When Is An Attorney Client Relationship Established In California ?
In determining whether an attorney-client relationship has been established, several guiding principles are applicable. "It is elementary that the relationship between a client and his retained (or noncourt-appointed) counsel arises from a contract, whether written or oral, implied or expressed." ( Purdy v. Pacific Automobile Ins. Co. (1984) 157 Cal. App. 3d 59, 75 [203 Cal. Rptr. 524], original italics.)
An attorney-client relationship can be formed though no retainer is signed or no fees are paid. ( Miller v. Metzinger (1979) 91 Cal. App. 3d 31, 39-40 [154 Cal. Rptr. 22].) Quoting from Perkins v. West Coast Lumber Co. (1900) 129 Cal. 427, 429 [62 P. 57], Miller v. Metzinger, supra, 91 Cal. App. 3d at page 39 stated:
'When a party seeking legal advice consults an attorney at law and secures that advice, the relation of attorney and client is established prima facie.' the absence of an agreement with respect to the fee to be charged does not prevent the relationship from arising." (Italics omitted.) Contractual formality is not required. (91 Cal. App. 3d at p. 40.)
In Fifield Manor v. Finston (1960) 54 Cal. 2d 632 [7 Cal. Rptr. 377, 354 P.2d 1073, 78 A.L.R.2d 813], because of the highly personal nature of malpractice actions, the Supreme Court held that legal malpractice claims are not assignable. Fireman's Fund Ins. Co. v. McDonald, Hecht & Solberg, supra, 30 Cal. App. 4th 1373, 1385, rejected equitable subrogation as a basis for an insurer's legal malpractice action against an attorney hired by it to defend its insured, concluding that equitable subrogation was sufficiently similar to assignment so as to be controlled by Fifield Manor.
However, in dictum, the court suggested that insurers could assert a direct right of action (not by subrogation) for malpractice as the employer and client of the defense attorney. (Fireman's Fund Ins. Co. v. McDonald, Hecht & Solberg, supra, 30 Cal. App. 4th at p. 1385.)
Unigard, supra, 38 Cal. App. 4th 1229, was the first California case to deal squarely with the dictum in Fireman's Fund Ins. Co. v. McDonald, Hecht & Solberg, supra, 30 Cal. App. 4th 1373.
In Unigard, the plaintiff was not asserting a right to sue for malpractice of the counsel it hired for its insured based upon equitable subrogation, but upon "an independent right to assert a malpractice claim against the O'Flaherty law firm arising out of its allegedly negligent representation . . . ." of the insured. (Unigard, supra, 38 Cal. App. 4th at p. 1235.)
The court held that when, pursuant to insurance company obligations, an insurer hired counsel to defend its insured, the retained attorney owes a duty of care to the insurer that will support its independent right to bring a legal malpractice action for acts committed in the representation of the insured, provided the interests of the insurer and insured are not in conflict. (See also American Casualty Co. v. O'Flaherty, supra, 57 Cal. App. 4th 1070.)
Unigard found the rationale for its conclusion in the out-of-state case, Atlanta Intern. Ins. Co. v. Bell (1991) 438 Mich. 512 [475 N.W.2d 294], 3 which it quoted, at length, as follows: " 'A rule of law expanding the parameters of the attorney-client relationship in the defense counsel-insurer context might well detract from the attorney's duty of loyalty to the client in a potentially conflict-ridden setting.
Yet to completely absolve a negligent defense counsel from malpractice liability would not rationally advance the attorney-client relationship. Moreover, defense counsel's immunity from suit by the insurer would place the loss for the attorney's misconduct on the insurer.
The only winner produced by an analysis precluding liability would be the malpracticing attorney. . . . the defense counsel-insurer relationship is unique. the insurer typically hires, pays, and consults with defense counsel.
The possibility of conflict unquestionably runs against the insured, considering that defense counsel and the insurer frequently have a longstanding, if not collegial, relationship.
In a malpractice action against a defense counsel, however, the interests of the insurer and the insured generally merge. the client and the insurer both have an interest in not having the case dismissed because of attorney malpractice.
Allowing recovery for the insurer on the basis of the failure of defense counsel to adhere to basic norms of duty of care thus would not 'substantially impair an attorney's ability to make decisions that require a choice between the best interests of the insurer and the best interests of the insured.' . . . the best interest of both insurer and insured converge in expectations of competent representation.' " ( Unigard, supra, 38 Cal. App. 4th at p. 1236.)
The Unigard court continued:
"We conclude that where the insurer hires counsel to defend its insured and does not raise or reserve any coverage dispute, and where there is otherwise no actual or apparent conflict of interest between the insurer and the insured that would preclude an attorney from representing both, the attorney has a dual attorney-client relationship with both insurer and insured." (Id. at pp. 1236-1237).