The inquirer's firm was appointed by an insurance carrier to defend an insured in connection with an automobile accident. Another carrier issued a policy to the same insured, and it is not known which carrier is primary. The inquirer asks whether it is permissible to seek a declaratory judgment on the issue of coverage while simultaneously defending the insured.
The first issue raised is one of conflict of interest under Pennsylvania Rule of Professional Conduct 1.7 (b). Specifically, would the inquirer's representation of the insured be materially limited by seeking a declaratory judgment against the other carrier? The Committee believes that prior to seeking a declaratory judgment, the inquirer is obligated under Rule 1.7 (b) to determine whether the two policies issued to the client provide identical coverage. If the coverage provided by the other carrier (i.e., the proposed declaratory judgment defendant) is in any way inferior (for example, it has lower liability limits or a higher deductible), the inquirer is prohibited from seeking the declaratory judgment because such other carrier could be declared primary. This type of conflict is non-waivable under the provisions of Rule 1.7 (b) (1). However, if the inquirer determines that the other policy provides identical or superior coverage, it would be reasonable for the inquirer to conclude, under Rule 1.7(b)(1), that the conflict will not adversely affect the insured as the client, and the inquirer's obligations will be satisfied so long as the inquirer complies with the provisions of Rule 1.7b(2), fully discloses the situation to the insured and obtains the insured's consent to continue representation while seeking the declaratory judgment.
The second issue involves the ability of the inquirer's firm to withdraw from representation if successful in the declaratory judgment action. Rule 1.16 (b) permits withdrawal from representation only if it can be accomplished without material adverse effect on the interests of the client. Therefore, under Rule 1.16, the inquirer's firm would be prohibited from withdrawing representation until such time as arrangements for representation by the other carrier could be made.