## Facts

- A dairy farmer sued Pine Island Farmers Coop for damages arising from Pine Island’s sale and installation of a milk metering system.
- Pine Island was insured by Farmland Mutual Insurance Company, which retained the law firm Erstad & Riemer, P.A., and two attorneys to defend Pine Island.
- After the underlying case settled, Pine Island and Farmland alleged defense counsel mishandled the defense, including failing to raise a potentially significant contractual defense.
- Pine Island (the insured) sued defense counsel for legal malpractice.
- Farmland (the insurer) also sued defense counsel, asserting malpractice despite not being found to be counsel’s client.

## Issues

1. In the insurer–insured–defense counsel relationship, does defense counsel represent only the insured, or can counsel also represent the insurer absent a conflict and with the insured’s informed consent?
2. May a nonclient insurer bring a legal malpractice claim against defense counsel under equitable subrogation when the insured client has brought its own malpractice claim?

## Decision

- The Minnesota Supreme Court affirmed the court of appeals’ judgment, though on different reasoning.
- The court held that defense counsel retained by a liability insurer to defend the insured represents the insured.
- The court held that, absent a conflict of interest, defense counsel may also represent the insurer if the insured consents after consultation.
- The court held that a nonclient insurer may not pursue a legal malpractice claim against defense counsel under equitable subrogation when the insured client brings a malpractice claim.
- As a result, Farmland’s equitable-subrogation malpractice claim against defense counsel was barred.

## Legal Principles

- In insurance-defense representation, the insured is defense counsel’s client by default; counsel’s loyalty and confidentiality run to the insured.
- Dual representation of insured and insurer is permitted only if (a) there is no conflict of interest and (b) the insured gives informed consent after consultation.
- Legal malpractice liability generally tracks the attorney–client relationship; expanding malpractice claims to nonclients risks shifting counsel’s allegiance away from the insured.
- Equitable subrogation does not permit a nonclient insurer to assert a malpractice claim against defense counsel when the insured client is already pursuing malpractice, because the client’s claim preserves the client-centered nature of the relationship and avoids added conflicts and complications.

## Conclusion

The court confirmed that insurer-retained defense counsel represents the insured, with any insurer co-representation allowed only through conflict-free, informed consent by the insured, and it rejected an insurer’s attempt to sue defense counsel for malpractice through equitable subrogation when the insured client has filed its own malpractice action.


Pine Island Farmers Coop. v. Erstad & Riemer, P.A., 649 N.W.2d 444 (Minn. 2002)