Opinion #122. Notifying Employer of Settlement in Worker’s Compensation Cases
Issued by the Professional Ethics Commission
Date Issued: March 5, 1992
The Grievance Commission has requested an advisory opinion as to whether a lawyer representing an employer’s workers’ compensation insurer is obligated by the Maine Bar Rules to communicate with the employer before settling a workers’ compensation claim before the Maine Workers’ Compensation Commission.
For the reasons discussed below, the Professional Ethics Commission concludes that a lawyer representing an employer’s workers’ compensation insurance carrier is required by Maine Bar Rule 3.6(a) to communicate with the employer (the insured) before settling a workers’ compensation claim before the Maine Workers’ Compensation Commission.
In relevant part, Maine Bar Rule 3.6(a) provides that “[a] lawyer shall take reasonable measures to keep the client informed on the status of the client’s affairs.” The Professional Ethics Commission has previously opined that the insured party is the “client” of a lawyer retained by a liability insurer to represent the interests of the insured. See Opinions 63 and 72. In that situation, therefore, Rule 3.6(a) generally requires the lawyer retained by the insurer to communicate with the insured in regard to the settlement of a claim against the insured since the settlement concerns “the status of the clients’ affairs” within the meaning of that Rule.
The question now presented is whether that same principle also applies in the context of a workers’ compensation claim. At the outset, it is noted that there are some differences between the interests of an insured in defending against a tort claim and the interests of an insured (employer) in a workers’ compensation claim. in the former situation, the insured has an immediate interest in any settlement since the settlement may require that the insured pay certain amounts below certain policy limits (deductibles) or above policy limits (excess exposure). In contrast, in the workers’ compensation context, the insured‑employer generally has no exposure in regard to the payment of a settlement, and the insurer generally bears the full cost of paying any settlement arrived at.
It is also noted that there may be differences between some liability insurance policies and workers’ compensation policies in regard to the insurer’s right to settle claims. Finally, it is noted that, in contrast with the usual tort action in which the insured is the defendant, the employer’s insurer is a party to a worker’s compensation claim proceeding.
Based on these considerations, it could be argued that in the worker’s compensation context the insurer is the real party in interest, and that the employer is not the “client” of the lawyer retained by the insurer. The problem with that argument, however, is that the employer as well as the insurer is also a party to the proceeding; the lawyer enters an appearance as counsel for each, and the settlement is approved by both of those parties, signified by the lawyer’s signature as counsel for each. Under these circumstances, the Commission is constrained to conclude that the employer as well as the insurer are “clients” of the lawyer for purposes of the above‑quoted provision of Bar Rule 3.6(a).
That the settlement of a worker’s compensation claim concerns the “status of the client’s [employer’s] affairs” within the meaning of Rule 3.6(a) is also manifest since the terms of the settlement may affect the employer’s insurance premium level and may also involve consideration of such things as the resignation or the return to work of the employee‑claimant, matters of significant interest to the employer.
Accordingly, the question presented here is answered in the affirmative.
 The Professional Ethics Commission notes that its opinion in this matter is in line with the recent amendment to 39 M.R.S.A. § 106(2), which requires the insurer to give notification of proposed settlements to the employer under certain circumstances. P.L. 1991, ch. 615, § A‑50 (effective October 17, 1991).