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It happens constantly in civil litigation. An insurance company hires a lawyer to defend its policyholder from a third party’s claim of injury. But just who is the lawyer’s “client?” Is it the policyholder who is the named defendant in the case and is “represented” in court proceedings? Or is it the insurer who, in most cases, selected the attorney, pays the attorney, supervises the litigation, and has (by the terms of the liability insurance policy) the right to settle the case, even over the objections of the policyholder? Ordinarily, the liability insurer has both the duty to defend a policyholder sued by a third party and the right to control the defense and settlement of the case. In addition, the insurer has a “duty to settle” claims if this can reasonably be done for an amount at or below the policy limits.

For years, I have been telling students that Nevada followed a “one client” model of this three-part relationship between insurer, policyholder and lawyer. Three separate formal opinions of the State Bar Committee on Ethics and Professional Responsibility (Nos. 9, 26 and 28), spanning nearly 20 years, seemed to clearly adopt the view that the lawyer’s only “client” is the policyholder/defendant and that the insurer has only contract-based rights vis-à-vis the retained defense lawyer. See, e.g., Formal Opinion No. 28 (Nov. 19, 2002) (“under Nevada law, the attorney’s client is the policyholder” while “insurer has the subordinate rights of a third party payer”). However, the insurer’s contract rights were substantial, both in law and as a practical matter, at least if the attorney wished to continue to receive future business from the insurer.

Publication Citation

Nev. Lawyer, June 2007, at 20.