Introduction
Both lawyers and insurers are regulated by law. Lawyers by the State Bar Act, Rules of Professional Conduct (Rule), and case law. Insurers are regulated through the Insurance Code, regulations, and case law. The common purpose of these regulations is to protect the public from those who wield great power.
Lawyer Regulation
“It is an attorney’s duty to protect his client in every possible way, and it is a violation of that duty to assume a position adverse or antagonistic to his client without the [client’s] free and intelligent consent. Nor does it matter that the intention and motives of the attorney are honest. The rule is designed to preclude the honest practitioner from [having] to choose between conflicting duties.”
“These traditional obligations are in no way abridged by the fact that an insurer employs [a lawyer] to represent an insured. [I]n the insurer-insured context, the attorney who undertakes to represent parties with divergent interests owes the ‘highest duty’ to each to make a fully informed decision, including potential conflict and seeking independent legal advice. The loyalty owed to one client by an attorney cannot consume that owed to the other. Thus a lawyer who devotes himself to the interests of the insurer breaches his obligations to the insured.”
1. State Bar Act
The State Bar Act is “a comprehensive scheme regulating the practice of law. . . . [N]o one but an active member of the State Bar may practice law for another person. . . . The prohibition . . . is designed to ensure that those performing legal services do so competently.” “No person shall practice law in California unless the person is an active member of the State Bar.” Attorneys must be licensed so that the public is protected from being advised and represented by persons not qualified to practice law. In litigation, unlicensed attorneys threatens the integrity of the judicial process itself. Ethical rules “are intended to regulate professional conduct of lawyers.”
“No one may recover compensation for services as an attorney”, unless they are licensed. Attorneys must also comply with ethical rules promulgated by the California Supreme Court. “The rules of professional conduct . . . are binding upon all members of the State Bar. Attorneys are “officers of the court” who owe duties to the court and to the administration of justice.
“Protection of the public shall be the highest priority for the State Bar in licensing, regulatory, and disciplinary functions. Whenever the protection of the public is inconsistent with other interests sought to be promoted, the protection of the public shall be paramount.”
“It is the duty of an attorney to do all of the following: (c) To counsel or maintain those actions, proceedings, or defenses only as appear to him or her legal or just. (d) To employ, for the purpose of maintaining the causes confided to him or her those means only as are consistent with truth, and never to seek to mislead the judge or any judicial officer by an artifice or false statement of fact or law. (e) To maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client. (f) To advance no fact prejudicial to the honor or reputation of a party or witness, unless required by the justice of the cause with which he or she is charged. (g) Not to encourage either the commencement or the continuance of an action or proceeding from any corrupt motive of passion or interest. (h) Never to reject, for any consideration personal to himself or herself, the cause of the defenseless or the oppressed.”
An attorney may not appear for a party to an action without the authority of a client under penalty disbarment or suspension. It is a misdemeanor for an attorney to be guilty of any deceit, collusion, or consent to any deceit or collusion with intent to deceive any party.
2. Rules of Professional Conduct
A. Purpose
The Rules “are intended to regulate professional conduct of lawyers through discipline. . . to protect the public, the courts, and the legal profession; protect the integrity of the legal system; and promote the administration of justice and confidence in the legal profession.”
B. Disclosure of Conflicts
A lawyer who: 1) has a relationship with an entity, such as an insurer, that would be affected substantially by resolution of a lawsuit; 2) has a relationship with a another party or a witness that would substantially affect the lawyer’s representation; or 3) has an interest in the subject matter of the representation cannot accept or continue representation of a client without written disclosure to the client of the relevant circumstances and reasonably foreseeable adverse consequences.
C. Informed Written Consent to Conflicted Representation
A lawyer must obtain the client’s written agreement following the lawyer’s written disclosure to do any of the following: 1) represent in a single matter multiple clients whose interests potentially or actually conflict; 2) represent in separate matters multiple clients whose interests are adverse; 3) work for one client who is adverse to another client about whom the lawyer has confidential information; 4) settle claims by or against multiple clients; or 5) be paid by someone else, such as an insurer: unless: A) the client give informed written consent; B) the client’s secrets are not compromised; C) the payor does not interfere with the lawyer’s independent professional judgment or with the client-lawyer relationship.