Dependent counsel has an attorney-client relationship with both the insurer and the policyholder and is charged with protecting the financial interests of the insurer while protecting the policyholder as a party. This simple statement may seem so self-evident as to be unworthy of comment. But often, insurers may deny that dependent counsel is their lawyer in a battle to seize control a policyholder’s defense in an attempt to limit dependent counsel’s ethical conflicts of interest in representing the policyholder.
Although the insurer is not normally a party to the lawsuit, it has a financial stake in the lawsuit by virtue of its promise to defend and indemnify its policyholder in the suit. Dependent counsel represents both the insurer and the policyholder as clients. “[T]he attorney has two clients.”[1] The insurer and its lawyer have “an attorney-client relationship as a matter of law.”[2] “[T]he attorney represents two clients, the insured and the insurer, and he owes to both a high duty of care imposed by statute and the rules governing professional conduct.”[3]
“Between the attorney and the insurer who retained the attorney and paid for the defense, there exists a separate attorney-client relationship endowed with confidentiality. [T]he attorney has a dual attorney-client relationship with insurer and insured. In analyzing this attorney- insurer-insured relationship, the courts have acknowledged that, as a practical matter, the attorney may have closer ties with the insurer than with the insured.”[4]
“It is elementary that the relationship between a client and his retained counsel arises from a contract, whether written or oral, implied or expressed. An attorney-client relationship can be formed though no retainer is signed or no fees are paid. When a party seeking legal advice consults an attorney at law and secures that advice, the relation of attorney and client is established prima facie.”[5] “We conclude that where the insurer hires counsel to defend its insured and does not raise or reserve any coverage dispute, and where there is otherwise no actual or apparent conflict of interest between the insurer and the insured that would preclude an attorney from representing both, the attorney has a dual attorney-client relationship with both insurer and insured.”[6]
Some dependent counsel deny that they have an attorney-client relationship with an insurer, either because the insurer is not an actual party to the liability dispute, or because the lawyer seeks to avoid compliance with Rule 3-310. While the existence of an attorney-client relationship is a question of fact, minimum facts may establish the relationship as a matter of law. “The signed defense guidelines, with the negotiated hourly rate, and subsequent correspondence, along with the subsequent dealings between [dependent counsel] and [the insurer], reflected an agreement between them and an attorney-client relationship as a matter of law.”[7]
[1] American Mut. Liab. Ins. Co. v. Superior Court (Nork) (1974) 38 Cal.App.3d 579, 592.
[2] Gulf Ins. Co. v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2000) 79 Cal.App.4th 114, 127 (Berger, Kahn).
[3] Lysick v. Walcom (1968) 258 Cal.App.2d 136, 146 (citation omitted).
[4] State Farm Mut. Auto. Ins. Co. v. Federal Ins. Co. (1999) 72 Cal.App.4th 1422, 1428-1429 (emphasis added and ellipses omitted.)
[5] Berger, Kahn, supra, 79 Cal.App.4th at 126.