Freivogel on Conflicts
 
 
 
 
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This is a new page as of June 6, 2011.  It is not comprehensive, in that  we have made no attempt to capture cases preceding the creation of this site in mid-2000.  However, since mid-2000, we have attempted to include all insurance defense cases with conflict-of-interest issues.

        The contents of this page are as follows:

  • One Client, or Two
  • Reservation of Rights/Denial of Coverage
  • Possibility of Excess Verdict?
  • Other Cases and Authorities

One Client, or Two

       The North Carolina Approach.  Nationwide Mutual Fire Ins. Co. v. Bourlon, 617 S.E.2d 40 (N.C. App. 2005).  Suit by casualty insurer against insured regarding allegedly non-covered acts.  This 2-1 opinion deals with several discovery disputes involving communications with the lawyer retained by the insurer and the application of the attorney-client privilege to those communications.  The disputes are very fact-specific, and the opinion is long and hard to follow.  However, several holdings are noteworthy.  (1) The lawyer retained by the insurer to represent the insured has two clients.  (2) As to communications with the lawyer regarding the underlying defense, communications with the lawyer are not privileged as between the insured and insurer.  (3) As to communications between the lawyer and insured regarding matters unrelated to the defense, such as communications relating to coverage, the insured enjoys a privilege as to those communications.  Stated another way, the insurer cannot see those communications.

        In Nevada Lawyer Has Two Clients.  Nevada Yellow Cab Corp. v. Eighth Jud. Dist. Ct., 152 P.3d 737 (Nev. 2007); State Farm Mut. Auto. Ins. Co. v. Hansen, 2015 WL 5656978 (Nev. Sept. 24, 2015); Hansen v. State Farm Mut. Auto. Ins. Co., 2012 U.S. Dist. LEXIS 176057 (D. Nev. Dec. 12, 2012).

       Kentucky Federal Court; Two ClientsLee v. Medical Protective Co., 2012 U.S. Dist. LEXIS 59778 (E.D. Ky. April 30, 2012).

       In California Lawyer Has Two Clients unless there Is a Conflict between the Insured and the Carrier.  J.R. Marketing, L.L.C. v. Hartford Cas. Ins. Co., 2007 Cal. App. Unpub. LEXIS 8797 (Cal. App. Oct. 30, 2007); Doublevision Entm’t, LLC v. Escrow Servs., Inc., 2015 WL 370111 (N.D. Cal. Jan. 28, 2015).  Same holding where title insurance involved, Bank of Am. v. Superior Ct., 2013 Cal. App. LEXIS 27 (Cal. App. Jan. 15, 2013). LA County Op. 528 (April 2017) holds that where a lawyer retained by an insurer to defend an insured discovers a coverage defense, that lawyer may not inform the insurer of the discovery, and must withdraw. This result is predicated on cases such as Auto. Ins. Co. v. Federal Ins. Co., 72 Cal.App.4th 1422, 1429 (1999), which holds that insurance defense counsel has two clients.

        In New York Defense Counsel has One Client.  Federal Ins. Co. v. North American Specialty Ins. Co., 2007 N.Y. App. Div. LEXIS 11139 (N.Y. App. Nov. 8, 2007).

        Weitz Co., LLC v. Ohio Cas. Ins. Co., 2011 U.S. Dist. LEXIS 68801 (D. Col. June 27, 2011).  One client, relying on Col. Op. 91 (1993).

        Maryland: One Client Unless Documentation Shows Carrier Is also a Client.  Pennsylvania Nat'l Mut. Cas. Ins. Co. v. Perlberg, 2011 U.S. Dist. LEXIS 54763 (D. Md. May 20, 2011).

        Carrier May Sue Counsel Retained for Insured for Malpractice.  Hartford Ins. Co. v. Koeppel, 2009 U.S. Dist. LEXIS 38135 (M.D. Fla. May 5, 2009).

       Whether Insurance Defense Lawyer Represents the Insurer Is a Fact Issue.  Pharmacists Mut. Ins. Co. v. Billet & Connor, 2006 U.S. Dist. LEXIS 5168 (E.D. Pa. Feb. 9, 2006).

        Lawyer has one client (insured) if insured and insurer disagree on settlement.  Swiss Reinsurance America Corp., Inc. v. Roetzel & Andress, 837 N.E.2d 1215 (Ohio App. 2005).

        Pine Island Farmers Coop v. Erstad & Riemer, P.A., 649 N.W.2d 444 (Minn. 2002).  An insurer attempted to sue for malpractice a law firm it had retained to defend an insured.  The court held that ordinarily the lawyer for the insured is not also lawyer for the insurer and, therefore, cannot sue the lawyer for malpractice.  For the lawyer to represent both, the court held that a lawyer must explain to the insured the potential conflicts that could develop and then get the insured’s express consent for the lawyer to represent both.  The court also held that the insurer could not sue the law firm for equitable subrogation.  The court distinguished Atlanta International Insurance Co. v. Bell, 475 N.W.2d 294 (Mich. 1991), in which the Michigan court did allow such an action.  In Bell the insured had not sued the defense lawyer.  In this case the insured had sued the law firm.  One justice in this case dissented, noting that the insured was only suing for its deductible.  The dissenter did not quarrel with the majority’s equitable subrogation finding, but felt that the default rule should be that the defense lawyer does represent both the insured and insurer.  (The author of the majority opinion is Alan Page, formerly of the Minnesota Vikings and Chicago Bears, and in the Pro Football Hall of Fame.)

        Lawyer for Insured not Necessarily Lawyer for Insurer, but May Still Owe Duty of Care to Insurer.  Paradigm Ins. Co. v. Langerman Law Offices, P.A., 24 P.3d 593 (Ariz. 2001).  The Arizona Supreme Court held that the lawyer hired by an insurer to defend the insured is not thereby necessarily lawyer for the insurer.  However, the court also held that even though the insurer is not a client, the lawyer may hold a duty of care to the insurer.  One of the interesting aspects of this opinion is the court's heavy reliance on the Restatement.  For example, as to when a lawyer-client relationship is formed, the court relies on Restatement § 14.  As to whether the lawyer for the insured is also lawyer for the insurer, the court quotes from cmt. f to Restatement § 134.  As to conflicts generally, the court cites Restatement § 121.  The court relies, in part, upon Restatement § 51(3) in holding that the lawyer may owe a duty of care to the insurer, even though not a client.  The court remanded the case to the trial court to determine whether the lawyer did, in fact, violate his duty to the insurer.

