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MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 1988-55
Attorneys: Obligation of Attorney to Joint Tort-feasor Making Settlement Offer When Attorney’s Client Has Executed a General Release
Your letter of inquiry poses the following facts. You represent clients A and B in connection with injuries they sustained in 1985. You settled the case with one of the potential defendants, distributed the proceeds to your clients and had them sign a general release. Thereafter you received a settlement offer accompanied by a release, and a draft from an insurer of another potential defendant. That insurer was apparently unaware of the case had been settled by the other party. You ask if you may accept the second offer to settle on behalf of your clients.
The Committee is of the opinion that Rule 4.1 of the Maryland Rules of Professional Conduct applies in the situation you outline. The Rule states as follows:
(a) In the course of representing a client a lawyer shall not knowingly:
(1) make a false statement of material fact or 'law to a third person; or
(2) fail to disclose a material fact to a third person when disclosure is necessary ~b 'avoid assisting a criminal or fraudulent act by a client.
(b) The duties stated in this Rule apply even if compliance requires disclosure of information otherwise protected by Rule 1.6. (Confidentiality of Information)
The Committee assumes that if the release is a true general release, that is it releases all parties, then the insurer making the second offer has been released and neither it or its insured has any liability. However, that is a legal question and beyond the scope of the Committee's responsibility and we decline to opine on that matter.
The insurer's offer to settle is based upon its belief that liability still exists. While you have no affirmative duty to inform an opposing party of relevant facts the Committee believes the acceptance of a settlement offer when no legal liability exists is the same as asserting the existence of a legal liability. Thus, mere acceptance of the offer would be a misrepresentation of the existence of liability.
We believe the best course of action would be to advise the insurer of the settlement by the first party. If it reaffirms its offer with that knowledge then you could accept on behalf of your clients. If the insurer withdraws its offer your clients have not been harmed as their position vis-a-vis the insurer has not been changed.
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