Biting The Hand That Feeds You: Is It Ever Ethical For A Panel Counsel To Sue Its Insurer Client?

Is it ethical for a lawyer to sue a current client?  That was the question posed to me last week by an insurer.  It seems that one of the insurer’s primary panel counsel firms that does both coverage and defense work for the insurer has inquired about taking on a plaintiff case against the insurer.

To begin with, let’s be very clear on this point.  Suing a current client is not a potential conflict of interest, it is an actual conflict of interest.  See ABA Model Rules of Prof. Conduct (RPC) 1.7(a).

At issue are the duties of “loyalty” to the client and the overriding duty to protect “confidential information” about the client (RPC 1.6) that is acquired during the course of the representation.  But while it is considered a conflict of interest to sue a current client, the RPC, which purportedly are in place to protect clients (and not lawyers), do give lawyers an out.  In fact, RPC 1.7(b) gives the lawyers several outs. Continue reading