       Hartford Cas. Ins. Co. v. Halliburton Co, 826 So. 2d 1206 (Miss. 2001.  In an earlier case, Ringer represented Pierce who was sued for his role in an oil well "blow-out."  When that suit was filed, Pierce claimed that he was covered by Hartford.  Hartford initially denied coverage.  Pierce then hired Ringer.  Later, Hartford relented and began paying Ringer's fees and expenses.  This case is a dispute between Halliburton and Hartford arising from the same blow-out.  Ringer appeared for Halliburton.  Hartford moved to disqualify Ringer, claiming it was a former client of Ringer.  The trial judge denied the motion.  The Mississippi Supreme Court affirmed.  The court noted that ordinarily, where the insurance company retains defense counsel, the lawyer represents both the insured and the insurance company.  Not so in this case because Ringer had been hired by Pierce and not by Hartford.  The fact that Hartford had ultimately paid Ringer's fees did not make Hartford a client.

        U.S. Specialty Ins. Co. v. Burd, 2011 U.S. Dist. LEXIS 62877 (M.D. Fla. June 14, 2011).  In this opinion the court held that an insurance defense lawyer has a relationship ("tri-partite relationship") with the insurer such that the insurer can sue the lawyer for malpractice.  The lawyer claimed that two conflicts obviated that relationship.  The first was the prospect of an excess verdict.  The court found that the mere prospect of an excess verdict did not constitute a conflict or obviate the relationship.  The second was a policy defense.  The court rejected that claim, finding there was no policy defense and noting that the insurer did not issue a reservation of rights letter.

        Remodeling Dimensions, Inc. v. Integrity Mut. Ins. Co., 2011 Minn. App. LEXIS 80 (Minn. App. June 21, 2011).  Owner hired Contractor to build an addition to Owner's home.  Allegedly, Contractor failed to note that a window had earlier been installed by someone else incorrectly, leading to moisture damage.  Owner's claim against Contractor was arbitrated by AAA, and Owner received an award of $50,000.  This case is a claim by Contractor against Contractor's insurance carrier ("InsCo") for indemnification of that amount.  The trial court found for Contractor.  In this opinion the appellate court reversed.  Taking the issues out of order, the appellate court held that Contractor's failure to detect the defective window and advise Owner plainly did not fall within the coverage of the insurance policy.  The more relevant discussion to this audience is the court's analysis of whether the law firm retained by InsCo (under a reservation of rights) to defend Contractor in the AAA arbitration had one client or two.  The court said that where there is no conflict, the law firm retained by the carrier could have two clients, the insured and the insurer, if the law firm consulted with the insured and the insured agreed.  Here, there was no evidence of any consultation on this issue, and the court found a conflict.  That conflict arose when the law firm failed to request, prior to the selection of the arbitrator, an explanation for the basis of the award.  Thus, the law firm was representing the Contractor only, and InsCo cannot be charged with the law firm's failure to request the explanation.  [Note: anyone with an interest in this area had better read the opinion.  We have never encountered a claim that failure to make a pre-hearing request for explanation of an arbitration award was grounds for anything.  Therefore, our description of the case may be flawed.]

        In Camico Mut. Ins. Co. v. Heffler, Radetich & Saitta, LLP, 2013 U.S. Dist. LEXIS 10832 (E.D. Pa. Jan. 28, 2013), the court held that the insurer is not always a client of the defense lawyer.

        Woodruff v. Am. Family Mut. Ins. Co., 2013 U.S. Dist. LEXIS 56883 (S.D. Ind. April 22, 2013).  Auto accident.  InsCo. for a defendant ("Insured") hired Law Firm to defend Insured in the tort case.  Insured lost the case and filed bankruptcy.    The bankruptcy trustee sued InsCo for bad faith (this case).  The trustee sought communications between Law Firm and InsCo.  InsCo claimed attorney-client privilege.  In this opinion the magistrate judge first noted that it knew of no Indiana precedent as whether Law Firm had one client or two.  But, the judge said it did not matter because under the co-client rule there would be no privilege as between InsCo and Insured.

        Stewart Title Guar. Co. v. Sterling Sav. Bank, 2013 Wash. LEXIS 769 (Wash. Oct. 3, 2013).  In Washington a title insurance company represents only the insured.

        Evraz Inc. v. Riddell Williams P.S., 2013 U.S. Dist. LEXIS 165430 (D. Ore. Nov. 21, 2013).  Evraz operates steel mills, including one near Portland harbor.  When environmental officials began leaning on Evraz to assist in the clean up of Portland harbor, Evraz notified its environmental insurance carriers.  In the meantime, Evraz had retained its long time law firm, Law Firm, to defend the environmental claims.  Several carriers participated until their limits were exceeded.  The last carrier to stop paying was Continental.  Evraz, represented by Law Firm, brought this suit against Continental for breach of its policy.  Continental, claiming that Law Firm had been Continental’s firm, as well as Evraz,’ moved to disqualify Law Firm in this case.  In this opinion the magistrate judge denied the motion.  First, the court noted that Oregon ethics opinions had seemed to adopt the “two-client” view of insurance defense.  However, the court noted a number of factors indicating that Continental should have known that it was not a client of Law Firm in the environmental representation.  First, Evraz hired Law Firm in the first instance.  Second, Law Firm had almost no direct contact with Continental.  Several times Law Firm indicated in writing that Law Firm was not representing Continental.  Law Firm billed Evraz, not Continental.  The court held that Continental had not reasonably relied on the Oregon “two-client” ethics opinions because they were not rendered until after Continental’s initial involvement in the environmental matters.

        YA Global Invs., L.P. v. Mandelbaum, Salsburg, Gold, Lazris & Discenza, P.C., 2014 U.S. Dist. LEXIS 81966 (D.N.J. June 17, 2014). In the face of a claim InsCo reserved rights and offered to retain “panel counsel.” Insured resisted and hired Law Firm. In this opinion the court held, for conflicts purposes, that Law Firm’s only client was Insured. The court discussed other cases holding that panel counsel may have two clients.

        Landmark Am. Ins. Co. v. Deerfield Constr., Inc., 2017 WL 157858 (N.D. Ill. Jan. 12, 2017). Landmark issued an excess commercial auto insurance policy to Deerfield ($10 mil. X $1 mil.). There was an auto accident, and the other driver sued Deerfield. The primary carrier provided a defense. Late in the case Landmark was notified of the case. At the trial the jury returned a verdict of $2,368,000. Landmark hired Law Firm to review the file, which it did in cooperation with Deerfield’s lawyer. Landmark, represented by Law Firm, filed this case seeking a declaration that it did not have to contribute to the verdict. Deerfield moved to disqualify Law Firm, claiming that Law Firm had represented Deerfield when it initially reviewed the file for Landmark. In this opinion the court denied the motion, finding that Deerfield had never been a client. [Our note: while the result seems OK to us, the opinion contains a confusing, and to us unnecessary, discussion of the juxtaposition of Rules 1.7 and 1.9. It should have been enough to hold that where an excess carrier hires a law firm to review a bad result, that alone should not result in a lawyer-client relationship with the insured.]
       
