(concurring). I agree with the majority as to the result of this case, but I disagree with its reasoning. The issue in this case is whether an *26attorney-client relationship has ever existed between Attorney Walther and Hartford. I would adopt the single representation rule, and, applying that rule, I would hold that under the facts of this case, no attorney-client relationship has ever existed between Attorney Walther and Hartford. In so holding, however, I would note that the facts of this case do not implicate the direct action statute; this is not a direct action lawsuit. See sec. 632.24, Stats.
I disagree with the majority's opinion primarily because it uses agency law to define the relationship between Attorney Walther and Marten. I am also concerned about the effect that this application of agency law will have on attorney-client relationships and on normal principal-agent relationships.
Despite attempts by the majority to characterize this case as "unique," it nonetheless involves a tripartite relationship between an insurer, an insured, and an insurance defense attorney. Many courts,1 as well *27as the leading insurance and ethics commentators,2 have addressed conflicts that arise in such a relationship by applying the "single representation rule." Under this rule, an insurance defense attorney, who is selected and paid by the insurer to defend an insured against a claim, owes an undivided loyalty to the insured and, therefore, represents the insured alone. I *28would join these jurisdictions in adopting the single representation rule in the insurance defense setting, provided that the direct action statute is not involved.
The single representation rule clearly defines the insurance defense attorney's obligation in the event of a conflict of interest. In the instant case, the insured, Marten, selected and paid for an attorney, Attorney Walther. Marten informed its insurer, Hartford, that it had retained Attorney Walther. Under the single representation rule, Attorney Walther owed and continues to owe an undivided loyalty to Marten and, therefore, represents Marten alone. Hartford was not and is not a client of Attorney Walther.
In this case, the insured, not the insurer, selected and paid the attorney. This fact, however, only strengthens my conclusion that Attorney Walther represented and continues to represent only Marten and not Hartford. Indeed, it would defy common sense to apply the single representation rule when the attorney is selected and paid by the insurance company, but not apply the rule when the attorney is selected and paid by the insured. See Dempsey v. Associated Aviation Underwriters, 141 F.R.D. 248, 252 (E.D. Pa. 1992). An insured like Marten should not receive less favorable treatment simply because it selected, hired, paid, and established a long-term relationship with its attorney, as opposed to simply having an unknown attorney assigned to the insured by its insurer. Moreover, Hartford initially rejected Attorney Walther and stated that it would not follow his advice.3
*29Applying the single representation rule to the case at bar is consistent with the reasonable expectations of the parties, Hartford's arguments to the contrary notwithstanding. Evidence that Hartford understood the relationship between Attorney Walther and itself comes from the retrospective nature of Hartford's policy with Marten. As the court of appeals correctly noted, policies with a retrospective rating can create an inherent conflict of interest between the insured and the insurer. Marten Transp. Ltd. v. Hartford Specialty, 180 Wis. 2d 285, 296, 509 N.W.2d 106 (Ct. App. 1993). Because a commission is charged as a percentage of the retrospective premium, commissions increase as premiums increase. Retrospective premiums, in turn, increase as settlements and awards under the policy increase. Thus, as the insurer pays more out in claims, the insured must pay more in premiums and more in commissions to the insurer. Id. As an insurer, Hartford undoubtedly understood that this potential conflict of interest existed and, therefore, could not have reasonably expected that the law firm selected, hired, and paid by the insured would actually represent the conflicting *30interests of the insurer as well. Hartford was not a neophyte in these matters. I have no doubt that it understood the full effect of the retrospective premiums it charged.
In sum, I would hold that under the single representation rule, an insurance defense attorney, who is selected and paid by either the insured or the insurer to defend the insured, owes an undivided loyalty to the insured and, therefore, represents the insured alone. In this case, Attorney Walther owed an undivided loyalty to Marten and, therefore, represented Marten alone. Attorney Walther and Hartford never entered into an attorney-client relationship. This conclusion comports with Hartford's reasonable expectations, since Hartford should have known that a conflict of interest could exist between Marten and itself as a result of the retrospective nature of the worker's compensation policiés. Accordingly, I would reverse the decision of the court of appeals and remand the case to the circuit court for reinstatement of Attorney Walther as counsel for Marten.
