Formal Advisory Opinion No. 99-1

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State Bar of Georgia
Issued by the Supreme Court of Georgia
On May 27, 1999
Formal Advisory Opinion No. 99-1

QUESTION PRESENTED:

May an attorney ethically defend a client pursuant to an insurance contract when the attorney simultaneously represents a company in an unrelated matter and that company claims a subrogation right in any recovery against the defendant client?

SUMMARY ANSWER:

Under Standard 35 and Standard 36, an attorney may not simultaneously represent clients that have directly adverse interests in litigation that is the subject matter of either one of the representations. Whether or not this is the case in the Question Presented here, depends upon the nature of there presentation of the insurance company.

If it is, in fact, the insurance company that is the true client in the unrelated matter, then the interests of the simultaneously represented clients in the litigation against the insured client are directly adverse even though the insurance company is not a party to the litigation and the representations are unrelated. The consent by the clients provided for in Standard 37 is not available in these circumstances because it is not obvious that the attorney can adequately represent the interests of each client. This is true because adequate representation includes a requirement of an appearance of trustworthiness that is inconsistent with the conflict of interests between these simultaneously represented clients.

If, however, as is far more typically the case, it is not the insurance company that is the true client in the unrelated matter, but an insured of the insurance company, then there is no simultaneous representation of directly adverse interests in litigation and these Standards do not apply. Instead, the attorney may have a personal interest conflict under Standard 30 in that the attorney has a financial interest in maintaining a good business relationship with the insurance company. This personal interest conflict may be consented to by the insured client after full disclosure of the potential conflict and careful consultation. The Standard 37 limitation on consent to conflicts does not apply to Standard 30 conflicts. Such consent, however, should not be sought by an attorney when the attorney believes that the representation of the insured will be adversely affected by his or her personal interest in maintaining a good business relationship with the insurance company for to do so would be to violate the attorney's general obligation of zealous representation to the insured client.

OPINION:

Correspondent asks whether an attorney may defend an insured client when the attorney also represents, in unrelated litigation, an insurance company that claims a subrogation right in any recover against the insured client. If the representation of the insurance company is, in fact, representation of the insurance company and not representation of an insured of the company, then the analysis of this situation is governed by Standards of Conduct 35 and 36 which prohibit accepting or continuing representation if the exercise of the lawyer's independent professional judgment on behalf of a client will be or is likely to be adversely affected by his representation of another client. In interpreting these Standards, we are guided by Ethical Consideration 5-14:

Maintaining the independent professional judgment required of a lawyer precludes his acceptance or continuation of employment that will adversely affect his judgment on behalf of or dilute his loyalty to a client. This problem arises whenever a lawyer is asked to represent two or more clients who may have differing interests, whether such interests be conflicting, inconsistent, diverse, or otherwise discordant.

Unlike the more familiar standard applied in subsequent representation conflicts, the prohibition in simultaneous representation conflicts is not dependent upon a showing that the matters involved are substantially related. This is so because the prohibition against simultaneous representation of adverse interests is based, primarily, on concerns with loyalty to clients, the appearance of trustworthiness, and the preservation of a lawyer's independent professional judgment for each client. See, generally, ABA/BNA Lawyers Manual on Professional Conduct 51:104-105 and cases and advisory opinions cited therein. See, also, ABA Comm. on Ethics and Professional Responsibility, Informal Op. 1495 (1982) (lawyer may not accept employment adverse to existing client even in unrelated matter; prohibition applies even when present client employs most lawyers in immediate geographical area, thereby making it difficult for adversary to retain equivalent counsel). See, also, ABA Model Rules of Professional Conduct, Comments, Rule 1.7 ("Thus, a lawyer ordinarily may not act as an advocate against a person the lawyer represents on some other matter, even if it is wholly unrelated.")¹

Of course, some simultaneous representation conflicts can be consented to by the simultaneously represented clients. Consent, under the Standards of Conduct is limited by two requirements. The first is that consent can only be obtained in those circumstances in which the full disclosure necessary to adequately inform the clients' consents can be provided without breach of confidentiality. The second is that consent is limited, by Standard of Conduct 37, to those circumstances in which it is "obvious that [the lawyer] can adequately represent the interests of each [client]. . . ." In interpreting the "obvious and adequate" test for consent, we are guided by the provisions of Ethical Consideration 5-15. Ethical Consideration 5-15 advises that all doubts about divided loyalties should be resolved against the propriety of the representation and that, generally, consent should not be obtained when clients have differing interests in litigation and rarely obtained when they have only potentially differing interests in litigation.

In the circumstances presented here, it would be reasonable for an attorney to be concerned that the adverse interests of the simultaneously represented clients could adversely affect the quality of the representation by jeopardizing the quality of the relationship with the client. It is, therefore, not obvious that adequate representation will be provided. This is not because Georgia lawyers are not sufficiently trustworthy to act professionally in these circumstances by providing independent professional judgment for each client unfettered by the interests of the other client. It is, instead, a reflection of the reality that reasonable client concerns with the appearance created by such directly adverse interests could, by themselves, adversely affect the quality of the representation.

If however, as is more typically the case, what is referred to in the Question Presented as representation of the insurance company is, in fact, representation of an insured of that company, then the above analysis does not apply. In such a situation, the attorney's primary ethical obligation is to thei nsured and not to the company, thus the fact that the company may have interests directly adverse to the other insured client is not the issue. Instead, the attorney may have apersonal interest conflict under Standard 30 which provides: "Except with the written consent or written notice to his [sic] client after full disclosure a lawyer shall not accept or continue employment if the exercise of his professional judgment on behalf of the client will be or reasonably may be affected by his own financial, business, property or other personal interests." Such a conflict arises because of the attorney's need to maintain, for financial reasons, a good business relationship with the insurance company.

Personal interest's conflicts are not subject to the limitation on consent found in Standard 37. Here, the insured client may consent, in writing, to the conflict after full disclosure of the potential adverse effect of the personal interest conflict and careful consultation with the attorney. No attorney, however, should seek such consent if he or she believes that his or her business interest will, in fact, adversely affect the quality of the representation with the insured client. To seek consent in such circumstances would be in violation of an attorney's general obligation of zealous representation of all clients.

We conclude, therefore, that if the representation in the situation described in the Question Presented is a true representation of an insurance company, then an unconsentable conflict of interests exists and that entering into or continuing with such simultaneous representations would be inviolation of the Standards of Conduct. If, however, the representation is not a true representation of an insurance company, but a representation of an insured of that company, then a personal interest conflict exists which ordinarily may be consented to by the insured client.

¹The Supreme Court of Georgia has not, of course, adopted the ABA Model Rules. This citation is as persuasive authority only. The adoption of the ABA Model Rules by other jurisdictions did not change the analysis of simultaneous representation conflicts applied in this Opinion as an interpretation of Georgia Standards of Conduct. The point is that this analysis is well established.