        Ethics Opinion.  Col. Op. 91 (1993) (one client); Mass. Op. 91-5 (1992) (two clients).

Reservation of Rights/Denial of Coverage

        Duty to provide separate counsel for insured when reserving rightsMagnolia Healthcare, Inc. v. The Hartford Fin. Services Group, Inc., 2006 U.S. Dist. LEXIS 85079 (N.D. Miss. Nov. 17, 2006).

      Reservation of Rights Letter Does not Automatically Create a Conflict between the Insurer and Insured.  Twin City Fire Ins. Co. v. Ben Arnold-Sunbelt Bev. Co. of S.C., LP, 433 F.3d 365 (4th Cir. 2005).  Same, under Washington law, Weinstein & Riley, P.S. v. Westport Ins. Corp., 2011 U.S. Dist. LEXIS 26369 (W.D. Wash. March 14, 2011).  Same in Sierra Pac. Indus. v. American States Ins. Co., 2012 U.S. Dist. LEXIS 107761 (E.D. Cal. Aug. 1, 2012).  Same in Nevada, Hansen v. State Farm Mut. Auto. Ins. Co., 2012 U.S. Dist. LEXIS 176057 (D. Nev. Dec. 12, 2012) (finding of conflict based upon facts).

       Reservation of Rights Prevents Intervention.  Frank Betz Associates, Inc. v. J.O. Clark Construction, L.L.C., 2010 U.S. Dist. LEXIS 55193 (M.D. Tenn. June 4, 2010).  Ins. Co. is providing a defense to the defendants under a reservation of rights.  Ins. Co. moved to intervene for the purpose of submitting special interrogatories to the jury to resolve coverage issues.  In applying FRCP 24(b) the court denied the motion because allowing the coverage issues into the trial would create a conflict of interest for defense counsel (presumably because they had been retained by Ins. Co. to represent the defendants).

      Impact of Reservation of Rights on Insured's Right to Hire Own Counsel.  Armstrong Cleaners, Inc. v. Erie Ins. Exchange, 364 F. Supp. 2d 797 (S.D. Ind. 2005).  The first paragraph of the opinion summarizes the court’s holding:

This case presents a recurring conflict of interest question within law's "eternal triangle" -- the liability insurance company, the insured, and the insurance defense attorney. The question is whether an insurer's reservation of rights created a conflict of interest sufficient to entitle the policyholders to have their insurer pay attorneys of the policyholders' choice to defend them in the underlying litigation. As explained below, the court finds that the reservation of rights posed, in the terms of Rule 1.7(a)(2) of the Indiana Rules of Professional Conduct, "a significant risk" that representation of the policyholders by attorneys chosen by the insurer would be materially limited by the attorneys' responsibilities to the insurer. As a result, the policyholders are entitled to select their own counsel to defend the underlying claim, subject to reasonable approval by the insurer, with reasonable fees and expenses paid by the insurer.

        The court held that because the trier of fact could make findings, some of which could result in no coverage, the law firm selected by the insurance company would have a conflict.

       Reservation of Rights Case.  Tyson v. Equity Title & Escrow Co., 282 F. Supp. 2d 829 (W.D. Tenn. 2003).  The court held that a lawyer hired by the insurance company to defend an insured, where the insurance company had issued a reservation of rights, did not have a conflict of interest.

        Reservation of Rights: Questionable Conduct of Carrier-Retained Counsel.  Williams v. American Country Ins. Co., 833 N.E.2d 971 (Ill. App. 2005).

       Law Firm Does not Have a Conflict with Insured Where Carrier Had Initially Denied Coverage but then Admitted Coverage.  Bartolotta v. Gibney, 731 N.W.2d 385 (Wis. App. 2007) .

        Yaron v. Darwin Nat'l Ins. Co., 2011 Phila. Ct. Com. Pl. LEXIS 167 (Pa. Ct. Com. Pl. July 5, 2011).  InsCo hired counsel to defend Insureds under a reservation of rights.  Insureds hired their own additional counsel.  In this case Insureds sued InsCo to recover the fees and expenses of their own counsel.  In this opinion the court granted summary judgment to InsCo, holding that a reservation of rights does not automatically constitute a conflict of interest between the insurer and insured.

        Century Surety Co. v. 350 W.A., LLC, 2011 U.S. Dist. LEXIS 111366 (S.D. Cal. Sept. 29, 2011).  This is a suit by Insurer to rescind a policy and for a declaration that it owed Insured nothing.  Insured did not tender the defense of the underlying case to Insurer until after the trial of that case.  In this opinion the court held, among other things, that Insured was not entitled to hire independent ("Cumis") counsel for appeal of the underlying case because the trial record was fixed, and the law firm hired by Insurer would not have a conflict.

        British Columbia Med. Ass'n v. Aviva Ins. Co. of Canada, 2011 BCSC 1399 (CanLII) (B.C. S. Ct. Oct. 19, 2011).  A person brought a defamation action against an entity and several individuals ("underlying case").  The entity's insurance carrier issued a reservation of rights based upon a claim of no coverage.  In this case the insureds seek a declaratory judgment that they are covered by the policy and that they have a right to control the defense of the underlying case.  As to the latter issue the court, in this opinion, held that a law firm representing both the insureds and the insurer would have a conflict.  This is because coverage issues would turn upon the conduct of the insureds that would be shown at the trial.

        Coats, Rose, Yale, Ryman & Lee, P.C. v. Navigators Specialty Ins. Co., 2011 U.S. Dist. LEXIS 133886 (N.D. Tex. Nov. 21, 2011).  This is a suit by Law Firm against its malpractice carrier regarding the carrier's claimed right to control the defense of an underlying case.  In the underlying case former clients sued Law Firm for malpractice, breach of fiduciary duty, and declaratory judgment.  After Law Firm tendered defense of the underlying case to its carrier, the carrier reserved rights as to the claim of excessive fees and declaratory judgment.  Law Firm brought this action against the carrier for a declaration that the law firm could hire independent counsel at the carrier's expense.  In this opinion the court granted summary judgment to the carrier.  Evidently, the reservation of rights covered the excessive fee claim and the count for declaratory judgment, but not the underlying claim for malpractice damages.  The court held that just because the carrier might later reserve rights as to malpractice damages, did not justify a finding of an actual conflict of interest.  The court also held that the law firm retained by the carrier would have no incentive to guide the case to a result favoring the carrier and disadvantaging Law Firm.  In a one-paragraph opinion the appellate court affirmed, Coats, Rose, Yale Ryman & Lee, P.C., Navigators Specialty Ins. Co., 2012 U.S. App. LEXIS 21350 (5th Cir. Oct. 15, 2012).

