State Bar of South Dakota

Ethics Opinion 93-1

1993

FACTS

You are in-house counsel for an insurance company. You have two similar situations involving settling a claim with a minor.

One of your policyholders, as determined by you, would be liable for the injuries done to a minor. You have been in contact with the parents of both minors and at this point, neither of them have obtained a lawyer. You have informed the parents of both minors that they can, of course, obtain a lawyer. Also, you have made a settlement offer to both sets of parents and both have accepted the settlement offer.

The problem is that you would like to get a release signed which would relive your insured of any possible legal liability in the future. Both parties are aware that a release must be signed before you pay them any money. Since you are dealing with minors, you will need a guardian ad litem appointment and have the guardian sign off for the minor to make the release and settlement effective. You would like to handle the guardian ad litem appointment and settlement hearing yourself but wonder if that would present a conflict of interest. You need to know if you can represent the insurance company and represent the claimant in the guardian ad litem appointment and settlement hearing.

Based upon these facts, you have requested that this Committee answer the following question: Whether an insurer's legal counsel can represent both the insurer and the claimant in the guardian ad litem appointment and negotiate an effective release and settlement between the insurer and claimant without violating the South Dakota Rules of Professional Conduct.

OPINION

It is the opinion of this Committee that an insurer's legal counsel cannot ethically represent both the insurer and the claimant in a guardian ad litem appointment and negotiate an effective release and settlement between the insurer and claimant. See Rule 1.7. It is the opinion of this Committee that this is a conflict that does not fit within the exceptions under either Rule 1.7(a)(1) and (2) or under 1.7(b)(1) and (2).

Due to a conflict of interest, Committee member Larry Von Wald did not participate in this request.

Michael S. McKnight
Chair, Ethics Committee

Supplement to Ethics Opinion 93-1

July 2, 1993

You have asked that we supplement our response to Ethics opinion 93-1. The basic fact situation is the same as that presented in Ethics Opinion 93-1 except that now the insurance company for whom you are in-house counsel is wondering whether it would be acceptable to hire outside counsel to represent the claimant in the guardian ad litem appointment and settlement approval with the outside counsel's attorney's fees to be paid by the insurance company.

Opinion

It is the opinion of this Committee that it is acceptable for an insurance company to hire, and ethical for outside counsel to represent, the claimant in a guardian ad litem appointment and settlement approval with the outside counsel's attorney's fees to be paid by the insurance company. Under Rule 5.4(c), the outside counsel hired and paid by the insurance company must not permit the insurance company to direct or regulate his or her professional judgment. It should be emphasized that the lawyer hired and paid by the insurance company represents the claimant. Accordingly, the lawyer's duties under the Rules and state law are owed to the claimant not the insurance company, including the requirement under SDCL 30-17-15 that the lawyer represent that the offer is fair, reasonable, and just. See, SDCL 30-17-15.

For your benefit and the benefit of the other members of the Bar, it should be emphasized that what this Committee found objectionable in the facts of Ethics Opinion 93-1 was that you, as in-house counsel, wanted to represent the claimant in the guardian ad litem appointment and settlement approval. This Committee opined in Ethics Opinion 93-1 that it would be unethical for in-house counsel to represent the claimant in the guardian ad litem appointment and settlement approval. Such a situation creates an impermissible conflict of interest. In our opinion, however, it would be acceptable for the insurance company to hire and pay outside counsel for such proceeding.

Due to a conflict of interest, Committee member Larry Von Wald did not participate in this request.

Michael S. McKnight
Chair, Ethics Committee