Chapter 2. Ethics & Professionalism - Insurance Defense Practice - Tripartite relationship

4:13. Insurance Defense Practice -- Tripartite Relationship

The tripartite relationship between insurer, insured, and defense counsel is unique in the legal profession, variously described as “deeply and unavoidably vexing” 1 and presenting an ethical dilemma that would “tax Socrates.” 2

The insurance defense lawyer serves two masters--the insurer that hires him and controls the defense, and upon whose continuing good will he may depend for future business, and the insured client who did not choose him, will not pay him, and may never be in the position to refer him future business. The inherent conflicts present ethical dilemmas that arise primarily with regard to control, confidentiality, consent, and candor.3

The Restatement view is that “the lawyer's professional conduct on behalf of client may be directed by someone other than client when direction reasonable in scope and character, such as by reflecting obligations borne by person directing lawyer, and client consents to directions.” 4

Generally, in the “tripartite relationship” of insurer, insured, and defense attorney, insurance defense counsel may not subordinate the interest of either insurer or insured to the other. If their interests come into conflict, defense counsel cannot ethically continue to represent either without making disclosure to both and refraining from taking sides with either against the other.

A conflict of interest between an insurance company and an insured “occurs whenever their common lawyer's representation of the one is rendered less effective by reason of [the lawyer's] representation of the other.” 5 “Even the most optimistic view of human nature requires us to realize that an attorney employed by an insurance company will slant his efforts, perhaps unconsciously, in the interests of his real client--the one who is paying his fee and from whom he hopes to receive future business--the insurance company.” 6 An attorney should “not be permitted to put himself in a position where, even unconsciously, he will be tempted to ‘soft pedal’ his zeal in furthering the interests of one client in order to avoid an obvious clash with those of another.” 7 In insurance defense work, counsel simultaneously represents the interests of both the insured and the insurance company, and there is a substantial likelihood that the attorney's representation of either party may in the future be materially limited.8 Therefore, Rule of Professional Conduct 1.7 generally precludes a defense attorney from jointly representing both the insurance company and the insured in a liability matter. If there is a coverage dispute between the insurer and insured, defense counsel must not take either side. Information the attorney obtains from the insured that would defeat coverage if known to the insurer should not be conveyed to the insurer.9 Defense counsel should resist the temptation to curry favor with an insurer by reporting to the adjuster information obtained in confidence from the insured client which could result in a denial of coverage.




1 Charles Silver, Does Insurance Defense Counsel Represent the Company or the Insured?, 72 Tex. L. Rev. 1583, 1587 (1994).

2 Hartford Acc. & Indem. Co. v. Foster, 528 So. 2d 255, 273 (Miss. 1988).

3 Nancy J. Moore, The Ethical Duties of Insurance Defense Lawyers: Are Special Solutions Required?, 4 Conn. Ins. L. J. 259 (1997-1998).

4 Restatement (Third) of the Law Governing Lawyers §215 (2000). See generally Czarnecki, Ethical Considerations Within the Tripartite Relationship of Insurance Law--Who is the Real Client?, 74 Def. Couns. J. 172 (2007); Brownlee, Insurers, Litigation Management, and the Tripartite Relationship, 33 ABA Brief 56 (2004); Daniel M. Martinez, Insurance Companies Use of “Captive” or In-House Counsel to Represent Insureds Constitutes the Unauthorized Practice of Law: Is America Home the Right Decision for Texas?, 34 St. Mary's L.J. 1007 (2003); Susan Randall, Managed Litigation and the Professional Obligations of Insurance Defense Lawyers, 51 Syracuse L. Rev. 1 (2001); Thomas D. Morgan, Whose Lawyer Are You Anyway?, 23 Wm. Mitchell L.Rev. 11 (1997); Douglas R. Richmond, Lost in the Eternal Triangle of Insurance Defense Ethics, 9 Geo. J. Legal Ethics 475 (1996); Charles Silver & Kent Syverud, The Professional Responsibilities of Insurance Defense Lawyers, 45 Duke L. J. 255 (1995); J. Kevin Owens, Wrestling with the Tar Baby: Ethical Obligations of Mississippi Insurance Defense Lawyers, 17 Miss. C. L. Rev. 359 (1997); Leo J. Jordan & Hilde E. Kahn, Ethical Issues Relating to Staff Counsel Representation of Insureds, 30 Tort & Ins. L. J. 25 (1994); Robert E. O'Malley, Ethics Principles for the Insurer, the Insured, and Defense Counsel: The Eternal Triangle Reformed, 66 Tul. L. Rev. 511 (1991).

5 Barefield v. DPIC Companies, Inc., 215 W. Va. 544, 600 S.E.2d 256 (2004); Spindle v. Chubb/Pacific Indemnity Group, 89 Cal. App. 3d 706, 713, 152 Cal. Rptr. 776, 780-81 (2d Dist. 1979).

6 U. S. Fidelity and Guaranty Co. v. Louis A. Roser Co., Inc., 585 F.2d 932, 938 (8th Cir. 1978).

7 Committee on Legal Ethics v. Frame, 189 W. Va. 641, 433 S.E.2d 579, 583 (1993) (citation omitted).

8 See Robert E. Keeton and Alan I. Widiss, Insurance Law 809 (1988); Stephen L. Pepper, “Applying the Fundamentals of Lawyers” Ethics to Insurance Defense Practice, 4 Conn.Ins.L.J. 27, 31 (1997).

9 Allan D. Windt, 1 Insurance Claims and Disputes §4:19 (4th ed. 2004).