        Sydie v. Murad, 2011 ONSC 5781 (CanLII) (Ont. Sup. Ct. Nov. 28, 2011).  InsCo denied coverage for this occurrence (negligent house inspection) because the inspector did not mention this occurrence on his insurance application.  In this opinion the court held that while the claim of coverage was ongoing, the insured/inspector had the right to hire his own counsel in the liability case at InsCo's expense.

        Partain v. Mid-Continent Specialty Ins. Services, Inc., 2012 U.S. Dist. LEXIS 7530 (S.D. Tex. Jan. 20, 2012).  Architects sued Developer for copyright infringement (not this case).  Developer's insurance carrier ("Insurer") served a reservation of rights, identifying several coverage issues.  But, Insurer did assume the defense and hired a law firm to defend.  Developer claimed that Insurer had a conflict and that Developer should be allowed to hire its own law firm.  Developer filed this case for a declaration, among other things, that Developer had the right to its own law firm at Insurer's expense.  On that point, in this opinion, the court held that Developer could not show the requisite conflict.  For each coverage issue, the court concluded that no findings would be made in the underlying case that would resolve that issue.  Thus, Insurer's law firm would not have a conflict because it would not have to ability to influence the outcome as to coverage.

        Downhole Havigator, L.L.C. v. Nautilus Ins. Co., 2012 U.S. App. LEXIS 13342 (5th Cir. June 29, 2012).  Downhole was sued by a customer for negligence.  Downhole tendered the defense to its carrier, Nautilus.  Nautilus responded with a reservation of rights letter, noting several exclusions that might be the bases for denying coverage.  Based upon what Downhole believed was a conflict of interest, Downhole rejected Nautilus' designated lawyer and hired its own.  This suit seeks reimbursement from Nautilus for Downhole's legal expenses.  The magistrate judge granted Nautilus summary judgment on that claim.  In this opinion the Fifth Circuit affirmed.  The court held that because the facts to be adjudicated in the negligence case were different from the facts that would determine coverage, Nautilus' designated counsel would not have a conflict.

        Classic Distrib. & Bev. Grp., Inc. v. Travelers Cas. & Sur. Co., 2012 U.S. Dist. LEXIS 129545 (C.D. Cal. Aug. 29, 2012).  This case is largely about California insurance and employment law.  The issue of interest to this audience is whether, in the face of a reservation of rights, the insured was entitled to independent counsel compensated by the insurance company.  In this opinion the court held that the insured was so entitled because counsel appointed by the insurance company would be in a position to "steer the settlement" toward non-covered claims.

        Axis Reins. Co. v. Telekenex, Inc., 2012 U.S. Dist. LEXIS 179647 (N.D. Cal. Dec. 19, 2012).  InsCo in this case seeks a declaratory judgment that it does not cover Insured in an underlying liability action.  Early in the underlying action InsCo issued a reservation of rights.  Pursuant to its rights under the policy Insured hired its own independent law firm to defend Insured.  That law firm had to withdraw because of a conflict of interest (conflict not explained in this opinion).  InsCo then, with Insured's knowledge, undertook to hire another law firm ("Law Firm 2") to defend Insured.  Insured lost the underlying case.  Insured claims in this action that InsCo is collaterally estopped from denying coverage for the underlying case.  Insured claims InsCo failed to inform Insured that Law Firm 2 would have a conflict of interest.  The conflict was that Law Firm 2 was in a position to guide the underlying case in a direction that would result in no coverage.  In this opinion the court rejected that defense because the reservation of rights had preceded the hiring of Law Firm 2, and the Insured knew all about its rights at the time Law Firm 2 was retained.

        Bank of Am. v. Superior Ct., 2013 Cal. App. LEXIS 27 (Cal. App. Jan. 15, 2013).  Title Insurance Company hired Law Firm to bring an action on behalf of insured Bank to vindicate Bank's mortgage lien.  The trial court, in a discovery dispute, ruled that communications between the insurance company and Law Firm were not protected by the privilege.  In this opinion the appellate court reversed.  First, the court ruled that, as in the case of casualty policies, in California the law firm hired by the insurance company represents the insurer, as well as the insured.  This assumes there is no conflict.  Second, the court held that the mere fact of a reservation of rights does not obviate the privilege so long as the policy defense relies on facts separate from the issues being dealt with by the law firm.

        Hastings Mut. Ins. Co. v. Mosher Dolan Cataldo & Kelly, Inc., 2013 Mich. App. LEXIS 292 (Mich. App. Feb. 14, 2013).  Contractor had a CGL Policy from InsCo.  Insco reserved rights in a claim against Contractor.  Contractor wanted a different law firm from that hired by Insco.  Contractor agreed to pay the difference between the fees charged by the first law firm and its own law firm.  In this suit on the policy Contractor claimed that it should recover the difference in fees.  In this opinion the court denied that relief, holding that there was not a conflict of interest, which might have had the effect of negating Contractor's earlier agreement to pay the fee differential.

        Economy Premier Assur. Co. v. Faith in Action, 2013 Ill. App. Unpub. LEXIS 602 (Ill. App. March 26, 2013).  Reservation of rights, among other things.  This case involves a not-for-profit entity, an entity volunteer, a fatality in an auto driven by the volunteer, the carrier for the entity, and the carrier for the driver.  There are many issues including estoppel from asserting a reservation of rights.  The one issue relevant to this audience was whether one of the carriers had a duty to pay for independent counsel for one of the insureds.  Because one law firm would be in a position to make arguments militating against coverage, the court held that the carrier had to pay for independent counsel.

        Riva v. Ashland, Inc., 2013 U.S. Dist. LEXIS 43596 (D. Mass. March 26, 2013).  This audience is familiar with the concept that an insurance carrier, which has reserved rights, must hire independent counsel for the insured where counsel would be in a position to skew the case into a non-covered one.  In this case the court said the same principle applied to a contractual indemnitor who controlled counsel in defending the contractual indemnitee.  However, the court found no such conflict in this case.


        Wausau Bus. Ins. Co. v. Alpine Consulting Co. of N.Y., Inc., 2013 U.S. Dist. LEXIS 46440 (S.D.N.Y. March 25, 2013).  A sued B and C for breach of contract.  B, claiming any liability it might have resulted from C's misconduct, brought a cross claim for indemnity against C.  C told B that C intended to defend both B and C, that C would pay any resultant liability, and that C had sufficient funds to do so.  Nevertheless, B hired independent counsel to defend B.  At the end of the case B claimed C owed B $60,000 for the cost of independent counsel.  C objected.  In this opinion, finding for B, the court held that there was a conflict between B and C from the outset and that B did not have to rely upon C's representation that C would take care of everything.

        Park Townsend, LLC v. Clarendon Am. Ins. Co., 2013 U.S. Dist. LEXIS 96412 (N.D. Cal. July 10, 2013).  The issue in this case is whether InsCo should pay the fees of independent counsel in the face of InsCo's reservation of rights.  The opinion is very fact-specific and relies heavily on California statutory law.  Thus, we will leave it to those with California insurance practices to read it.

