Can Insurance Defense Counsel ‘Serve Two Masters’?

If you are a DRI member and are reading this, you’re probably a defense lawyer. And, as a defense lawyer, you probably receive the majority of your work from insurance carriers. The relationship between the insurer, insured, and defense attorney is a complicated one and is known by many names: the triad, the triadic or tripartite relationship, the eternal triangle, the Bermuda triangle—and even the eternal conundrum—to name just a few. This relationship has been called “deeply and unavoidably vexing” and understood to create problems that would “tax Socrates.” Silver, C., “Does the Insurance Defense Counsel Represent the Company or the Insured?” 72 Tex L. Rev. 1583, 1587 (1999); Harland v. Foster, 528 So. 2d 255, 273 (Miss. 1988).

Of course, this “deeply and unavoidably vexing” situation is rooted in the notion that “insurance defense counsel” represent and have obligations to two different clients. And, because of this, there is an “inevitable tension and a potential that the attorney’s representation of one may be rendered less effective because of his representation of the other.” Spindle v. Chubb/Pacific Indemnity Group, 152 Cal. Rptr. 776, 780-81 (Cal. Ct. App. 1979). This “inevitable tension” arises because most defense attorneys have established, ongoing relationships with the insurer that hires them, not the insured they are hired to represent.

Indeed, a large chunk of many practices (and marketing budgets) are devoted to creating and maintaining relationships with insurance carriers, and their adjusters and claims attorneys, in an effort to secure future business. On the other hand, very few defense attorneys enjoy similar relationships with the insureds – and therein lies the problem. It is the “strong and perpetual economic linkage between insurers and their regular counsel that most concerns courts and insureds.” Richmond, Douglas R., Lost in the Eternal Triangle of Insurance Defense Ethics, 9 Georgetown Journal of Legal Ethics 475, 482 (1996).

With that said, where should your loyalties lie and who is your actual client? Is it the insured who is the named defendant and is “represented” in court? Or is it the insurer who, more often than not, chose the attorney, pays the law firm, supervises the litigation, and has, by virtue of the insurance policy, the right to settle the case, even over the objections of the insured? Stempel, Jeffrey W., The Relationship Between Defense Counsel, Policyholders, and Insurers: Nevada Rides Yellow Cab Toward “Two-Client” Model of Tripartite Relationship. Are Cumis Counsel and Malpractice Claims by Insurers Next? (2007). Scholarly Works. Paper 183. The ABA Model Rules (or state equivalent) and the Restatement (Third) of the Law Governing Lawyers (“Restatement”) govern the ethical duties of attorneys in these relationships. Counsel should also consult individual state professional responsibility rules (most states have adopted the ABA Model Rules) and state ethics opinions.

Like most questions in the law, the answer varies by forum. The majority rule is that in the absence of a conflict, both the insurer and insured are considered clients of the insurance defense firm. See Nevada Yellow Cab Corporation v. The Eighth Judicial District Court 152 P.3d 737 (Nev. 2007). Obviously, this article is not a comprehensive review of all states’ positions on this matter, and not all states follow the majority rule, so you should refer to the appropriate state-specific rules and case law to be sure of your obligations.

The prominent two-client model provides that your “primary” client is the insured and the insurer is a “secondary client.” This means that if an insurer and insured’s interests conflict, you “may not betray the interests of the policyholder in favor of the insurer, no matter how steady a stream of business the insurer may provide.” Id. Practically, for example, in a status update to the carrier, you may not purposefully divulge an insured’s ethically privileged information that would cause the insurer to deny coverage. The conflict in this example is your duty of confidentiality owed to your client versus the carrier’s interest in limiting its expenditures related to your client’s policy. We all deal with small conflicts like this on a regular basis.

Larger conflicts of interests, however, are less likely but create particularly thorny situations for defense counsel. For instance, a carrier may choose to furnish a legal defense while at the same time reserving its right to deny coverage related to any judgments against its insured. The insurer and policy holder’s interests become adverse because the insured will aim to preserve indemnity whereas the insurer will work to establish a basis for non-coverage, and you will find yourself stuck in the middle. Various states, including California, Illinois, Texas, and New York, agree that a carrier’s reservation of rights can create a conflict of interest for the carrier retained defense counsel. Effectively, those states conclude that an insured’s “legal right to a conflict-free defense supersedes the carrier’s contractual right to select its panel counsel and control the litigation decisions.” Bolender, Jeffrey, Will Nevada Adopt the Cumis Requirement: History, Analysis, and Conflict Resolution (2013). Many forums hold that while the issuance of a reservation of rights letter can create a conflict of interest, it is not absolute and will be considered on a case by case basis.

The question then becomes whether the client can (or will) consent to representation by retained defense counsel despite the potential conflict, or whether the attorney must withdraw from representation of one or both clients. Sometimes the conflicting interests in these situations makes ethical representation of both clients difficult, if not impossible. Some of the unavoidable ethical considerations involve including retained counsel’s ability to manipulate trial strategy to benefit one client to the detriment of the other and retained counsel’s access to potentially damaging information through confidential communication with each client.

