Source: http://dutytodefend.com/pitches-and-fallacies-of-dependent-counsel/
Timestamp: 2019-04-22 08:31:54+00:00

Document:
Attorneys have fiduciary obligations of the very highest character, which bind them to the most conscientious fidelity to the client. Like all attorneys, dependent counsel hired by the insurer owes four primary duties to the policyholder: full and fair disclosure, confidentiality, undivided loyalty, and competent representation.
When an insurer reserves its rights to deny coverage to the policyholder, the reservation always creates some conflict of interest between the policyholder and the insurer. Simply put, the reservation of rights says that the insurer wants the policyholder to pay, while the policyholder wants the insurer to pay. Often dependent counsel may telephone the policyholder to orally assure the policyholder not to worry about the insurer’s reservation of rights and not to doubt the lawyer’s trustworthiness. The caller may make one or more of the following pitches. Each is supplemented by legal authorities which may expose the as a fallacy.
1. The Pitch: Let’s talk.
The Fallacy: Mere talk is insufficient.
A lawyer hired by the insurer may call or visit to orally assure the policyholder that the lawyer is trustworthy. But oral communication is insufficient to satisfy ethical obligations. Dependent counsel cannot ethically start work without written disclosure to and informed written consent of the policyholder. Disclosure of potential conflicts of interest must be in writing. The policyholder’s consent to conflicted representation must be in writing. The policyholder may be protected by insisting that the lawyer confirm all oral assurances by following up with a written record that develops admissible, unambiguous evidence. A lawyer that fails to make required written disclosure may not be trustworthy.
2. The Pitch: We can win this!
The Fallacy: Most cases settle. Plus, there’s a downside to “winning”.
3. The Pitch: Most of the time, nothing bad happens.
The Fallacy: But what about this time?
Every time the insurer reserves its rights, the policyholder bears the burden of uncertainty as to who will end up paying. The policyholder may shift the burden of uncertainty back to the insurer by requesting that it withdraw its reservation of rights – now. If it does, coverage is likely assured. If it does not, the policyholder risks loss of coverage in the future while only the insurer is protected.
4. The Pitch: There’s no harm in waiting.
The Fallacy: Silent acquiescence is dangerous.
5. The Pitch: We’re all in this together.
The Fallacy: One common goal does not eliminate all conflicts of interest.
6. The Pitch: I don’t represent the insurer.
The Fallacy: But dependent counsel does represent the insurer’s interests as a client.
7. The Pitch: My job is limited to defending, not coverage.
The Fallacy: The policyholder needs a lawyer to protect, not ignore coverage?
8. The Pitch: I’m coverage neutral.
The Fallacy: Neutrality is not protection.
All lawyers owe a duty of undivided loyalty to each client. (See, fn. 4.) Claiming neutrality does not change the fact that if dependent counsel can impact the policyholder’s coverage for good or ill, he or she is not neutral. Ignorance of coverage issues can be dangerous. Dependent counsel who is not aware of all coverage issues might inadvertently disclose information to the insurer which is harmful to the policyholder’s coverage.
9. The Pitch: Conflict? What conflict?
The Fallacy: The lawyer cannot ethically start work without analyzing conflicts of interest. Feigning ignorance them does not resolve conflicts.
10. The Pitch: There is no “actual” conflict of interest.
The Fallacy: Ethics require disclosure and consent for potential conflicts.
11. The Pitch: I’ll favor you over the insurer.
The Fallacy: Money is the root of all evil.
12. The Pitch: I’m free.
The Fallacy: The policyholder may end up paying.
While the policyholder does not directly pay dependent counsel at the outset, the policyholder may end up being financially responsible for these fees and costs. By reserving its rights, the insurer can sue the policyholder for reimbursement of its cost of defense. Dependent counsel may not ethically accept compensation from the insurer without the policyholder’s informed written consent.
13. The Pitch: Hire some other lawyer to protect you from me.
The Fallacy: Why should the policyholder pay?
Nothing in ethics or law relieves a conflicted lawyer of ethical violations because another lawyer also represents the client. While a statute permits dependent counsel to participate in litigation under certain circumstances, the statute itself reassures clients that lawyers must behave ethically. An attorney is the client’s agent on matters for which the attorney is employed, so that the client may be bound by the attorney’s acts. Also, the policyholder paid premiums with a reasonable expectation that the policyholder’s insurer would provide to the policyholder an ethical lawyer.
14. The Pitch: So prove it.
The Fallacy: No, dependent counsel should prove it.
