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Attorney Ethics of the Insurer Insured Relationship III

Written by: Alan James Brinkmeier

Reputation Level 20

Posted over 2 years ago. Applies to Illinois, 4 helpful votes, 0 comments

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Negotions Consent

In considering Rule 1.8(e), a lawyer assigned by an insurer to represent it’s policyholder is not to participate in making a settlement of a claim unless both the insurer and insured consent to the settlement, after a full disclosure. Given that settlements will most often be paid by the insurer, there are exceptions to that general rule. It is becoming more and more commonplace in the professional liability claim setting against an attorney or physician for example, for the professional to balk at and even refuse settlement of a claim because of potential adverse affects on that professional’s reputation, or because settlements of medical malpractice claims are reported to the Illinois Department of Professional Regulation.

Excess Exposure Potential

Also, situations arise with some frequency where the size of a claim against an insured represents a potential excess exposure beyond the insured’s policy limit thereby potentially requiring the insured to also participate in funding the settlement. See e.g. Ivy v. Illinois State Police, 263 Ill. App. 3d 12 (1st Dist. 1994), Illinois Municipal League Risk Management Association v. Seibert, 223 Ill App. 3d 864 (4th Dist. 1992) and Illinois Masonic Medical Center v. Turegum Insurance Company, 168 Ill. App. 3d 158 (1st Dist. 1988). These situations give rise to special handling requirements that vary from the general rule, too.