Ethics Committee issues draft policy for discussion
Joint retainers in the defence of third-party liability claims – what should be a lawyer’s obligations?
For the past several years, the Ethics Committee has examined the ethical obligations of counsel who jointly represent insurers and insureds in the defence of third-party liability claims. Although the Committee has benefitted from the views of a number of lawyers who practise in the insurance field, there is no clear agreement among them on several key issues. In particular, what advice should a lawyer give clients about a joint retainer? What circumstances require a lawyer to withdraw from a joint retainer? What information can the lawyer give to the parties when the lawyer is required to withdraw?
It seems likely that not all lawyers who practise in this area are complying with their obligations in Chapter 6, Rules 4 and 5 of the Professional Conduct Handbook which state:
Acting for two or more clients
4. A lawyer may jointly represent two or more clients if, at the commencement of the retainer, the lawyer:
(a) explains to each client the principle of undivided loyalty,
(b) advises each client that no information received from one of them as a part of the joint representation can be treated as confidential as between them,
(c) receives from all clients the fully informed consent to one of the following courses of action to be followed in the event the lawyer receives from one client, in the lawyer’s separate representation of that client, information relevant to the joint representation:
(i) the information must not be disclosed to the other jointly represented clients, and the lawyer must withdraw from the joint representation;
(ii) the information must be disclosed to all other jointly represented clients, and the lawyer may continue to act for the clients jointly, and
(d) secures the informed consent of each client (with independent legal advice, if necessary) as to the course of action that will be followed if a conflict arises between them.
5. If a lawyer jointly represents two or more clients, and a conflict arises between any of them, the lawyer must cease representing all the clients, unless all of the clients:
(a) consented, under paragraph 4(d), to the lawyer continuing to represent one of them or a group of clients that have an identity of interests, or
(b) give informed consent to the lawyer assisting all of them to resolve the conflict.
The Ethics Committee proposes, for discussion purposes only, a formulation of a lawyer’s obligations when acting for an insured and insurer in the defence of a third-party claim (see right). The Committee invit es comment from the profession.
From the Ethics Committee – draft for discussion
Defending third party liability claims
under a policy of insurance
(1) Lawyer may defend a third party liability claim under joint retainer
A lawyer engaged by an insurer to represent an insured to defend a third-party liability claim may represent the insured alone or, with appropriate disclosure in accordance with Chapter 6 of the Professional Conduct Handbook, may represent both the insurer and the insured jointly with respect to all or some aspects of the matter. Where the representation is structured as a joint retainer, the lawyer has duties to both the insured and the insurer, and must take care to identify and avoid conflicts of interest between the two clients. So long as the insured is a client, the rules of professional conduct — and not the insurance contract — govern the lawyer’s obligations to the insured.
(2) Duty of lawyer when a conflict emerges
If, after commencing to act on a joint retainer, the lawyer receives information that evidences a conflict between the insured and the insurer, the lawyer must withdraw from the joint representation without disclosing the information giving rise to the conflict.
(3) Duty of lawyer when policy authorizes insurer to conduct defence
Where the policy of insurance authorizes the insurer to control the defence and to settle within policy limits in its sole discretion, the lawyer must inform the clients of these limitations on the representation. After the lawyer has communicated the necessary information to the insured, the lawyer may settle at the direction of the insurer. If a lawyer for an insured knows that the insured objects to a settlement, the lawyer may not settle the claim against the insured at the direction of the insurer, without giving the insured an opportunity to reject the defence offered by the insurer and to assume responsibility for the defence at the insured’s own expense.
Lawyers are invited to comment on the Ethics Committee’s proposed opinion by contacting Jack Olsen, Staff Lawyer – Ethics, at:
Law Society of British Columbia
8th Floor, 845 Cambie Street
Vancouver, BC V6B 4Z9
Tel. 604 443-5711
Fax 604 646-5902