United States: Washington Supreme Court Imposes RPC 1.7 Conflict Waiver Requirement On Insurance Defense Counsel Retained Subject To Reservation Of Rights

On September 14, 2017, the Supreme Court of Washington issued its long-awaited opinion in Arden v. Forsberg & Umlauf, P.S, No. 93207-7, 2017 Wash. LEXIS 911 (Wash. Sept. 14, 2017). Arden brings into focus yet again the potential conflicts of interest inherent in the practice of insurance defense law and demonstrates the unique contours of these issues in Washington, which long ago forged its own tripartite relationship path with the Supreme Court's decision in Tank v. State Farm, 105 Wn.2d 381, 715 P.2d 1133 (1986).

In Arden, Hartford's insureds, the Ardens, were sued by their neighbors, the Duffys, after Mr. Arden allegedly shot the Duffys' Labrador puppy while purportedly suffering from the effects of Post-Traumatic Stress Disorder. Hartford retained the Forsberg firm to defend the Ardens. Hartford eventually issued a reservation of rights (ROR) letter, reserving the right to disclaim coverage based on the intentional acts exclusion and other policy provisions. The Ardens retained personal counsel to advise them on coverage issues and to monitor the litigation. The Duffys made a settlement demand, which Hartford countered, based upon Forsberg's evaluation. The Ardens contended that Forsberg made the counter without consulting them. The case did not settle at that time.

The underlying litigation between the Ardens and the Duffys metastasized, with the Ardens eventually bringing claims against Hartford for bad faith and Forsberg for legal malpractice and breach of fiduciary duty. All claims were resolved at mediation except the claims against the lawyers. Forsberg obtained summary judgment when the trial court found that there was no disqualifying conflict of interest as to Forsberg nor a breach of fiduciary duty, and the Duffys had failed to show support for their damages claim. The Court of Appeals affirmed, and the Supreme Court, in en banc review, affirmed.

At issue on appeal was whether Forsberg fell below the standard of care and breached its fiduciary obligations to the clients, the Ardens, by failing to disclose to them that Forsberg enjoyed a longstanding relationship with Hartford, including not only representing other Hartford insureds in the defense of lawsuits but also in representing Hartford itself in insurance coverage matters. Although not explicitly stated in either the Court of Appeals or Supreme Court opinions, both courts implied that Forsberg represented Hartford in other matters at the same time it represented the Ardens. 

The Court rejected the Ardens' contention that Forsberg was disqualified per se from representing the Ardens because of Forsberg's longstanding (and undisclosed) relationship with Hartford, which they contended created a conflict of interest. The Court acknowledged the conflict of interest created by the concurrent representation but held that Forsberg would be ethically permitted to represent the Ardens if the requirements of Rule of Professional Conduct (RPC) 1.7 were satisfied. Specifically, Forsberg would be permitted to concurrently represent Hartford (in unrelated matters) and the Ardens if Forsberg "reasonably believed" it would be able to provide competent and diligent representation to each affected client, there was no "significant risk" that the representation of either client would be materially limited, and if Forsberg secured informed consent from each client before undertaking the representation. Given that it was apparently undisputed that Forsberg failed to disclose its concurrent attorney-client relationship with Hartford to the Ardens, the Court implied that the firm had violated Rule 1.7 by proceeding as the Ardens' defense counsel. The Court held, however, that the Rule 1.7 violation was not controlling, rather, the dispositive question was whether the attorneys complied with the applicable standard of care, and if not, whether any deviation caused the Ardens to sustain damages.

On this note, the Court considered competing expert opinions, finding that a genuine issue of fact remained for trial on the issue of whether the standard of care required Forsberg to reveal to the clients the existence and extent of its concurrent client relationship with Hartford and to have obtained their informed written consent to the representation given the potential conflict of interest between Hartford and the Ardens. The Court also considered and rejected the notion that Forsberg could be found by the trier of fact to have breached its duty to inform the clients of settlement offers and to have obtained their consent to extend offers of settlement on behalf of Hartford.

Although a question of fact remained on the alleged breach of the disclosure requirement, the Court affirmed dismissal on the basis that the Ardens had failed to offer any evidence that they suffered damages as a result of any breach by Forsberg, with the threat of exposure to the Duffys having been extinguished by the settlement funded by Hartford.

This is an important case for insurance practitioners in Washington. To understand its importance, it is helpful to recall the principles announced in Tank v. State Farm in 1986. In Tank, the Court found that when an insurer retains counsel to represent the insured while reserving the right to later disclaim coverage, the only attorney-client relationship established is that between the insured and defense counsel. The insurer's relationship with counsel is that of a mere third-party payor of legal services being supplied to the insured. Despite relegating the insurer to the status of non-client, the Tank court also imposed heightened duties of care upon defense counsel and the insurer in cases where the insurer is providing the defense while reserving the right to disclaim indemnity based on a coverage defense. Importantly, defense counsel in Washington is required to not only inform the insured client of counsel's relationship with the insurer but also to explain that the insured is the attorney's only client in the case. In the ROR setting, counsel has a heightened duty of disclosure to the client, including continuously apprising them of the exposure in the case, the likelihood of prevailing, and of all pertinent developments in the litigation. Tank also held that where defense is under reservation of rights, the insured, not the insurer, "must make the ultimate choice regarding settlement." As such, counsel has a duty to keep the insured clients fully informed of all settlement offers.

Forsberg was exonerated from civil liability in Arden because there was no proof that any professional failure by the lawyers caused the Ardens any cognizable harm. However, the firm's close call does provide other insurance defense practitioners and insurers in Washington with some new valuable lessons and reinforces some old ones.

  1. When retained by an insurer to represent an insured, counsel must disclose to the client that the insured is the only client in the matter at issue. Counsel must also disclose to the client the nature and extent of counsel's current client or other relationship with the insurer.
  2. In the reservation of rights setting, there is a conflict of interest between the insured and the insurer. Therefore, where the insurer is also a present client of the firm, the representation of the insured is conditioned on a knowing, signed waiver of conflicts pursuant to RPC 1.7, and both the insurer and defense counsel are held to "heightened" duties of care to the insured.
  3. Whether rights are reserved by the insurer or not, counsel has a duty to both the insured and the insurer to keep them continuously apprised of all relevant developments in the case, including factual developments, the chance of prevailing, the exposure, and the status of all settlement opportunities and negotiations.
  4. In the reservation of rights setting in Washington, the insured has the right to "make the ultimate choice regarding settlement." Therefore, counsel must promptly advise the insured of all settlement developments and, specifically, must disclose to the insured any offers received from the plaintiff or which the carrier has asked to be extended. In Arden, the Court found that Forsberg had protected itself on this issue by stating in its retention letter to the clients that "unless instructed otherwise, we will assume that any settlement authority or instructions we receive from Hartford are given with your consent." While inclusion of such a phrase in the initial letter to the clients is advisable, it is best practice to always advise the clients immediately upon receipt of any offer from plaintiffs and to give advance notice of any offer authorized by the insurer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions