Ethics Opinion 109

Ethics Opinion 109

6.10.1969

By Committee on Professional Ethics

NEW YORK STATE BAR ASSOCIATION

Professional Ethics Committee Opinion

Opinion #109 – 06/10/1969 (14-69)
Topic:  Conflict of Interests Intermediaries House Counsel

Digest: House counsel defending assureds
Canons: Former Canon 6, 35

QUESTION

An attorney asks the following two questions:1. May an attorney be retained or employed as “house counsel” for an insurance company either on a retainer or salary basis to defend assureds in negligence actions?2. Is the insurance company practicing law if it retains the attorney under the conditions as outlined in question 1?

OPINION

It is the opinion of the Committee that it is proper for an insurance carrier to hire an attorney as house counsel to defend its assureds.The American Bar Association Committee on Professional Ethics states in its Opinion No. 282 that an attorney employed by an insurance company exclusively, upon a salary basis, may defend lawsuits against assureds on behalf of the company without making any charge to the assured, and without the request or the approval of the assured. The reason for this position is that the insurance contract specifically gives the company control over the defense of any action brought against the assured.  The main purpose of a liability insurance policy is to relieve the insured from the responsibility of the defense of the action and the payment of litigation expenses or judgments which might result. It is also to the interest of the company that the lawyer defeat claims which the company may be required to pay and there is a community of interest between the company and the insured. The lawyer employed by the company cannot be said to be violating either the spirit or the letter of the provisions of Canons 6 and 35 concerning conflicting interests and intermediaries.Question No. 2, namely whether the action of the company constitutes the unlawful practice of law, is a legal question on which this Committee does not pass. Accordingly, the question is being referred to the Unlawful Practice of Law Committee of the Association.See NYSBA Unlawful Practice of Law Committee Opinion #13.