On February 8, I was honored to co-chair with Randy Metzger of Lancer Insurance the Trucking Industry Defense Association’s Advanced Conference in San Diego.
This purpose of this conference was to provide practical information to the trucking and insurance industry in the “routine cases.”
One of the panel groups, hosted by Mark Barber, discussed the “pressure” between the insured, insurer and excess carrier. One aspect of the panel, addressed the consequences of failing to obtain a consent to settle. Typically, the consent to settle by the insured is not part of an insurance contract, so it should NOT be a problem if you fail to get pre-approval of the insured.
However, the Louisiana Supreme Court recently issued a relatively scathing opinion against some defense attorneys who failed to counsel with the INSURED client before settling the case. Even if the consent to settle was not limited by the insurance contract, the ATTORNEY HAD AN ETHICAL DUTY TO KEEP THE INSURED INFORMED!
Several people asked for the decision. If you would like a copy of the opinion, contact me and I will forward a copy to you because the opinion may have bearing on self-insured policies of insurance. It most certainly applies to circumstances where the insured must consent to the settlement (often a requirement in the professional malpractice insurance, such as with doctors or realtors).
In case you are not aware of the ruling, it is actually directed to the ethical duties of LAWYERS, but has a profound impact on settlement decisions:
Rule 1.2 of the Rules of Professional Conduct requires a lawyer who represents an insurer and insured in a case involving a “consent to settle” clause to advise the insured as soon as practicable (generally at the inception of representation) of the limited nature of the representation the attorney will provide to the insured.
Once the lawyer has made the appropriate disclosure and the insured indicates consent by accepting the defense, the lawyer may then proceed with the direction of the insurer in accordance with the terms of the insurance contract, including settling the claim within the limits of the policy at the insurer’s sole direction.
However, the lawyer should make efforts to keep the insured reasonably apprised of developments in the case. In the case before it, the Court found that the attorneys did not do this. Because there was a lack of controlling jurisprudence at the time of the attorneys’ actions, the Supreme Court provided the following prospective admonition:
“[W]e take this opportunity to make it clear to respondents and all members of the bar that limited representation situations are fraught with potential dangers to all parties, as readily illustrated by the instant case. Henceforth, lawyers should be scrupulous in adherence to their obligations under Rule 1.2 to ensure that all clients in such a relationship are fully apprised of the nature of the representation and indicate consent by accepting the defense.” In Re Zuber, No. 12-B-0916 (10/16/12) (Johnson, J, dissents in part)
I hope this gives you some guidance on the continued responsibility to keep BOTH the insurer AND the insured aware of the status of litigation. Even though the insurer may retain my services my services, my duty is TO the INSURED!
As always, if there is ANYTHING I can do for you in Louisiana or Texas, particularly NORTH Louisiana or NORTHEAST Texas, please feel free to call or e-mail at any time, day or night. Our goal is to keep you informed and to receive the best possible defense.