The Lawyers Weekly - January 15, 2010

Ethics
Continued From Page 9

widely considered by the insurance bar to be wrongly decided on this point, which held that insurer-appointed defence counsel has only one client, namely, the insured (see Hopkins v. Willington, [1999] B.C.J. 1164 (S.C.)). However, it is the almost universal view of the insurance bar and of the Law Society of B.C. that the appointment of defence counsel is in fact a “joint retainer” involving two clients, namely, insurer and insured.

effort cultivating long-term client relationships with the insurers who send them work. Those insurers will not be enthusiastic when their lawyers cause file handling problems and potentially extra expense through compliance with technical law society requirements when, in the real world, most insureds could not care less.

The Law Society of B.C. has issued a series of bulletins to the bar addressing the implications of the so-called “tripartite relationship,” including insurer-imposed litigation and billing guidelines (1999), professional negligence and defending third-party liability claims (2003), the

Insurance Corporation of B.C.’s strategic alliance agreement with its defence law firms (2006) and third-party liability claims

“

(2008).

The 2003 bulle-
tin states, “A lawyer
appointed by an
insurer to defend a
third-party claim
has two clients: the
insurer and the
insured. The law-
yer has obligations
to both clients...
care must be taken
by the lawyer to
avoid conflicts of
interest between
the two clients and
to ensure that they
are both fully pro-
tected.”
Chapter 6 of the Law Society
of B.C.’s professional conduct
handbook dictates certain man-
datory procedures in the event of
a joint retainer. These include an
explanation of: a) the concept of
undivided loyalty, b) confidenti-
ality of information between the
clients, and c) what should hap-
pen if a conflict arises between
insurer and insured. In my expe-
rience, spanning almost 30
years, these requirements have
been almost universally ignored
by B.C.’s insurance bar.

Drawing from various law society directives issued over the years, insurance defence counsel have a long list of professional obligations to their other client, the insured, including the following:

A lawyer appointed by an insurer to defend a third-party claim has two clients: the insurer and the insured.

; Awareness of whatever coverage issues might exist so that conflicts can be identified and avoided;

The lawyer has
obligations to
both clients...

; Securing from the insurer the confirmations required by the law society before submitting accounts to any external auditors employed by the insurer;

It is not difficult to imagine numerous liability defence scenarios where the interest of the insurer and insured may differ and ultimately conflict. A partial list includes:

; Monitoring the insurer-imposed litigation handling guidelines to ensure they do not impair the proper defence of the claim (failing which withdrawal is mandatory);

;Allegations of multiple or alternative claims (damages or causes of loss), some covered by the policy and some not;

; Writing to the insured at the outset of the defence retainer to advise of its scope and limitations;

; Reservation of rights by the insurer to later deny coverage in the event a policy breach or a misrepresentation voiding coverage can later be substantiated; ; Claims for damages exceeding the available policy limits which, if not settled, may expose the insured to personal liability not covered by the policy.

; Informing the insured of the rights granted by the policy to the insurer to control the defence and settlement of the claim;

; Informing the insured of the lawyer’s long-term relationship with the insurer and the implications of any restrictions the lawyer may be under as a result of any retainer contract with that insurer;

Caught in the middle of this coverage tug of war is the defence counsel, who has professional duties of loyalty and confidentiality to both the insurer and the insured. Defence counsel face a delicate task. They have spent much time and

;Providing the mandatory explanations respecting undivided loyalty, non-confidenti-ality of information received and informed consent as to conflict resolution;

; When information is received
that might prejudice the
insured’s right to coverage,
withdrawing from the retainer
without disclosing the informa-
tion to the insurer;

An oddity in Insurance Law

Atheist foils insurance plan to favour the faithful

Nigel Kent is a partner with Clark Wilson in Vancouver and has been practising insurance law for almost 30 years. A more extensive paper on the ethical challenges of insurance defence counsel is available on the firm’s website.

An allegation of religious discrimination recently brought an insurance company to its knees — and not in prayer.

GuideOne Mutual Insurance offered a homeowners’ policy called FaithGuard that gave special benefits and discounts to “churchgoers” and “persons of faith.” This offended an atheist and an agnostic, who filed a complaint in the U.S. District Court in Kentucky against the company for discrimination on the basis of religion.

The parties worked out a settlement of US$75,000 that included awards to the complainants as well as a civil penalty payable to the government, according to the U.S. Department of Justice’s website.

GuideOne Mutual will now keep its plans non-discriminatory and forget about favouring the faithful. — Natalie Fraser

KATHY KONKLE / ISTOCKPHOTO.COM

WHAT KIND OF
PERSON WORKS
AT HOWIE, SACKS
& HENRY

Adam Wagman PERSONAL INJURY LAWYER | LEAD GUITAR

We’re on your side

HOWIE, SACKS & HENRY LLP

PERSONAL INJURY LAW

ALMA MATER

University of Toronto Law School

WHY HS&H

I started this firm with Messrs. Howie, Sacks and Henry to be able to practice in an environment where we could give our clients the best possible personal service. Despite our growth over the years, it still feels like a small firm that clients can relate to. I know everyone who works here. It’s like a big family.

YOU CAN QUOTE ME ON THIS

“My goal is to help people who truly need help. Being a personal injury lawyer is the best way that I can think of to accomplish this goal. I have the rare pleasure of leaving my clients at the end of a case in a much better position than when they first met with me. It is an extremely rewarding profession.”