        Federal Ins. Co. v. MBL, Inc., 2013 Cal. App. LEXIS 679 (Cal. App. Aug. 26, 2013).  The federal government brought a CERCLA action against Insured.  When notified of the matter, InsCo reserved rights based upon the fact that some of the actions complained of might have fallen outside certain policy years.  Insured claimed the right to hire its own counsel at InsCo's expense.  InsCo filed this declaratory judgment action.  The trial court granted InsCo summary judgment on this claim.  In this opinion the appellate court affirmed.  The court held that counsel hired by InsCo were primarily concerned with defeating liability and had no control over what actions of Insured occurred when.

        Swanson v. State Farm Gen. Ins. Co., 2013 Cal. App. LEXIS 759 (Cal. App. Sept. 23, 2013).  Tort action.  InsCo served a reservation of rights.  Insured then hired independent counsel ("Lawyer"), and the parties agreed on a billing rate.  InsCo later withdrew the reservation of rights.  In this opinion the court held that InsCo could hire counsel of its choosing, and InsCo did not have to further compensate Lawyer.

        Nucor Corp. v. Employers Ins. Co. of Wausau, 2013 U.S. Dist. LEXIS 139381 (D. Ariz. Sept. 27, 2013).  Nucor was sued for polluting nearby water supplies.  Nucor hired Law Firm to represent it.  Nucor also notified its liability carrier ("InsCo").  Insco issued a reservation of rights.  InsCo did not exercise its contractual right to hire a law firm to defend until a year after notification.  The court first held that a reservation of rights does not automatically deprive the carrier of the right to select defense counsel.  Second, the court held that this right can be waived by passage of time.  In this case the court denied the carrier summary judgment and held that waiver would be a jury question.

        Admiral Ins. Co. v. Petron Energy, Inc., 2013 U.S. Dist. LEXIS 160662 (N.D. Tex. Oct. 31, 2013).  99% of this opinion deals with insurance contract interpretation, including recognition of the “eight-corners” rule (a new one on us).  The court said in passing that not every reservation of rights creates a conflict of interest.  Otherwise, an insurer could never reserve rights.

        Ind. Ins. Co. v. CE Design Ltd., 2013 U.S. Dist. LEXIS 179372 (N.D. Ill. Dec. 20, 2013).  Ind. issued an insurance policy to Matrix.  CE brought a class action against Matrix for violating junk fax laws.  Ind. sued CE (but not the insured, Matrix) in this case for a declaration that it did not cover the loss.  When Ind. had issued a reservation or rights letter to Matrix regarding the class claims, Ind. failed to disclose that the law firm it had hired had a conflict of interest.  CE claimed in this case that the failure to disclose the conflict estopped Ind. from denying coverage.  In this opinion the court dealt with that and several unrelated issues.  As to estoppel, the court said that failure to disclose a conflict in a reservation of rights letter could trigger an estoppel.  However, the court held that only the insured (Matrix) could claim estoppel, and Matrix had not done so.  Thus, CE’s motion for summary judgment on that issue was denied.  [Note: we are totally without a clue how, or why, Ind. sued CE for a declaration of non-coverage in this case, when CE was not the insured.  Or, why Ind. did not sue Matrix, which was the insured.]

        Centex Homes v. Lexington Ins. Co., 2014 U.S. Dist. LEXIS 39433 (N.D. Tex. March 25, 2014). This case involves liability insurance policies issued to a building contractor. A claim was made, and the insurance company issued a reservation of rights letter. This suit involves, among other things, the right, if any, of the contractor to retain independent counsel at the insurance company’s expense. This opinion by the magistrate judge deals with several motions for summary judgment. The analysis is too fact-specific to merit discussion here. Of interest is the court’s conclusion that under both California and Texas law the insured may retain counsel at the insurer’s expense if the insurer’s retained counsel can control the coverage issue in the underlying case. In Centex Homes v. Lexington Ins. Co., 2014 U.S. Dist LEXIS 81853 (N.D. June 16, 2014), the same court, in this case, ruling on a variety of other issues, reiterated the same principle.

        Graper v. Mid-Continent Cas. Co., 2014 U.S. App. LEXIS 11903 (5th Cir. June 24, 2014). Architects sued Builder for copyright infringement of Architects’ designs, claiming, in part that Builder’s acts were “willful” within the meaning of the Copyright Act. Builder tendered the defense to InsCo. InsCo accepted but issued a reservation of rights letter, which claimed, in part, that Builder’s conduct may have included “knowledge” that Builder’s conduct was wrongful. Builder, claiming that InsCo’s chosen counsel would have a conflict, hired independent counsel. In this case Builder seeks to recover the cost of independent counsel. In this opinion the Fifth Circuit rejected this claim. The court said that the finding of willfulness under the Copyright Act would not resolve the “knowledge” issue in the policy exclusion because “willfulness” includes conduct that “knowledge” does not.

        Enter. Leasing Co. of Chi. v. Jenkins, 2014 Ill. App. Unpub. LEXIS 1731 (Ill. App. Aug. 11, 2014). Insured was in an automobile accident. InsCo denied coverage because Insured was unlicensed, a policy exclusion. InsCo defended the case with retained counsel, Insured lost, and Plaintiff, in this proceeding, sought to collect from InsCo. In this opinion the appellate court held that the exclusion prevailed. InsCo had not waived the exclusion because it had not failed to disclose a conflict to Insured. Retained defense counsel had no conflict because the liability issue was different from the coverage issue.

        Select Comfort Corp. v. Arrowood Indem. Co., 2014 U.S. Dist. LEXIS 118494 (D. Minn. Aug. 26, 2014). Insured sued InsCo over fees Insured paid its own counsel to defend an underlying injury case. The policy covered accidents. The underlying injury complaint contained an allegation of intentional conduct. InsCo reserved rights, in part, because of this provision. In this opinion the court held that InsCo’s retained counsel had a conflict of interest and that Insured was entitled to reimbursement for its own counsel.

        Hinds County School Dist. v. Ace Am. Ins. Co., 2014 U.S. App. LEXIS 17879 (5th Cir. Sept. 17, 2014). An issue in this case is whether “Moeller Counsel” (Mississippi’s version of “Cumis Counsel”) had authority to settle a case for the insurance carrier as well as for the insured. In this opinion, answering no, the court held that such authority would, among other things, create a conflict of interest on the part of Moeller Counsel.

