through the insurer), making it impossible to exercise independent professional judgment for either, contrary to Canon 5 of the new Code of Professional Responsibility. The Committee concluded that it would be unethical for the lawyer to use the plaintiff's statement against him, and that in such a case the attorney must withdraw from the suit.

Currency note

This opinion was issued in December 1969, before New Jersey's September 13, 1971 adoption of the Disciplinary Rules (Code of Professional Responsibility), so the Committee was applying the Canons of Professional Ethics and discussing the then-pending Code (Canons 4 and 5) before its adoption here. It also predates the 1984 Rules of Professional Conduct and all later revisions. The confidentiality and conflict principles it applied are now treated under RPC 1.6 and RPC 1.7. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Is a statement an insured gives his liability insurer privileged?

A: The Committee treated it as privileged, relying on State v. Kociolek and the general rule that an insured's communication to an insurer obliged to defend him through its own attorney is privileged as an attorney-client communication.

Q: Can the same insurer's defense lawyer use one insured's statement against another insured?

A: No. The Committee concluded it would be unethical to use the plaintiff's statement against him at trial, because doing so would betray a privileged communication and reflect the lawyer's impermissible conflicting duties to both insureds.

Q: What must the lawyer do in that situation?

A: The Committee held the attorney must withdraw from the suit, because his duties to multiple clients with differing interests make it impossible to exercise independent professional judgment for either.

Background and rules framework

The opinion applied Canon 37 (preserving client confidences) and Canon 6 / Canon 5 of the then-pending Code (undivided fidelity and independent judgment) to the insurance-defense triangle where one insurer covers both parties. In current New Jersey terms, the duty of confidentiality is governed by RPC 1.6 and the conflict among multiple clients by RPC 1.7.

Citations and references

Cases:

• State v. Kociolek, 23 N.J. 400 (1957)
• State Farm Mutual Automobile Insurance Co. v. Walker, 382 F.2d 548 (7th Cir. 1967)

Other authorities:

• Canons of Professional Ethics, Canon 37 (confidences); Canon 5, Code of Professional Responsibility (final draft 1969)
• 22 A.L.R.2d 660 (privilege of insured's communication to insurer)
• ABA Committee on Professional Ethics and Grievances, Opinions 268 (1945), 274 (1946), 314 (1965)

See also

• NJ ACPE Op. 165: Insurance Defense Counsel and a Coverage Dispute Over the Facts
• NJ ACPE Op. 407: Insurance Carrier's Attorney Opposed to the Insured in a Declaratory Action
• NJ ACPE Op. 578: Insurance Defense Counsel's Duty to Advise the Insured on Settlement

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp166-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

92 N.J.L.J. 843, December 25, 1969

OPINION 166

Use at Trial of Statements Given by Policyholder to Insurance Companies

Several judges have called to the attention of this Committee a problem which is occurring with increasing frequency in the trial of automobile negligence cases. It arises when both the plaintiff and the defendant have policies with the same insurance company and each has given a statement to the company setting forth his version of the accident. Then a suit is brought by one of the parties involved and in the defense of that suit the insurance company, which engages a lawyer to defend the suit, furnishes the latter with its file, containing the statement given by the plaintiff and, in cases where there also is medical examination, a copy of the medical report. At the trial of the case, the attorney uses these statements in an effort either to completely defeat the plaintiffs claim or to mitigate the damages.

The question to be resolved is whether the attorney, who ostensibly is representing the defendant but actually is representing the insurance company, under such circumstances should be precluded on ethical grounds from using the statements.

Canon 37 of the Canons of Professional Ethics requires that a lawyer preserve his client's confidences and provides that this duty outlasts his employment. Ordinarily, this would present no problem because it would be considered that the plaintiff was not the client of the defense attorney. However, our Supreme Court, in State v. Kociolek, 23 N.J. 400, 416 (1957), said, with respect to this, as follows:

The annotation to the case in 22 A.L.R. 2d 660 shows it to be the general rule that a report or other communication made by an insured to his liability insurance company, concerning an occurrence that may give rise to a claim against him under the policy, is privileged as one between attorney and client, if the policy obliges the insurer to defend him through its own attorney and the communication is intended for the information or assistance of the attorney in making such defense.

Thus, it would appear that the privilege rule between attorney and client is applicable with respect to the statement given by the plaintiff to his insurance company and subsequently given by it to its attorney. This also includes the report of the medical examination which plaintiff undertook presumably at the request of the company. The views of the various trial lawyers associations of this state have been solicited, and there is no agreement among them on this subject.

Under the new Code of Professional Responsibility recently adopted by the American Bar Association, but not as yet approved by our Supreme Court, there appear in the July 1, 1969 final draft with respect to new Canon 4 - which refers to the requirement that a lawyer must preserve the confidences and secrets of a client - numerous citations of American Bar Association opinions to the effect that a client must be free from fear that his statements to his attorney will be revealed. A.B.A. Committee on Professional Ethics and Grievances, Opinions 268 (1945), 274 (1946) and 314 (1965).

If, as stated in the Kociolek case, the giving of the statement to the insurance company is in effect giving it to any attorney who represents the company, then no client could be free from the fear that the statement could be used against him if litigation ensued and it developed that the other party to the accident was insured with the same company.

In State Farm Mutual Automobile Insurance Co. v. Walker, 382 F.2d 548, 552 (7th Cir. 1967), the court was critical of the action of a lawyer who represented a defendant through an insurance company to which the defendant had given a statement under the cooperation clause of his policy. It developed during the course of the case that the lawyer discovered that the statement given by the defendant (his client of record) to the insurance company (his real client) was not true. The lawyer, however, went on to take a sworn statement from the defendant and a deposition, all of which he forwarded to the insurance company. It then brought the suit which was before the Court of Appeals to be relieved of its obligations under the policy. The court said that the lawyer should have refused to participate in the case after the false statement was revealed, stating

This action appears to contravene an Indiana attorney's duty "at every peril to himself, to preserve the secrets of his client" [Richard Walker] (Section 4-3608 Fifth Burns Indiana Statutes). This statement was hardly in Walker's best interest, for as State Farm's brief acknowledges, it revealed "an essential element to ... Dorothy Walker's action under the Indiana Guest Statute... .

In the situation here present, the lawyer finds himself confronted by the interests of multiple clients, i.e., both the plaintiff and the defendant through the insurance company. This makes it impossible for him to exercise independent professional judgment on behalf of either client, contrary to the provisions of Canon 5, of the new Code of Professional Responsibility. In the discussion of that canon (pp. 60-62), it is made plain that where a lawyer finds that he is representing multiple clients having potentially differing interests, which may impair his judgment or divide his loyalty, he must resolve all doubts against the propriety of such representation.

We conclude that, if a lawyer is to appear for a defendant in a situation as hereinabove described, it would be unethical for him to use the plaintiff's statement against him in the suit. In such case the attorney must withdraw from the suit.