The relationship between insured defendant, defense attorney, and insurance company is one of unimaginable complexity, characterized by ethical dilemmas and the conflicting interests of its three discrete parties. Normally, the relationship between lawyer and client is one of simple duality. While witnesses and experts may be brought into the equation, ultimately the lawyer and client are in a ‘monogamous' legal relationship, if you will. The lawyer owes loyalty to no one but the client who has retains and pays them. There is no uncertainty as to whose interest the lawyer will promote - they will act in the client's best interest, and in that interest exclusively. In a medical malpractice case, this is true of the relationship between the plaintiff and the plaintiff attorney, but not true of the relationship between the aforementioned defendant and their insurance-funded defense attorney.
Insurance Company Funded Defense
While the American Bar Association has ethically condoned a lawyer acting in the interest of two parties, a moral quandary remains. The best interest of the defendant client and the best of the insurance company may sometimes be at odds. While the defense lawyer's foremost obligation should be the client whose name is on the defendant line of the lawsuit and who has their professional reputation at stake, ultimately their loyalties are shifted and readjusted, their decisions scrutinized and audited so as to protect the assets of the insurance company. The lawyer and insurance company are essentially mutual clients: the insurance company supplies the defense lawyer with cases from their pool of insured, subpoenaed physicians; the lawyer provides legal counsel and representation to the defendant and is in turn paid by the insurance company. They are in a mutual symbiotic business relationship, and the lawyer's repeat job prospects hinge on that relationship. For that reason, they often are at odds with the client; the ‘best' defense possible may be trimmed, with insurance company's encouraging the lawyer to cut corners at all points and provide the leanest possible result - to save the insurance company money. They have insured the defendant and thereby obligated to fund their defense, but seek to do so for the smallest possible dollar figure.
Financial Limits on Defense Costs
The company imposes financial limits on the defense attorney, and this usually infringes on the quality of the defense they can provide: cutting down hours spent researching, choosing less expensive experts or fewer experts in number, etc. By doing so, the insurance company and insurance defense lawyer have had a fruitful business relationship - one that would not have been possible without the plight of the defendant, who becomes the least important and eventually disposable player in this ‘triad.' The insured defendant occupies the ‘revolving' role, and this fact seems to diminish their relative importance in the eyes of the insurance company. Although they profit off of ensuring medical personnel, defending their cases is largely a “numbers game,” with some even characterizing the defense as “cheap.” The defense lawyer cannot represent their client with undivided fidelity, forced to apportion their loyalty between the insurance company and the client. Often, the client's interest takes the backseat because it is the insurance company who ultimately signs off on their paycheck.
Insurance companies employ auditors whose sole function is to scrutinize the decisions of defense lawyers, weighing them against corporate's figures of the “average” costs for a given type of case. These 'litigation guidelines' dictate how much work the commissioned lawyers ought to put into a case because that work is ultimately billed to the insurance company. If a case requires a vigorous investigation that exceeds the bounds of the insurance company's allotment, the lawyer may be forced to perform a less thorough investigation and therefore present a weaker case in court. In some cases, it could be said that liability insurance companies will defend “on the cheap.” They draw a line where the cost of competent defense exceeds the return on investment - it's a number game.
One expert noted, “within the practice of law, there is no specialty more directly affected by a conflict of interest problems than insurance defense.” The relationship between insured, insurer and defense counsel has been likened to the Bermuda Triangle, a “vexing” triad. Complex insurance defense ethics have been explored at length in various legal journals. The American Bar Association issued an ethical opinion regarding the concept of “dual clients,” ‘unequivocally' accepting the notion that a defense attorney may represent two clients, those being the defendant and their insurer. The ABA stipulated, "If the lawyer is to proceed with the representation of the insured at the direction of the insurer, the lawyer must make appropriate disclosure sufficient to apprise the insured of the limited nature of his representation as well as the insurer's right to control the defense in accordance with the insurance contract."