Court Opinion

ID: 9884139
Source: CourtListenerOpinion
Date Created: 2023-10-06 02:39:59.473078+00
Date Added: 2024-06-11T07:37:55.968281
License: Public Domain

GILBERT, Justice
(concurring in part, dissenting in part).
Today, the majority establishes new standards regarding the formation of an attorney-client relationship. These new standards are based on the presumption that even in the absence of a conflict of interest between the insured and the insurer, the insured is defense counsel’s sole client. Under the majority’s approach, an insurer cannot become a co-client of defense counsel based on contract or tort theory unless two conditions are met. First, defense counsel or another attorney must consult with the insured and explain the implications, advantages, and disadvantages of dual representation. Second, the insured must give express consent to the dual representation after such consultation. Applying these new standards, the majority concludes that because there was no evidence in the record that defense counsel consulted with the insured regarding dual representation and there was no evidence that the insured consented to dual representation, defense counsel did not represent the insurer in the Windhorst case. The majority also declines to apply the doctrine of equitable subrogation to permit the insurer to assert a malpractice claim against defense counsel.
Although I concur with the majority’s opinion regarding equitable subrogation, I respectfully dissent from the majority’s opinion as to whether the insurer had an attorney-client relationship with defense counsel. Under our traditional contract and tort principles, when an individual is licensed as a lawyer, looks like a lawyer, sounds like a lawyer, acts like a lawyer, gives advice like a lawyer, bills like a lawyer, and the client believes he is being represented by a lawyer, the client is being represented by a lawyer. The majority, however, chooses to depart from these traditional principles and sets forth additional criteria that must be satisfied to establish an attorney-client relationship. The majority adopts this approach because it is concerned that a potential conflict of interest between the insured and the insurer might lead defense counsel to favor the interests of the insurer at the expense of the insured. However, the majority does not explain why the insured needs such additional protections when there is no actual conflict of interest but only a potential conflict of interest. Indeed, under the facts of this case, there was a unity of interest between the insured and the insurer.
Under our traditional contract and tort principles, when a party seeks legal advice from an attorney and the attorney gives that party legal advice, an attorney-client relationship exists. See Togstad, 291 N.W.2d at 693. In this case, the insurer retained defense counsel. Matters of legal strategy relating to investigation, experts, and the appropriate affirmative defenses were discussed and decided by defense counsel and the insurer. For example, *454defense counsel sought specific approval from the insurer for agreeing to toll the statute of limitations to delay the commencement of the lawsuit and decided not to interplead a third party. There is no indication that these issues were even discussed with the insured. In fact, the law firm did not even meet with the insured until two months after a claim was presented. The billing instructions for representing the insurer or the insured states that “the parties shall be represented,” indicating that dual representation was contemplated by the insurer and the insured.
Despite the fact that under traditional contract and tort principles an attorney-client relationship existed between the insurer and defense counsel, the majority chooses to depart from these traditional principles and sets forth additional criteria that must be satisfied to establish an attorney-client relationship. The majority is concerned that a potential conflict of interest between the insured and the insurer might lead defense counsel to favor the interests of the insurer at the expense of the insured. However, in dual representation situations, the potential for conflict of interest is always present. It is only when an actual conflict arises that the insured may need the protection from the possibility, if any, of defense counsel favoring the interests of the insurer at the expense of the insured. When an actual conflict arises, however, and it is not handled properly by defense counsel, the insured may sue defense counsel for malpractice and/or bring an ethics complaint. The solution is not to establish a bright-line rule as a matter of law that no attorney-client relationship existed between defense counsel and the insurer such that the insurer has no standing to bring a malpractice claim. We have never used our rules of professional conduct as the basis for a legal malpractice action or for a defense to a malpractice action.
It is ironic that the majority uses this case as a vehicle for establishing new standards to protect the insured from a potential conflict of interest when the facts of this case indicate that there was a unity of interest between the insurer and the insured. The source of the insurer’s malpractice claim against defense counsel is that defense counsel failed to assert a limitation of remedy defense as an affirmative defense in the Windhorst suit. This limitation of remedy defense was specified on the back of the contract that formed the basis for the entire Windhorst suit. The reason that defense counsel did not assert this defense is that defense counsel did not even read the contract in preparing its answer and defenses, even through trial. In fact, the lawyer testified at a deposition that he first saw the contract when he and respondent law firm were sued for legal malpractice by the insurer. Significantly, this limitation of remedy defense limits the damage exposure of both the insured and the insurer. On this issue and the other affirmative defenses, there was obviously not only a dual representation with no actual or apparent conflict between the insurer and the insured, but there was a unity of interest to mitigate damages for both the insurer and insured. Because both the insured and the insurer are plaintiffs and appellants in this case, this unity of interest between the insurer and the insured has apparently continued throughout this litigation.
The practical effect of the new standards promulgated by the majority is to grant attorneys a shield of immunity from malpractice claims when there is no conflict of interest between the insurer and the insured. In this case, the insurer paid the judgment at issue and the insured had no meaningful monetary damages except a *455deductible of $10,000. Now, the majority denies the insurer any effective recourse to even have its claim heard. I would hold that there was an attorney-client relationship between defense counsel and the insurer such that the insurer had standing to bring a malpractice action against defense counsel.