        Demand for Independent Counsel not Failure to Cooperate. Fid. & Guar. Ins. Co. v. Centex Homes, 2014 U.S. Dist. LEXIS 158649 (E.D. Cal. Nov. 10, 2014). Homebuilder (“HB”) had liability insurance with InsCos. HB was sued for defects in state court. InsCos filed this action for a declaration that they did not cover the state court liability. When tendered the state court case, InsCos wrote a reservation of rights letter. At some point HB demanded in a letter the right to hire independent counsel because InsCos’ counsel would have a conflict of interest. Among other things, InsCos claim that this demand violates the cooperation clause of the policy. Based upon the wording of the letter the court, in this opinion, held that the demand did not violate the cooperation clause. In effect, the court is saying that any request for independent counsel does not, per se, violate the cooperation clause. Had HB refused to work with InsCos’ appointed counsel, that would have been another matter. Very similar holding, Travelers Indem. Co. of Conn. v. Centex Homes, 2015 WL 66420 (N.D. Cal. January 5, 2015).

        Hartford Cas. Ins. Co. v. J.R. Mktg., L.L.C., 2015 WL 4716917 (Cal. Aug. 10, 2015). We are keeping this one short. Lawyers in California dealing with Cumis counsel should probably read it. In this opinion the California Supreme Court, saying its “conclusion hinges on the particular facts and procedural history of this litigation,” held that an insurer may recover excess fees directly from Cumis counsel, as opposed to from the insured.

        State Farm Mut. Auto. Ins. Co. v. Hansen, 2015 WL 5656978 (Nev. Sept. 24, 2015). In responding to a certified request from the federal court, the court held that, in the case of a reservation of rights, the insured has a right to independent counsel only where counsel selected by the insurer could control resolution of the coverage issue. The court also reiterated that, in Nevada, counsel retained by the insurer has two clients unless, and until, a conflict develops.

        Hoang v. Vincentini, 2015 ONCA 780 (CANLII) (Ct. App. Ont. Nov. 16, 2015). Auto accident case. Father had dropped Son off in downtown Toronto. Son’s hat blew off, and when Son went after the hat, he was hit by another vehicle. Son sued Father and the other driver. Son won a jury award at trial. Law Firm, retained by Father’s auto insurance carrier, defended at trial. Law Firm has appeared for Father in this appeal. One of the grounds of the appeal is obviation of the jury’s “unsuitable choice of unloading area.” That is the only allegation in the case covered by Father’s insurance policy. Because of this conflict, a judge of the appellate court ordered that Law Firm withdraw from defending Father and that replacement counsel by compensated by Father’s insurance carrier.

        Title Insurance. Anastasi v. Fid. Nat’l Title Ins. Co., 2016 WL 462380 (Hawaii Feb. 4, 2016). The case concerns bad faith issues of questionable interest to this audience. However, the court did hold that principles regarding reservations of rights and possible conflicts of interest apply fully to title insurance.

        DHR Int’l Inc. v. Travelers Cas. & Sur. Co. of Am., 2016 WL 561914 (N.D. Ill. Feb. 12, 2016). Employee sued DHR for wrongful termination and owed wages. They settled. In this case DHR sued InsCo for failing to appoint independent counsel at InsCo’s expense because InsCo’s reservation of rights letter created a conflict of interest. In this opinion the court dismissed that count. The court said that Employee’s original complaint did not “contain two mutually exclusive theories of liability such that DHR was entitled to independent counsel under Illinois law.” InsCo’s appointed counsel would have no motive or ability to steer the defense to affect coverage.

        Siltronic Corp. v. Employers Ins. Co. of Wausau, 2016 WL 1270999 (D. Ore. March 31, 2016). This case involves an insurer’s liability for certain environmental cleanup expenses. One issue was whether the insured was entitled to reimbursement for fees of independent counsel hired by insured. In this opinion the magistrate judge ruled that the insured was so entitled. The insurer had accepted tender of the case under a reservation of rights. The analysis concerned Oregon’s unique environmental statute as it relates to hiring independent counsel, and would appear to be of little value to lawyers outside Oregon. Accordingly, we will not discuss the analysis further and leave it to concerned Oregon lawyers to read the opinion.

        Feld v. Fireman’s Fund Ins. Co., 2016 WL 4742224 (D.D.C. Sept. 9, 2016). In a footnote the court noted that where there is a denial of coverage or reservation of rights, the carrier has a conflict and must pay for independent counsel only if the suit contains both claims that are covered and those that are uncovered.

        Hollyway Cleaners & Laundry Co. v. Central Nat’l Ins. Co., 219 F. Supp. 3d 996 (C.D. Cal. 2016). Nearby land owners sued Cleaning Co. for various environmental torts and violations. Cleaning Co. tendered the defense to InsCo. InsCo responded by agreeing to defend under a complete reservation of rights. The response claimed that the contamination in question was not “sudden or accidental,” as required by the policy. The issue in this opinion is whether the conflict between InsCo and Cleaning Co. entitles Cleaning Co. to independent counsel at InsCo’s expense. In this opinion the court said “no” because the underlying claim does not restrict its claims to “deliberate or intentional acts.” Thus, there would be no advantage to InsCo’s retained counsel, in the underlying suit, to manipulate the defense in a way to avoid coverage. [Note: We are a tad uncomfortable with the the court’s conclusion. We would encourage lawyers with insurance defense cases in the environmental world to read the opinion.]

        CMW Int’l LLC v. Amerisure Ins. Co., 2016 WL 7438846 (S.D. Ind. Dec. 27, 2016). Insured Co. had a CGL policy with InsCo. Faced with environmental liability, Insured turned the matter over to InsCo. InsCo neither denied coverage nor issued a reservation of rights. InsCo wants to proceed with its chosen counsel. Insured wants to use its own counsel, and in this case Insured seeks an injunction allowing it to do so. InsCo seeks a declaration to the contrary. In this opinion the court denied a preliminary injunction because Insured “failed to show a reasonably likelihood of success.” Because there was no denial of coverage or reservation of rights, the court was “hard pressed” to find a conflict of interest preventing InsCo from using its own counsel as provided in the insurance contract.

        Nat’l Union Fire Ins. Co. of Pgh., Pa. v. Donaldson Co., Inc., 2017 WL 3642120 (D. Minn. Aug. 23, 2017). One issue treated in this opinion was whether Minnesota or Mississippi law applies as to the effect of a reservation of rights letter. The court chose Minnesota, which provides that a general reservation of rights letter - the case here - does not amount to a “per se conflict of interest” triggering a duty of the carrier to notify the insured of its right to independent counsel.      
       
        James A. Johnson, CUMIS Counsel, 6 J. of Ins. & Indem. L., No. 4 (Oct. 2013).  A state-by-state survey of conflicts of interest arising out of reservations of right.
 


