CONFLICTING INTERESTS - Necessity of an attorney retained by an insurance company to defend it and the assured in a damage suit for an amount in excess of the policy limits to inform the assured of the holding in Stowers v. American Indemnity Co., 15 SW (2) 544.
P and D are involved in an automobile collision. D has a "5 and 10" insurance policy issued by I. P sustained such injuries that if it finds in his favor on liability, an average jury would allow him $20,000.00 damages. The evidence, both physical and eyewitness testimony, is such that it is a toss-up whether the jury will hold for P or D on the question of liability. P employs Attorney A to handle his case. Before suit is filed, A writes D, informing him that P has employed A to handle his case; and P has assigned to A an undivided one-half interest in his cause of action; and offering to settle the cause of action for $10,000. A hears nothing from D, and A file's suit for P against D for $40,000.00. I employs Attorney B to defend the suit, and B files an Answer for D.
1. Was A guilty of unethical practice in writing said letter to D?
2. Is D B's client in the case?
3. If the answer to question No. 2 is "Yes," at what instant did D become B's client?
4. As between D and I, does B owe more duty to one than he does to the other?
5. If the answer to question No. 4 is "Yes," to which does B owe his primary duty?
6. Is there a conflict of interest between D and I?
7. If the answer to question No. 6 is "Yes," does Canon 6 require (not whether B may do it, or whether the Attorney for the insurance company usually would do it; but would it be a violation of Canon 6 if he did not do it) B to fully inform D of the conflict between his interest and that of I?
8. If the answer to question No. 7 is "Yes," at what stage of the case is B required to make such disclosure to D?
9. Would Canon 6 require that B go so far as to inform D of the holding in the Stowers
It is the opinion of the Committee that the above questions should be answered as follows:
1. No, if D is not represented by an attorney with respect to the accident and claims growing out of it at the time A writes to D. (See Opinion 97.) (8-0.
2. Yes. (8-0.)
3. When B accepted employment from I with respect to the matter. (8-0.)
4. No. One member while stating that ordinarily "No" would be the correct answer to this question, there could be a conflict between D and I in some circumstances and in the event of such conflict he is of the opinion that D will owe his primary duty to I. (7-1).
6. Yes. (7-1.)
7. Yes. (7-1.)
8. Immediately upon his accepting employment in the case from I. (7-1.)
9. Yes. (6-2.)