Dependent counsel has the legal duty to advise the policyholder about conflicts of interest, not the other way around. “The rationale is that, as between the lay client and the attorney, the latter is more qualified to recognize and analyze the client’s legal needs.” “One of an attorney’s basic functions is to advise. Liability can exist because the attorney failed to provide advice. Not only should an attorney furnish advice when requested, but he or he should also volunteer opinions when necessary to further the client’s objectives.” There is no reciprocal duty by the client to prove to the lawyer an absence of conflict. Because dependent counsel cannot accept the job without written disclosure and informed written consent, the burden of avoiding conflicts rests on the lawyer alone. The attorney has “an independent ethical obligation to disclose the conflict to [the clients] and either obtain written waivers of the conflict or withdraw.” If the policyholder sues dependent counsel, the policyholder will have an initial burden of proof to show that dependent counsel failed to comply with Rule 3-310.
15. The Pitch: You can’t fire me.
The Fallacy: Oh, yes I can.
16. The Pitch: You can’t stop me!
One tool to compel ethical compliance by dependent counsel is to expressly withhold authorization to appear and consent to representation. (See, fn, 7.) The policyholder’s ultimate power rests with the right to give testimony, upon which both liability and coverage may depend. If necessary, the policyholder may also file a motion to disqualify conflicted dependent counsel.
17. The Pitch: My firm will continue, even if I quit.
The Fallacy: Oh, no it won’t.
18. The Pitch: The next firm appointed by the insurer will be the same.
The Fallacy: And it too must behave ethically.
All attorneys are subject to the same rules, including any new lawyers. The policyholder need not have trust in dependent counsel unless the conflicted lawyer earns it.
 “The duty of a fiduciary embraces the obligation to render a full and fair disclosure to the beneficiary of all facts which materially affect his rights and interests. Where there is a duty to disclose, the disclosure must be full and complete, and any material concealment or misrepresentation will amount to fraud. [A]lthough the defendant makes no active misrepresentation, this element is supplied by an affirmative obligation to make full disclosure, and the non-disclosure itself is a ‘fraud.’” (Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 188-189 (Neel) (citations, ellipses, and quotations marks omitted)); See, Article: Duty of Disclosure.
 “It is the duty of an attorney to do all of the following: (e) (1) To maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.” (Bus. & Prof. Cd. . §6068(e).) “One of the principal obligations which bind an attorney is that of fidelity, the maintaining inviolate the confidence reposed in him by those who employ him, and at every peril to himself to preserve the secrets of his client.” (Anderson v. Eaton (1930) 211 Cal. 113, 116); See, Article: Duty of Confidentiality.
 “An attorney’s duty of loyalty to a client is not one that is capable of being divided, at least under circumstances where the ethical obligation to withdraw from further representation of one of the parties is mandatory, rather than subject to disclosure and client consent.” (Flatt v. Superior Court (1994) 9 Cal.4th 275, 282 (Flatt)); See, Article: Duty of Undivided Loyalty.
 “[T]he special obligation of the professional is exemplified by his duty not merely to perform his work with ordinary care but to use the skill, prudence, and diligence commonly exercised by practitioners of his profession.” (Neel, supra, 6 Cal.3d at 188); See, Article: Duty of Competent Representation.
 Judicial Counsel statistics show that as few as 4% of some kinds of cases go to trial.
 Blue Ridge Ins. Co. v. Jacobsen (2001) 25 Cal.4th 489, 492 (Blue Ridge).
 See, Article: Acquiescence Is Dangerous.
 Blue Ridge, supra, 25 Cal.4th at 497-498.
 San Diego Navy Fed. Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358, 371, fn.7 (Cumis).
 See, Article: Three Way Relationship – Harmony or Dissonance.
 Gafcon, Inc. v. Ponsor & Associates (2002) 98 Cal.App.4th 1388, 1406.
 American Mut. Liab. Ins. Co. v. Superior Court (1974) 38 Cal.App.3d 579.
 State Farm Mutual Automobile Ins. Co. v. Federal Ins. Co. (1999) 72 Cal.App.4th 1422, 1428-29.
 “To defend meaningfully, the insurer must defend immediately [and] entirely.” (Buss v. Superior Court (1997) 16 Cal.4th 35, 49 (Buss).
 ABA Model Rule 1.2(c) (limited representation requires client’s informed consent); Janik v. Rudy, Exelrod & Zieff (2004) 119 Cal.App.4th 930, 940.
 Nichols v. Keller (1993) 15 Cal.App.4th 1672, 1684 (Nichols).
 See, Phillips v. State Bar (1989) 49 Cal.3d 944, 952.
 Flatt, supra, 9 Cal.4th 275, 284-285.
 Cumis, supra, 162 Cal.App.3d at 364; See, text at fn. 16.
 See footnotes 7 and 22.
 Cd. Civ. Proc. §283; Blanton v. Womancare, Inc. (1985) 38 Cal.3d 396, 403.
 Id., at 1684-1685; See Article: Duty to Advise.
 Berger, Kahn, supra, 79 Cal.App.4th at 132.
 Fracasse v. Brent (1972) 6 Cal.3d 784, 790; See, Article: Client May Fire Attorney.
 Flatt, supra, 9 Cal.4th at 283.
 Kirk v. First American Title Ins. Co. (2010) 183 Cal.App.4th 776, 809-810.

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