Possibility of Excess Verdict


       Policy Limit Offers and Conflicts.  American Modern Home Ins. Co., Inc. v. Gallagher, 2008 U.S. Dist. LEXIS 9523 (S.D. Cal. Feb. 7, 2008).  Ins. Co. retained Lawyer to defend a property owner in a tort claim.  The policy limits were $300,000.  Plaintiff demanded the limits.  Ins. Co. did not respond in a timely manner, and Ins. Co. ultimately settled with Plaintiff for $5 million.  Ins. Co. then sued Lawyer for malpractice and breach of fiduciary (this case).  In this opinion the court denied Lawyer’s motion for summary judgment.  As to the effect of a policy limits demand on the lawyer’s relationship with a casualty carrier, the court said as follows:

 . . . [C]ase law does not suggest that a conflict arising between an insurance company and its insured nullifies an insurance defense attorney's duty to its insurance company client in favor of having a sole duty to the insured . . . .
     
        Possibility of Excess Verdict, without More, Does Not Create a Conflict for Insurer Retained Lawyer.  Sierra Pac. Indus. v. American States Ins. Co., 2012 U.S. Dist. LEXIS 107761 (E.D. Cal. Aug. 1, 2012),  U.S. Specialty Ins. Co. v. Burd, 2011 U.S. Dist. LEXIS 62877 (M.D. Fla. June 14, 2011), and Canada Inc. v. Economical Mut. Ins. Co., 2011 ONSC 1085 (CanLII) (Super. Ct. Ont. Feb. 22, 2011).

In R.G. Wegman Constr. Co. v. Admiral Ins. Co., 629 F.3d 724 (7th Cir. 2011), rehearing denied, 634 F.3d 371 (7th Cir. 2011), the court held that, under Illinois law, an insured is entitled to independent counsel when there is a “nontrivial probability” that the verdict in the case will exceed policy limits.

        Kannaday v. Ball, 2014 U.S. Dist. LEXIS 120775 (D. Kan. Aug. 29, 2014). Driver caused an accident. Driver was killed, and three passengers suffered serious injuries. Driver’s insurance had a $50,000 per occurrence limit. Passenger 1 obtained a verdict far in excess of the limit and, in this case, pursued InsCo for bad faith and related theories. One claim was that the law firm retained by InsCo had a conflict of interest. In this opinion, which granted summary judgment for InsCo, the court held that there was no conflict because Driver’s estate had no assets. Thus, InsCo was the only party for conflicts purposes.

        Mass. Op. 91-5 (1992).  Claim exceeds policy limits.  Lawyer believes Plaintiff will take less than the limits.  Because Lawyer represents both the insurer and the insured, Lawyer must advise the insurer to retain separate counsel to evaluate the claim.

Other Cases and Authorities

        Law Reviews.  William T. Barker & Charles Silver, Professional Responsibilities of Insurance Defense Counsel, Sec. 6.04; Tanya S. Bryant, Note, Loyalty Divided? The Ethical Considerations of the Tripartite Relationship in Insurance Defense Litigation, 29 Okla. City U.L. Rev. 889 (2004); Douglas A. Richmond, Walking A Tightrope: The Tripartite Relationship Between Insured And Insurance Defense Counsel, 73 Nebr. L.R. 265 (1994); Douglas R. Richmond, Lost in the Eternal Triangle of Insurance Defense Ethics, 9 Geo. J. Legal Ethics 475 (1996); Aviva Abramovsky, The Enterprise Model of Managing Conflicts of Interest in the Tripartite Insurance Defense Relationship, 27 Cardozo L. Rev. 193 (2005).

        The following list of opinions is taken from Conflicts of Interest in Multiple Representation: Part III—Specific Practice Areas, 31 Law. Man. Prof. Conduct 220 (2015). These opinions hold that lawyers may not comply with insurance company guidelines that would require the lawyers to violate ethics rules. E.g., Alabama Op. RO-98-02 (1998); Conn. Informal Op. 97-37 (1997); Ind. Op. 3 (1998); Mass. Op. 2000-4; Neb. Op. 2000-1 (2000); Ohio Op. 2000-3 (2000); R.I. Op. 99-18 (1999); Tenn. Op. 2000-F-145 (2000); Utah Op. 02-03 (2002); Wis. Op. E-99-1; see also In re Rules of Prof'l Conduct & Insurer Imposed Billing Rules & Procedures, 2 P.3d 806 (Mont. 2000).

        "Staff Counsel" OK.  American Home Assurance Co. v. Unauthorized Practice of Law Committee, 121 S.W.3d 831 (Tex. App. 2003).  The court held that insurance companies that employ staff lawyers to represent insureds do not violate unauthorized practice of law rules, and the staff lawyers do not violate the Texas Rules of Professional Conduct.  That was also the holding in Ala. Op. 2007-1 (March 2007).

        Another "Eternal Triangle" Case.  Kuhlman Electric Corp. v. Chappell, 2005 Ky. App. LEXIS 252 (Ky. App. Dec. 2, 2005), affirmed (no damages) 304 S.W.3d 8 (Ky. 2009).  Law Firm was retained by Insurance Carrier (“Carrier”) to defend Employer in a worker’s compensation case.  The claimant received an award.  Some years later, after Employer became self-insured, the claimant re-opened the case to seek a higher award.  The claimant claimed that his condition worsened over the years.  Carrier retained Law Firm to defend the matter.  Law Firm devised a strategy to make the claimant’s condition a new one, thus shifting the award to the self-insured Employer.  Employee’s counsel cooperated in this effort, because if the condition were deemed a new one, the award would be greater.  After a higher award was entered against Employer, Employer sued Law Firm.  The trial court granted Law Firm summary judgment.  The appellate court, in its opinion, found that favoring Carrier was malpractice.  However, the court affirmed the summary judgment, because Employer could not show that the result would have been different had Carrier employed different counsel to protect its position.

        "Additional Insured" Has Right to Defense Even Though It Might Be Adverse to Primary Insured.   BP Air Conditioning Corp. v. One Beacon Ins. Group., 821 N.Y.S.2d 1 (N.Y. App. 2006).  Additional insured's lawyer does not have a conflict even though he is being paid by the insurance company, and he is adverse to the primary insured.

       Ramifications of Personal Injury Plaintiff Taking from Insured Defendant Assignment of Claim against Casualty Carrier.  Jackson v. American Safety Ins. Holdings, Ltd., 2006 U.S. Dist. LEXIS 2167 (E.D. Ky. Jan. 20, 2006).

        Alleged wrongful termination of captive counsel.  Lewis v. Nationwide Mut. Ins. Co., 2003 U.S. Dist. LEXIS 5126 (D. Conn. March 18, 2003).  The plaintiff, a lawyer, had been a full time employee of defendant.  His job was to defend the defendant’s insureds.  He is now suing the defendant for wrongful discharge.  The plaintiff claims that he was harassed and fired for his refusal to take direction from superiors that would have impaired his ability to competently represent insureds.  He claims that following his superiors’ orders would have required him to violate Connecticut’s version of Model Rules 1.8(f)(2) and 5.4 (c).  The court in this opinion denied the defendant’s motion to dismiss.

