Ethical Conflicts in the Tripartite Relationship

Legal Compliance Resource
May 3, 2013 — 874 views  

A tripartite relationship is a relationship between an insurer, its insured, and the defense counsel that has been engaged by the insurer so as to represent him/her in covered insurance claims of third-parties. Practically, the defense counsel does representation for both insured and insurer. As such, there may be conflicts of interest when an insurer has reserved the rights and is giving the defense. The primary question in such cases is who the client is.

The common issues that involve communications and confidentiality by the defense counsel in a tripartite relationship are concerned with what information must be given to the insurer and the insured, and if some information may be withheld from one of the parties. For instance, most of the policies won't provide coverage if the damage was caused intentionally. This puts the defense counsel in a spot whether to reveal this information to the insurer or not.

When to Disclose Information and When Not to Do So

Generally, the attorney is required to maintain the confidential and privileged information of the client. However, in some circumstances, the attorney can disclose information, which is necessary to get information related to the representation, in order to establish a defense or claim on the lawyer's behalf in controversies between client and the lawyer, or in compliance with court orders. According to Model Rule 1.6:

  • (a) An attorney won't reveal information that is related to a client's representation unless he gets an informed consent from the client or the disclosure is authorized impliedly so as to perform the representation.
  • (b) An attorney can reveal information that is related to the client's representation to the extent that he reasonably believes it is essential:
  1. To get legal advice related to the attorney's compliance with these rules.
  2. To establish a defense or claim on the lawyer's behalf in a controversial situation between the client and the lawyer, to build a defense to some civil claim or criminal charge against the attorney based on the conduct in which the client had been involved, or to respond to allegations in other proceedings that concern the attorney's representation of the client.
  3. To comply with a court order or other laws.

Tripartite Relationship in Different States

Many states have different views regarding an attorney's ethical obligations when a carrier asks for files such as communication between the insurer and the attorney which the insurance carrier wasn't privy to. In states like California, the insured and the insurer are both joint clients of the attorney, and as such, they shouldn't expect confidentiality among themselves in matters where they're joint clients. Also, the joint clients generally enjoy equal rights to any original file of the attorney, and the attorney is required to return files to respective owners when they ask for it.

In some other states, however, the tripartite relationship is seen differently, and holds that the insured can only claim to be the lawyer's client. These are referred to as the one-client states, and there is significant friction between client's confidentiality demand, and the file information demand by the insurance carrier.

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