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                                         117 N.J.L.J. 6
                                        January 2, 1986


Appointed by the Supreme Court of New Jersey


Settlement of Professional
Negligence Action Without
Consent of Client

    We have been asked whether a lawyer retained by an insurance carrier to defend an insured in a matter covered by a Professional Liability Policy (sometimes called an Errors and Omissions Policy) has an obligation to keep the insured advised as to the status of settlement discussions where the client has a deductible or other uninsured interest.
    The opinions of this Committee as well as numerous decisions in New Jersey Courts have repeatedly held that the insured is the client, and that all of the obligations incident to the lawyer-client relationship obtain. See Opinion 502, 110 N.J.L.J. 349 (1982), and citations therein.
    While this is particularly true where the insured has a pecuniary interest in the disposition of the matter, it is important to remember that these duties exist even where there is no question of the adequacy of insurance coverage. Very often the only involvement that a person or family may have with the judicial system arises out of civil litigation in which they are represented by a lawyer engaged by an insurance company. The impression of the legal profession which they gain from that experience will color the image of the profession generally for the rest of their lives.

    Public confidence in the administration of justice can only be maintained if lawyers discharge all of their obligation to clients with the utmost fidelity and the undivided loyalty required by the Rules of Professional Conduct.
    Reference should be made to the Rules of Professional Conduct and particularly the following:
        RPC 1.4 Communication
        (a)    A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information.

        (b)    A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.

    The key word is, of course, "reasonably" as employed in sub-sections (a) and (b). The responsibility of the lawyer to the insured client turns upon the application of RPC 1.4 to the facts in the particular case. Common sense requires that a lawyer do what is necessary to confirm his authority to bind the client to a settlement. Cf. RPC 1.2(a); In re Education Law Center, Inc. 86 N.J. 124 (1981).

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