You have asked the Committee for advice relating to 1) disclosure of a Statute of Limitations defense to your clients and 2) withdrawing from their representation. You have informed us of the following set of facts:
We understand that you presently represent plaintiffs, as husband and wife, in a medical malpractice claim. Briefly stated, the plaintiff-wife presented to hospital on September 21, 1985, with complaints of abdominal pain and came under the care a Dr. Y. Although she advised the nursing staff of her allergy to Penicillin, she was nonetheless administered Keflex, a penicillin derivative.
The plaintiff then suffered an extreme allergic reaction to the Keflex. Two days later, upon her discharge from the hospital she apparently suffered a second attack and was rehospitalized.
It was later determined that her subsequent allergic-like attacks were a psychic reaction, whereupon she came under the care of a psychiatrist. The psychiatrist conveyed to the Inquirer in April 1987 that settlement is important in that the litigation is causing stress and impeding recovery.
After presenting the claim of the plaintiffs to the insurance carriers for Hospital X and Dr. Y, negotiation was carried on for months with no offer of settlement made prior to filing of the suit. After the plaintiffs instituted suit on October 8, 1987, the Defendants raised in New Matter the Statute of Limitations as a defense.
You have inquired whether you have a duty to disclose this defense to your clients. This concern is raised because of the possibility of a future legal malpractice claim and the fact that your professional liability insurance is on a claims-made basis. It is your understanding, apparently, that the policy may be compromised by informing your clients of a possible legal malpractice claim prior to the adjudication of the Statute of Limitations defense.
As to whether you must disclose the Statute of Limitations defense to your clients, the Committee looks to Rule 1.4 which provides:
(a) A lawyer shall keep a client informed about the status of a matter and promptly comply with reasonable requests for information.
(b) A lawyer shall explain a matter to the extent necessary to permit the client to make informed decisions regarding the representation.
In addition, a pertinent part of the Comment to this section adds: "[A] lawyer may not withhold information to serve the lawyer's own interest or convenience."
Given this rule, you do have a duty to disclose to your clients the factual and legal basis of the potential Statute of Limitations defense. Clearly, this matter may have a material effect on how your clients may choose to proceed.
Regarding your inquiry as to whether you should withdraw because of a conflict which may now exist between your clients and your position regarding your professional liability coverage, Rule 1.7(b) is dispositive:
(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless:
(1) the lawyer reasonably believes the representation will not be adversely affected; and
(2) the client consents after full disclosure and consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.
The Committee advised that:
(1) You may feel that your belief that the conflict is such that you must withdraw, due to your interest in limiting your liability;
(2) After your clients have a full understanding of the situation, they may waive any potential conflict and choose to let you continue as counsel; or
(3) They may ask you to withdraw, in which case you must.
If you are going to withdraw, you must of course look to Rule 1.16(b) wherein it states that withdrawal can only be accomplished if it has no material adverse effect on the clients' interest. You must also be aware of Rule 1.16(c) which provides that you must continue representation if so ordered by the tribunal.