I am authorized to state that Justice Roland B. Day joins this concurring opinion.
Eleven jurisdictions have apparently adopted the single representation rule. See Continental Casualty Co. v. Pullman, Conley, Bradley & Reeves, 929 F.2d 103, 108 (2d Cir. 1991) ("It is clear beyond cavil that in the insurance context the attorney owes his allegiance, not to the insurance company... but to the insured_"); In re A.H. Robins Co., Inc., 880 F.2d 709, 751 (4th Cir. 1989) ("It is universally declared that [insurance defense] counsel represents the insured and not the insurer") cert. denied sub nom. Anderson v. Aetna Casualty & Surety Co., 493 U.S. 959 (1989); Dempsey v. Associated Aviation Underwriters, 141 F.R.D. 248 (E.D. Pa.) (stating that insurance defense attorney owes ethical duty exclusively to insured, not insurer) aff'd, 977 F.2d 567 (3d Cir. 1992); Smith v. Anderson-Tuhley Co., 608 F. Supp. 1143, 1147 (D.C. Miss. 1985) ("[A]n attorney retained by an insurance carrier to defend an insured represents the insured") aff'd, 846 F.2d 751 (5th Cir. 1988); Atlanta Int'l Ins. Co. o. Bell, 448 N.W.2d 804, 805 (Mich. Ct. App. 1989) ("The only *27attorney-client relationship which exists is between the attorney and the insured client"), rev'd on other grounds, 475 N.W.2d 294 (1991); First American Carriers v. Kroger Co., 787 S.W.2d 669, 671 (Ark. 1990) (stating that insurance defense lawyer must represent the insured as his client with undivided loyalty); Brohawn v. Transamerica Ins. Co., 347 A.2d 842, 852 (Md. Ct. App. 1975) ("[T]he attorney selected by the insurer to represent the insured . . . has the duty to represent the insured with complete fidelity and may not advance the interests of the insurer to the prejudice of the rights of the insured"); Apex Mutual Ins. Co. v. Christner, 240 N.E.2d 742, 753 (Ill. App. Ct. 1968) (stating that insurance defense attorney represents insured, not insurer); Jackson v. Trapier, 247 N.Y.S.2d 315, 316 (N.Y. Sup. Ct. 1964) (stating that "the defendant is the client and not the insurance carrier even though the latter may have chosen the counsel and may be paying his fee"); see also Colorado Bar Ass'n Ethics Op. 91 (1993) (stating that "a lawyer retained by an insurance carrier to defend a claim against the company's insured represents the insured, not the carrier"); New Hampshire Bar Ass'n Ethics Op. 1982-3/2 (1982) ("Lawyers retained by an insurance company to represent insureds must be zealous advocates of the appointed clients, even though such representation would work to the detriment of the insurance company"); ABA Committee on Ethics and Professional Responsibility, Informal Op. 1476 <1981) (stating that "when a liability insurer retains a lawyer to defend an insured, the insured is the lawyer's client.").
See, e.g., 16A J. Appleman & J. Appleman, Insurance Law and Practice sec. 8839.35, at 108 n.9.5 (1981); Geoffrey C. Hazard and William Hodes, The Law of Lawyering 247-50 (1990).
In 1985, approximately two years before Marten purchased insurance from Hartford, Attorney Walther and Marten entered into an attorney-client relationship. Under the worker's compensation policy issued to Marten, Hartford agreed to retain an attorney for Marten and to defend Marten against any *29covered claim. Initially, Hartford retained counsel, other than Attorney Walther, to represent it and Marten in worker's compensation claims. In February 1989, Marten informed Hartford that Attorney Walther would be acting as Marten's general litigation counsel and, in that capacity, would be defending Marten against worker's compensation claims covered under the Hartford policy. Hartford objected to this arrangement because Attorney Walther was not on Hartford's list of approved attorneys. Hartford also informed Marten that Hartford would not be responsible for any recommendations made or advice given by Attorney Walther regarding claims against Marten. Nonetheless, Hartford acknowledged that Marten had the right to choose its own attorney.