So, how are you supposed to know if you are presented with a disqualifying conflict of interest? Relevant case law reveals that only specific types of issues—often times called “steerable” issues—create a disqualifying conflict of interest for carrier retained defense counsel. Generally, steerable issues are malleable, fact-intensive questions. A common steerable issue example is when a carrier issues a reservation of rights based on a mental basis, such as an exclusion for intentionally caused losses. This is because “the same universe of facts can be used to demonstrate either intentional conduct or accidental conduct. Thus, the issue is relatively steerable, because a good lawyer could employ the same “bucket” of facts to show the policyholder’s liability-producing conduct was intentional (not covered) or accidental (covered).” Id.

Regardless, if a carrier issues a reservation of rights letter, at the very least, it should send up a red flag prompting you to explore the conflict of interest issue, because at the end of the day, no man can serve two masters.

Jessica A. Green is an attorney at Lipson, Neilson, Cole, Seltzer & Garin, P.C. working in the firm’s Las Vegas, Nevada office. Her practice focuses primarily on professional liability defense, employment law, bad faith insurance defense, and commercial litigation. Ms. Green has also practiced in the areas of construction law and real estate. She can be reached at

Joseph Hainline is an attorney at Carr Maloney P.C. in Washington, D.C. He concentrates his practice in general liability, professional liability, and premises liability, as well as in complex civil litigation.

This article was published in the June 29, 2015 issue of The Whisper, the DRI’s Newsletter of the Young Lawyers Committee.

Dax Watson Appointed to the Board of Directors for the Valley of the Sun Community Leadership Board

The Valley of the Sun Community Leadership Board (CLB) is the face of the American Diabetes Association (ADA) in Phoenix, Arizona. The CLB shoulders the important responsibility of implementing the ADA’s mission and movement to Stop Diabetes. Working in alignment with the ADA’s Strategic Plan, the CLB works as a team to lead key fundraising, program, advocacy, volunteer and corporate recruitment activities.

Lipson Neilson Attorneys Selected to Chair Oakland County Bar Association Committees

The firm is proud to announce that two of the firm’s attorneys have been selected to Chair committees for the Oakland County Bar Association (OCBA) during the 2015-2016 term that began September 1, 2015:

Both of these committees generally meet monthly between September and May to address issues of interest and importance impacting the respective committee’s area of practice.

This year marks the 30th anniversary of the Lipson Neilson law firm that has grown from three founding members to thirty attorneys located in three states. Since its formation the firm has also expanded its practice areas from business, tax and litigation to a full range of practice areas which now also include international law, real estate, professional liability, probate litigation, family law and estate planning. Lipson Neilson attorneys represent and provide counsel to clients throughout the country and around the world. To learn more about the firm, please visit

Joe Garin: Featured Speaker at the E & O Insurance ExecuSummit

Joe Garin will be a featured speaker during the 7th Annual E&O Insurance ExecuSummit held during June 18-19, 2013 at the Mohegan Sun Resort & Convention Center in Uncasville, CT. Garin will be part included on a panel of experts that will discuss Professional Firm Dissolutions: Impact on Insurance and Liability. ExecuSummit attendees are insurance professionals in the forefront of the E&O insurance line, monitoring & researching emerging issues and trends.

Joe Garin on Panel of Industry Experts at 2013 Professional Liability Conference

Joe-Garin_croppedJoe Garin will be included on a panel of industry experts discussing The EFFECTIVE Use of The 3 P’s in Mediation of Professional Liability Claims during the 2013 Professional Liability Conference that will be held in Boston on July 26. This conference is conducted by the Claims and Litigation Management Alliance™

This discussion will focus on conducting an effective mediation with an emphasis on how careful strategy planning, detailed preparation and strong presentation skills can greatly enhance your chance to resolve claims at the right numbers at mediation. The panelists will use “real life” examples of strategic planning, attention to detail, diligent file investigation and overall preparation to ignite discussion among the attendees regarding the best ways to reach mediated settlement agreements that make sense.

They will also discuss how information is power at mediation, why it makes sense for defense counsel, insured and claims handler to jointly develop a number of potential routes to settlement before walking in the door, and the use of effective presentation techniques to encourage debate among attendees as to how strong advocacy skills can help reach excellent results at mediation.

Claims and Litigation Management Alliance™
The Claims and Litigation Management (CLM) Alliance is the only national organization
created to meet the needs of professionals in the claims and litigation management industries. Founded in 2007, the CLM currently has approximately 20,000 Members and Fellows — a number that grows by hundreds each month.

Attorney Carly Kolo Joins the Firm’s Bloomfield Hills Office

Carly Kolo Estate Planning AttorneyWe are proud to announce the addition of Carly Kolo as an Associate Attorney. She maintains a practice in the area of estate planning, with a specific focus on trust administration.

Prior to joining the firm, Ms. Kolo’s practice focused on real estate and financial advising. Ms. Kolo represented individuals in small business, intellectual property and civil matters including foreclosure prevention, consumer alerts that addressed Digital Television transition and unwanted text message advertising for the Michigan Office of the Attorney General, and she provided transactional counsel on wide range of matters including antitrust jurisdiction, non-profit conversion, homeowner association authority and banking organizations.

