Opinion 308
Question Presented
A and B are involved in a motor vehicle collision. A sues B, and B is defended by his liability insurance carrier. Prior to final judgment A offers to settle within the limits of the liability insurance policy. B, after consulting an attorney of his own choosing, calls upon his liability insurance carrier to settle the case. The insurance company refuses so settle. The case is tried to a jury, and a verdict in excess of the policy limits is rendered. B would now like to file a Stowers case against the liability insurance carrier as a result of their negligent refusal to settle the case and has indicated that he would like the attorney who represented A in the negligent collision case to represent him in the Stowers case against the insurance company. Is A's attorney prohibited and disqualified from handling B's Stowers case?
23 Baylor L. Rev. 827 (1972)
The hypothetical facts stated involve possible violations of Canons 6 and 16.
Canon 6 makes it unethical to represent conflicting interests, "except by express consent of all concerned given after a full disclosure of the facts." Assuming that A's judgment (including the excess over policy limits) has been satisfied, we see no possibility of conflict between the interests of A and B, and the attorney's acceptance of employment by B in the Stowers case would not violate Canon 6. However, we do see a possible conflict of interests if A's judgment has not been fully satisfied. In that case, A's attorney would be representing A (and possibly himself) in attempting to collect the judgment and, at the same time, would be representing B in attempting to pass the excess liability on to the insurance carrier. B's interest would be best served by a release of the judgment at no cost to himself, regardless of the settlement value of his claim against the carrier. A's interest would be best served by collection of the judgment, whether from B or from the carrier. In our opinion, conflict of interest would be likely enough to disqualify the attorney, unless A's judgment had already been satisfied, or unless both A and B expressly consent to such representation after full disclosure of the facts. In our opinion, "full disclosure" would require the attorney to explain in detail to both A and B, not only the fact of his employment, but the possible conflict and consequences thereof, and to satisfy himself that they fully understand the effect of such consent.
Canon 16 makes it unethical for an attorney to accept a case when he knows that he will be a material witness. In the Stowers case, the attorney might be a witness as to the settlement offer made on behalf of A and as to facts bearing upon negligent refusal to settle. If the attorney has reason to believe that his testimony would be admissible and necessary or desirable to the plaintiff, or if he knows or has reasonable grounds to believe that he will be called as a witness by the defendant, he should not accept employment in the case. (9-0.)
CONFLICT OF INTERESTS - REPRESENTING INSURED IN STOWERS CASE AFTER REPRESENTING PLAINTIFF IN COLLISION CASE AGAINST INSURED - ATTORNEY AS WITNESS
An attorney may ethically represent the insured in a Stowers case against the insurance carrier after having represented the plaintiff in a collision case against the insured if the judgment against the insured has been satisfied; but, because of the likelihood of conflict of interests, if would be unethical for the attorney to represent the insured in the Stowers case if the judgment has not been satisfied, unless both clients consent after full disclosure. It would also be unethical for an attorney who knows he will be a material witness to accept employment in the case.
Canons 6, 16.
Bluebook Citation
Tex. Comm. On Professional Ethics, Op. 308 (1965)