99 N.J.L.J. 496
June 3, 1976
Insurance Company Defending
Defendant and Third-Party Defendant;
Attorney Representing Both Insureds
The inquirer's firm was retained by an insurance company to
defend a certain negligence action and filed an answer and a
third-party complaint on behalf of the insured defendant. The
plaintiff then amended his complaint to state a claim against the
third-party defendant. It subsequently developed that both the
original defendant and the third-party defendant were insured by
the same company. The insurance company requested the attorneys who
were retained to represent the initial defendant to represent the
additional third-party defendant and to dismiss the third-party
The inquirer feels that there is no longer any conflict between the two defendants, since both are represented by the same insurance company, and the amount sought by plaintiff is within the coverage limitations of both policies. He, therefore, asks whether it is ethically permissible for his firm to represent both defendants so that the insurance company will not be compelled to hire two attorneys.
We said in Opinion 165, 92 N.J.L.J. 831 (1969), that the essential point of ethics involved in such cases requires the lawyer so employed to represent both insureds as his clients with undivided fidelity, as required by Canon 6, now DR 5-105(A), (B) and (C). We further cited American Employers Ins. Co. v. Goble Aircraft Specialties, 205 Misc. 1066, 1075, 131 N.Y.S. 2d 393, 401 (1954), where the court said: "The Canons of Professional Ethics make it pellucid that there are not two standards, one applying to counsel privately retained by a client, and the other to counsel paid by an insurance carrier." (At p. 401)
However, in this case, the one attorney may be permitted to represent both defendants if, in fact, the insurance company is the one real party in interest. The inquirer states that plaintiffs demand for damages is within the policy limits of both insurance policies. We question whether we can safely conclude that the "demand for damages is bound to be within the policy limits," since in negligence suits the plaintiff no longer demands specific dollar damages; and it would not necessarily follow that any verdict in a jury trial would be no higher than the "estimated value of the case." We also question whether there isn't a possibility that each insured may suffer unexpected consequences on his experience rating as a result of the litigation.
DR 5-105(B) and (C) read as follows:
(B) A lawyer shall net continue multiple employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by his representation of another client, except to the extent permitted under DR 5-105(C).