Ms. Kolo is an accomplished writer who has researched & written educational, motivational and commemorative videos for the State of Maryland, University of Texas, the Living Classroom Foundation & Catholic Relief Services

Ms. Kolo received her J.D. from Michigan State University College of Law. While attending on merit scholarship, Ms. Kolo was involved in the Journal of Business & Securities Law and worked at the Office of the Michigan Attorney General. Prior to law school, she graduated from the University of Southern California.

An east coast native, Ms. Kolo is also licensed to practice in Maryland.

Attorney Emily J. Scholler Joins the Firm’s Bloomfield Hills Office

Emily J SchollerWe are proud to announce the addition of Emily J. Scholler as an Associate Attorney.

Ms. Scholler’s particular focus is in the areas of Business and Tax law as well as Estate Planning and Trust Administration. Ms. Scholler’s expertise includes corporate, commercial and taxation matters, business formation and operations, mergers and acquisitions and other commercial transactions.

Integral with Ms. Scholler’s corporate practice is providing clients with estate- and succession-planning advice.

Ms. Scholler has more than four years of experience practicing business and tax law prior to joining Lipson Neilson. In addition, Ms. Scholler previously clerked at the State of Michigan Tax Tribunal and worked at the State of Michigan Corporations Division.

A graduate of the University of Michigan, Ms. Scholler earned her J.D. at Michigan State University College of Law and also earned her LLM in taxation at New York University.

Garin Named Co-Chair of Professional Liability Committee by CLM Alliance

Lipson Neilson Cole Seltzer & Garin partner, Joseph Garin has been named Co-Chair of the Lawyer Professional Liability Committee to The Claims and Litigation Management (CLM) Alliance.

The Claims and Litigation Management (CLM) Alliance is the only national organization created to meet the needs of professionals in the claims and litigation management industries. Founded in 2007, the CLM currently has approximately 20,000 Members and Fellows.

The Professional Liability Committee assists its members in obtaining a higher awareness of issues and trends in the professional liability insurance marketplace. The Committee emphasizes matters related to litigation management through a collaborative effort between insurance companies and brokerages, claims organizations and service providers.

Garin was also a panelist at the 2012 State Bar of Nevada Ethics Year in Review on December 10. The program covered recent developments in legal ehtics and risk management topics.

Cole, Seltzer, and Neilson Named to Elite Lawyer List

Three partners from Lipson, Neilson, Cole, Seltzer & Garin, P.C. in Bloomfield Hills have been named Michigan Super Lawyers for 2012.

Steven Cole, Philip Seltzer, and Jeffrey Neilson all joined the prestigious list that represents no more than 5 percent of the lawyers in the state. Super Lawyers, a Thomson Reuters publication, is a listing of outstanding lawyers in Michigan.

The organization employs a rigorous selection process – combining peer nominations and evaluations with third-party research. This process has been recognized by bar associations and courts across the country. Each candidate is evaluated on 12 indicators of peer recognition and professional achievement.

Jeffery T. Neilson was recognized for his professional efforts in the fields of Estate Planning & Probate, advising and counseling Closely Held Businesses and for his work in Professional Liability Defense litigation; Steven R. Cole was acknowledged for his work in Real Estate, advising and counseling Closely Held Businesses, and for Estate Planning & Probate;  and Phillip E. Seltzer was honored for his work in the fields of Professional Liability Defense and Business litigation.

Seltzer was also named as “Top Lawyer” for 2012 by dbusiness magazine, Detroit’s premier business magazine.  Seltzer was again honored for his work in the field of Professional Liability Defense, specifically including legal malpractice defense cases.  DBusiness magazine polled more than 21,000 attorneys in Oakland, Macomb, Wayne, Washtenaw, and Livingston counties among 51 specialized practice areas. The lawyers were asked to nominate up to three attorneys, resulting in 900 honorees for the 2012 list.

“This is a tremendous honor for those lawyers specifically and the firm overall,” said Managing Partner Jeffrey Neilson. “We have been consistently on the list for a number of years and it shows the talent and dedication we have within the firm.”

Lipson Neilson has had lawyers on the Super Lawyers list, under a variety of practice areas including Real Estate, Tax, Estate Planning and Probate and Closely-Held Businesses since 2006.

Super Lawyers, a Thomson Reuters publication, is a listing of outstanding lawyers in Michigan. The organization employs a rigorous selection process – combining peer nominations and evaluations with third-party research. This process has been recognized by bar associations and courts across the country. Each candidate is evaluated on 12 indicators of peer recognition and professional achievement.

Neilson Appointed by Michigan Supreme Court to Attorney Grievance Commission

The Michigan Supreme Court has appointed Lipson, Neilson Cole, Seltzer & Garin, P.C. Managing Partner Jeffrey Neilson as one of nine commissioners named to the Attorney Grievance Commission (AGC).

The AGC is the organization that investigates and commences misconduct proceedings against attorneys licensed in Michigan. Established in 1978 there are nine members that serve the AGC on a voluntary basis and are appointed by the Supreme Court. The AGC also employs a staff that includes attorneys and investigators.