Summary
The Arizona Supreme Court considers whether an attorney assigned by an insurer to defend an insured may owe the insurer a duty of care, including when the attorney-client relationship is not expressly established. The court holds that an insurer may be owed a duty as a nonclient when the insurer's interests do not conflict with those of the insured and the applicable factors support such a duty. The court also rejects the requirement that malpractice toward the insured must be alleged before a nonclient may pursue a claim against the attorney.
Holdings
- An express oral or written agreement is not a prerequisite to formation of an attorney-client relationship; the relationship may arise from the parties' manifested intent or objectively reasonable reliance on the lawyer's representation.
- An attorney assigned by an insurer to represent its insured may owe the insurer a duty of care, even when the insurer is not the attorney's client, when the lawyer's services are intended to benefit the insurer, the duty would not significantly impair obligations to the insured, and absence of the duty would make enforcement of those obligations unlikely.
- The mere potential for a future conflict between insurer and insured does not automatically prevent assigned counsel from representing both or eliminate a duty to the insurer; actual conflicts or substantial risks of conflict require the lawyer to prioritize the insured's interests and comply with applicable conflict rules.
- Summary judgment for Langerman was improper because Paradigm could pursue a negligence claim based on a duty owed by assigned counsel to the insurer, regardless of whether Paradigm was an attorney-client.
Questions Presented
- Whether an express agreement is required to form an attorney-client relationship between an insurer and counsel assigned to defend the insurer's insured.
- Whether an attorney assigned by an insurer to defend an insured may owe the insurer a duty of care even if the insurer is not an attorney-client of the lawyer.
- Whether the potential for a conflict of interest between insurer and insured automatically prevents dual representation or precludes a duty to the insurer.
- Whether summary judgment for Langerman was proper when the record did not establish as a matter of law that Langerman owed no duty to Paradigm.
Disposition
reversed_and_remanded
Cases Cited (19)
- Martinez v. Woodmar IV Condominiums Homeowners Ass'n, 189 Ariz. 206, 941 P.2d 218 (1997)(followed)
- Paradigm Ins. Co. v. Langerman Law Offices, 196 Ariz. 573, 2 P.3d 663 (App. 1999)(vacated_in_part)
- In re Pappas, 159 Ariz. 516, 768 P.2d 1161 (1988)(followed)
- In re Neville, 147 Ariz. 106, 708 P.2d 1297 (1985)(followed)
- Barmat v. John & Jane Doe Partners, 155 Ariz. 515, 747 P.2d 1214 (App. 1986)(followed_in_part)
- Parsons v. Continental Am. Group, 113 Ariz. 223, 550 P.2d 94 (1976)(followed_in_part)
- Zilisch v. State Farm Mut. Auto. Ins. Co., 196 Ariz. 234, 995 P.2d 276 (2000)(followed)
- Atlanta Int'l Ins. Co. v. Bell, 438 Mich. 512, 475 N.W.2d 294 (1991)(distinguished)
- In re Rules of Professional Conduct, 299 Mont. 321, 2 P.3d 806 (2000)(distinguished)
- Farmers Ins. Co. v. Vagnozzi, 138 Ariz. 443, 675 P.2d 703 (1983)(followed)
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Court Document
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