Ethics Opinion 1978-8

November 29, 1978



If a Workers' Compensation carrier has counsel, does direct negotiation with the carrier by claimant's attorney violate Rule 7-103?


Attorney "C" files an application on behalf of Tom Smith with the California Workers' Compensation Appeal Board with respect to a work-incurred injury. Defendant XYZ insurance company (against whom there is direct liability) retains attorney "S" who enters an appearance. Three months later attorney "C" makes a demand upon attorney "S" to settle in the amount of $5,000.00. Attorney "S" conveys the demand to XYZ insurance company who rejects it and extends authorization to make an offer in the amount of $1,000.00. Attorney "S" conveys the offer to attorney "C". Without the knowledge or permission of attorney "S", attorney "C" telephones representative of XYZ insurance company, engages in settlement negotiation, and reaches a settlement in the amount of $2,000.00. Attorney "C" contends that it is common general practice in the County of San Diego to negotiate directly with insurance companies, despite the fact of counsel being retained to handle any litigation.


Rule 7-103. Communicating with an adverse party represented by counsel.

A member of the State Bar shall not communicate directly or indirectly with a party whom he knows to be represented by counsel upon a subject of controversy, without the express consent of such counsel. This rule shall not apply to communications with a public officer, board, committee or body.


Direct communications with the Workers' Compensation insurance carrier is a clear violation. In the fact situation presented, counsel for the carrier and the employee had been negotiating. Thus there can be no doubt of the attorney's awareness that the carrier was represented by counsel. The applicant's attorney contended that it is "general practice" to negotiate directly with the insurance companies, even though counsel had been retained. However, there is no provision in the Rule for an exception based on custom and practice in the community.

An alternative to the present facts would be to allow direct negotiation with an adjuster by an applicant's attorney so long as the insurance company's attorney has first been advised and given his consent. The only other exception is the situation in which an adjuster undertakes direct communication to opposing counsel without advising his own counsel. If a representative of the insurer directly calls applicant's counsel and initiates discussions, an attorney would be justified in assuming that the insurance company intended to communicate directly, and that the insurance company's counsel is in accord.

See Abeles v. State Bar, 9 Cal.3d 603, 108 Cal. Rptr. 359 (1973).

"(Rule 12) . . . is necessary to the preservation of the attorney/client relationship and the proper functioning of the administration of the justice--it shields the opposing party not only from an attorney's approaches which are intentionally improper, but, in addition, from approaches which are well-intended but misguided. (Emphasis added.)

The court construed Rule 12, Rule 7-103's predecessor, as justifying sanctions against Abeles. Abeles had obtained an affidavit directly from client "A". Abeles knew that a suit had been filed by attorney "B", representing clients "A", "X", and "Y". Although Abeles had been advised that client "A" had not authorized filing of the lawsuit and had never entered into an attorney/client relationship with attorney "B", the court found Abeles' conduct improper. It is therefore submitted that direct negotiations with an insurance company, where an applicant's attorney knows that the company has counsel is improper.


Under the facts presented above, there has been a violation of Rule 7-103.

This opinion is advisory only. It is not binding upon the State Bar, the Board of Governors, its agents or employees.


Disclaimer: This opinion was issued by the Legal Ethics Committee of the San Diego County Bar Association. It is advisory only and is not binding upon any member of the SDCBA, any other member of the State Bar of California, the State Bar of California or its Board of Governors, or any persons or tribunals charged with regulatory responsibilities. The SDCBA, its officers, directors, agents, and the Legal Ethics Committee members assume no responsibility or liability in rendering this opinion.