Obedience.

• Position: To the client - Part 5 - Manual for lawyers representing insured defendants

In General

A client has the right to tell a lawyer how to handle a matter. Except in very unusual situations, a lawyer may not disregard a direct instruction from a client, even if the instruction is one the client previously agreed not to give. When a lawyer determines that an instruction is unwise, immoral or unlawful, the correct course is to withdraw, not to ignore the instruction or to violate it.

Assuming that both insurers and insureds can be and usually are defense lawyers' clients, it follows logically that both have the inherent authority to tell defense lawyers what to do. This is true even though a contractual term of a defensive representation is that the carrier, not the policyholder, will give instructions. Rather than disregard or disobey an order from either client, including an unauthorized instruction from a policyholder given in breach of the retainer agreement, a defense lawyer should withdraw.

Follow the Carrier's Instructions on Day-to-day Defense Matters

Insurance carriers run defense representations. The contractual understanding when the lawyer is retained is that the carrier will control the day-to-day conduct of the defense and the insured will go along passively. This understanding reflects the assignment of power to the insurer in the defense clause, which entitles a carrier to make all decisions normally made by a person defending a case.

The combination of carrier control and insured passivity makes good sense. In most defensive situations, only a carrier's money is at stake. Only the carrier is responsible for defense costs, and the policy limits are large enough to cover the expected adverse judgment or settlement. The insured's money simply is not on the line. Putting control of day-to-day decision-making in a carrier's hands enables it to manage its financial risks without exposing the insured to loss.

A lawyer who has a carrier as a co-client can receive instructions from a carrier concerning the manner of defending a claim. Every client has the right to tell a lawyer what to do. However, a lawyer who does not represent a carrier as a client cannot receive marching orders from this source, absent an agreement from the insured appointing the carrier as its agent for the purpose of managing the case. A carrier that is merely paying a policyholder's defense bills is a third-party payer, not a client, and it is black-letter law that a third party payer cannot interfere with an attorney-client relationship by...