99-3.

• Case Date: October 22, 1999
• Court: Alaska

Alaska Ethics Opinion 1999. 99-3. ETHICS OPINION NO. 99-3May In-House Staff Counsel For An Insurance Company Represent Insureds?INTRODUCTION A three-way relationship amongst a liability insurer, its insured, and defense counsel retained by the insurer to represent the insured, gives rise to numerous ethical considerations for defense counsel. (endnote 1) Insurers have attempted to institute a number of measures to control costs in recent years, including the provision of defense services directly through salaried lawyer employees. The Ethics Committee has been asked to consider the ethical propriety of this arrangement. May an insurance company employ in-house counsel (salaried employees) to represent their insured in litigation before Alaska courts? The Committee concludes that the attorney/employee of an insurer may provide defense services to an insured so long as: (1) there is full disclosure of the attorney's relationship with the insurer; (2) the client consents after consultation; (3) the lawyer reasonably believes the representation will not be adversely affected by his employment; and (4) there is no conflict of interest between the insurer and insured. ANALYSIS 1. The Tripartite Relationship An analysis of the issues involved in this opinion requires a brief discussion of the different aspects of the relationship between the insurer, its insured, and the defense attorney retained by the insurer to represent the insured. First, the insured has contracted with the insurer for insurance. As part of this insurance, the insurer typically agrees to provide a defense, including legal representation, for the insured. Often times, the insurer has a contractual duty to provide the insured with legal representation. In exchange, the insurer typically receives the right to control the defense (and often the settlement) of the underlying claim against the insured. When the insurer retains an attorney to represent the insured, the insured becomes the attorney's client. Even though the insurer is paying for the attorney's legal services (by fee or salary), professional responsibilities of the attorney, including the duties of confidentiality and loyalty, run to the insured. (endnote 2) 2. The Alaska Rules The Alaska Rules of Professional Conduct expressly recognize that an attorney may ethically represent a client, where another pays the legal fees or salary. Rule 1.8(f) provides: A lawyer shall not accept compensation for representing a client from one other than the client unless: (1) the client consents after consultation; (2) there is no interference with the lawyer's independence of professional judgment or with the client-lawyer relationship; and (3) information relating to representation of a client is protected as required by Rule 1.6. Rule 1.7 is also implicated: (b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless; (1) the lawyer reasonably believes the representation will not be adversely affected; and (2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved. (Emphasis added.) 3. The Lawyer Must Maintain Independent Professional Judgment In all cases, the lawyer for the insured must maintain his or her professional independence, and exercise professional judgment for the sole benefit of the client. A lawyer may accept compensation from someone other than the client only if there is no interference with his independence and professional judgment. In CHI of Alaska, Inc. v. Employers' Reins. Corp., 844 P.2d 1113 (Alaska 1993), the supreme court noted that appointed defense counsel owes "an absolute duty of fidelity to the insured...