Loyalty and clienthood go together.

• Position: Part 4 - Manual for lawyers representing insured defendants

Loyalty and Clienthood Go Together

A defense lawyer owes a client complete and unqualified loyalty but has no duty of loyalty to a non-client. This means that:

* A lawyer who represents only an insured owes no duty of loyalty to a carrier.

* A lawyer who represents only a carrier owes no duty of loyalty to an insured.

* A lawyer who represents both an insured and a carrier owes unqualified loyalty to each.

The duty of loyalty prohibits an attorney from acting against a client's interests without the client's informed consent. In co-client representations, each client is entitled to this same degree of respect. Therefore, a defense lawyer who represents both a carrier and an insured is generally free to take only those actions that are expected either to help both clients or to help one client without harming the other. Except in unusual circumstances, actions that reduce the expected loss to the claimant at trial fit this description. They make one or both clients better off, and they usually expose neither to harm.

Some discussions of insurance defense ethics argue that, like other lawyers with multiple clients, defense lawyers are subject to the no subordination rule (NSR). This rule prohibits a lawyer from acting to the detriment of any client without the client's informed consent. Other discussions contend that the primary client rule (PCR) governs defense lawyers' obligations. This rule requires defense lawyers to side with policyholders against insurers in conflict situations.

Although this guide endorses NSR, the decision to use one standard or the other probably has little practical importance. Neither rule leaves a defense lawyer free to sacrifice an insured's interests for the sake of an insurer. Both rules protect insureds reasonably well, and this is the most important point. The only remaining issue is whether a defense lawyer may permissibly protect a policyholder by harming an insurer. As a practical matter, this is something that few defense lawyers would do lightly even under PCR. Defense lawyers participate in long-term relationships of mutual advantage with liability insurers, and are strongly motivated to keep them happy.

Because insurance contracts are well designed, opportunities to help one client at the other's expense are not normal in most defense lawyers' experience. Far more common are opportunities to help both clients by minimizing the pay out to a liability claimant. This is as it should be. One purpose of a...