Introduction

Because the attorney-client relationship is a creature of contract, the scope of representation may be limited by agreement of the parties. However, “[t]he lawyer’s duty to his client arises from his contractual obligation as well as ethical demands.”[1] Ethically, a “lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.”[2] “If the attorney’s representation is to be limited in any way that unreasonably interferes with the defense, it is the insured, not the insurer, who should make that decision.”[3]

Attorneys Have a Duty to Advise

“Not only should an attorney furnish advice when requested, but he or she should also volunteer opinions when necessary to further the client’s objectives. The attorney need not advise and caution of every possible alternative, but only of those that may result in adverse consequences if not considered. . . . However, even when a retention is expressly limited, the attorney may still have a duty to alert the client to legal problems which are reasonably apparent, even though they fall outside the scope of the retention. The rationale is that, as between the lay client and the attorney, the latter is more qualified to recognize and analyze the client’s legal needs. The attorney need not represent the client on such matters. Nevertheless, the attorney should inform the client of the limitations of the attorney’s representation and of the possible need for other counsel.”[4]

“[T]he extent of an attorney’s duty to act necessarily depends on the scope of the attorney-client relationship and the scope of this relationship may be limited by the agreement between the attorney and the client. But an attorney who undertakes one matter on behalf of a client owes that client the duty to at least consider and advise the client if there are apparent related matters that the client is overlooking and that should be pursued to avoid prejudicing the client’s interests. [E]ven when a retention is expressly limited, the attorney may still have a duty to alert the client to legal problems which are reasonably apparent, even though they fall outside the scope of the retention.[5]

Insurers and Dependent Counsel May Not Conspire to Limit the Scope of Representation

“As long as two or more persons agree to perform a wrongful act, the law places civil liability for the resulting damage on all of them, regardless of whether they actually commit the tort themselves. [W]here an attorney is aware of a conflict of interest between his two clients, the insurer and the insured, he has a duty to disclose all facts and circumstances … necessary to enable each of his clients to make free and intelligent decisions regarding the subject matter of the representation. An insurance defense attorney who carries out and consumates [bad faith conduct] violates the fiduciary duty he owes to his other client, the insured. [A]ttorneys may be liable for participation in tortious acts with their clients, and such liability may rest on a conspiracy. By parity of reasoning, an insurer may be held liable for participation in tortious acts with attorneys it hires on behalf of its insured.”[6]