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Splitting the File in Liability Insurance Page 409information and coverage information tomake a reasoned decision. 58 Even beforecircumstances force it to evaluatepotential settlement, the insurer may wishto consider whether it should waive itscoverage defenses and settle the claim orsuit against the insured. 59 This againrequires knowledge of both the coverageand liability aspects of the case. In anyevent, the insurer is entitled to make thischoice and the insured benefits if theinsurer settles on its behalf. Given allthis, the argument that a liability insurershould have a duty to split a file is notpersuasive.Once defense counsel is retained in aparticular matter, it becomes even clearerthat a requirement to split the fileunnecessarily burdens the insurer.Defense lawyers’ ethical obligationsadequately protect the insured against therisks that file-splitting is designed toavoid.If the defense lawyer is the insured’sindependent counsel, the insured is hersole client and she owes her loyaltyexclusively to the insured. 60 Although alawyer functioning as independentcounsel must keep the insurer apprised ofdevelopments and facts relevant to thedefense of the third-party action, thelawyer must filter out information that the58 Plitt and Gross, supra note 6, at 156.59See, e.g., Flynn’s Lick Cmty. Ctr. &Volunteer Fire Dep’t v. Burlington Ins. Co.,No. M2002-00256-COA-R3-CV, 2003 WL21766244, at *5 (Tenn. Ct. App. July 31,2003) (“crossing over” from coverage side ofa wall to the liability side to settle claims wassaid to be appropriate because insurer waswaiving its coverage defenses by settlingclaims).60 Richmond, supra note 4, at 889.insurer might use to defeat or limitcoverage. 61 Thus, the presence ofindependent counsel alone should providesufficient protection for the insured andeliminate any alleged need for the insurerto split the file. 62 If the defense lawyerwas hired by the insurer and the insured isher sole client either by agreement or byoperation of law, the situation is thesame. 63 If the defense lawyer was hiredby the insurer and the insured and theinsurer are dual clients, the defenselawyer cannot share with the insurerinformation bearing solely on coverageabsent the insured’s consent. Suffice it tosay that such consent is unlikely to begranted and, for that matter, the lawyergenerally should not seek it. If there isdefense-related information that alsoaffects coverage, such that the insurer hasa right to receive it, the defense lawyerprobably has a material limitation conflictof interest that will require herwithdrawal from the case unless theinsured agrees to allow her to furnish theinformation to the insurer. 64 Regardless,the defense lawyer’s ethical duties to the61 Id. at 890-892.62 4 RONALD E. MALLEN AND JEFFREY M.SMITH, LEGAL MALPRACTICE § 30:21, at 369(2012 ed.) (citing Employers Ins. of Wausauv. Albert D. Seeno Constr. Co., 945 F.2d 284(9th Cir. 1991)).63 See State Farm Fire & Cas. Co. v. Mabry,497 S.E.2d 844, 847 (Va. 1998) (“Theattorney employed by the insurer to defend theinsured ‘is bound by the same high standardswhich govern all attorneys and owes theinsured the same duty as if he were privatelyretained by the insured.’”) (quoting Norman v.Ins. Co. of N. Am., 239 S.E.2d 902, 907 (Va.1978)).64MODEL RULES OF PROF’L CONDUCT R.1.7(a)(2) (2011).