         Adjuster Conflict Does Not Disqualify Lawyer.  Underwriters Ins. Co. v. L&L Marine Transportation, Inc.., 2001 U.S. Dist. LEXIS 18978 (E.D. La. 2001).  A ship sank, and a guest aboard was killed.  Underwriters provided hull coverage to the ship owner.  Piccolo represented Underwriters in declaratory judgment action against ship owner contesting the hull coverage.  Underwriters also provided liability coverage to the ship owner.  The decedent's family brought a wrongful death action against the ship owner and Underwriters.  Piccolo was not involved in the latter action.  However, initially Underwriters assigned the same adjuster to both matters.  The ship owner moved to disqualify Piccolo in the hull case, because Piccolo might have obtained the ship owner's confidences from the adjuster because of the adjuster's contacts with the ship owner in the wrongful death case.  The adjuster is no longer involved with either matter.  The court held that because there was no showing that Piccolo ever had any contact with the adjuster, Piccolo should not be disqualified.

        Employers Mut. Cas. Co. v. Al-Mashhadi, 2009 U.S. Dist. LEXIS 75442 (E.D. Mich. Aug. 24, 2009).  An employee at a filling station ("Employee"), at about the time he was getting off work, was horsing around with a rifle owned by the filling station.  The rifle accidentally discharged injuring a friend of Employee ("Friend").  Friend sued the filling station and several individuals, including Employee, in state court.  The plaintiff in this case ("EMC") issued an insurance policy covering the filling station for liability.  EMC is seeking in this case a declaration that its policy does not cover the shooting accident.  The law firm representing EMC in this case ("Law Firm") also represents the filling station and individual defendants in the state court case.  However, EMC retained a different law firm to represent Employee in the state court case.  Employee moved to disqualify Law Firm in this case.  In this opinion the court denied the motion, finding no conflict of interest.

        In State ex rel. Neb. State Bar Ass'n v. Frank, 262 Neb. 299 (2001), a disciplinary case, the court held that a lawyer handling insurance defense cases for a carrier could not bring a workmen's compensation case against that carrier's insured.

         United States v. Daniels, 163 F. Supp. 2d 1288 (D. Kan. 2001).  Health care fraud prosecution against a doctor.  In addition to two criminal defense lawyers, the doctor was being represented by the same law firm that defends him in malpractice cases.  The doctor's malpractice insurance company is paying the firm's fees in the criminal case.  The government moved to disqualify the law firm because it was being paid by the insurance company.  The court denied the motion, saying it saw no differing interests.  Moreover, the court felt the presence of the two criminal defense lawyers would provide the doctor further protection.

        Joint Defense with Insurance Carrier.  In re Skiles, 102 S.W.3d 323 (Tex. App. 2003).  Skiles sold property to Bridecam.  Bridecam has now sued Skiles for fraud.  Bean is Bridecam’s lawyer in this case.  After this case began, Bean joined the Chambers firm.  For that reason, Skiles has moved to disqualify the Chambers firm.  This is because the Chambers firm has previously represented Skiles’ insurance carrier in a coverage dispute arising out of this case.  The trial court denied the motion.  The Appellate Court reversed because Skiles’ lawyer had communicated with the Chambers firm pursuant to the joint defense privilege.  Skiles claims this included Skiles’ confidential information, which Bridecam did not deny.

        Plaintiff's lawyer had no duty to protect subrogation rights of plaintiff's automobile insurance companyFarm Bureau Mut. Ins. Co., Inc. v. Carmody, 88 P.3d 1250 (Kan. App. 2004).

        Conflict with Insurance Company: When Costs of Defense Are Recoverable Due to Conflict.  Santa’s Best Craft, LLC v. St. Paul Fire and Marine Ins. Co., 353 F. Supp. 2d 966 (N.D. Ill. 2005).  The plaintiff is suing St. Paul for declaratory judgment that St. Paul owes the plaintiff a defense in another action.  Part of its claim for reimbursement of costs of defense from St. Paul is that St. Paul has a conflict with plaintiff because they disagree in this case.  The court denied the claim saying that only if the plaintiff and St. Paul had had a conflict in the underlying case, would plaintiff be entitled to costs of defense.

       Standard for Employment of "Cumis Counsel."  Silacci v. Scottsdale Ins. Co., 2006 U.S. Dist. LEXIS 6076 (N.D. Cal. Feb. 16, 2006).

        No Conflict for Cumis Purposes just Because Amount Claimed against Insured Exceeds Policy Limits.  Ghiglione v. Discover Prop. & Cas. Co., 2007 U.S. Dist. LEXIS 22901 (N.D. Cal. March 29, 2007).

        Statutory Fee Cap for Cumis Counsel.  Long v. Century Indem. Co., 2008 Cal. App. LEXIS 919 (Cal. App. June 17, 2008). 

        Insurance Company Employee Knew Joint Representation Would Be a Conflict, but Wanted to Save Money.  Jurinko v. The Medical Protective Co., 2006 U.S. Dist. LEXIS 13601 (E.D. Pa. March 29, 2006).

       Lawyer Selected by Insurer to Represent Insured not thereby Lawyer for Reinsurer and cannot Be Sued by Reinsurer.  Zenith Ins. Co. v. Cozen O’Connor, 55 Cal. Rptr. 3d 911 (Cal. App. 2007).

        Representing Subrogation Service Company.  Pierce & Weiss, LLP v. Subrogation Partners LLC, 2010 U.S. Dist. LEXIS 13070 (E.D.N.Y. Feb. 16, 2010).  This case involves lawyers for a company that provides subrogation services to insurance companies.  We will call the company "SubCo."  An insurance company pays a claim.  There is a wrongdoer from whom the insurance company can obtain subrogation.  Rather than hire its own lawyers to pursue subrogation claims, the insurance company has a contract with SubCo, who hires the lawyers, supervises the process, and pays the lawyers.  SubCo is never named as a party in the cases.  A law firm ("Law Firm A") that handles such cases for SubCo sued SubCo for fees (this case).  Law Firm A hired another law firm ("Law Firm B") to represent Law Firm A in this case.  That required pro hac vice admission of the lawyers from Law Firm B.  In this opinion the court denied admission because Law Firm B had a conflict.  That is because Law Firm B handles SubCo subrogation cases.  Based upon all the facts, the court found that Law Firm B had a lawyer-client relationship with SubCo.

        Vinokur v. Raghunandan, 2010 N.Y. Misc. LEXIS 2644 (N.Y. S. Ct. June 25, 2010).  This is a personal injury case arising out of an automobile collision.  Law Firm appeared for two defendants, the driver and the car leasing company.  Law Firm moved for summary judgment for the leasing company under the federal "Graves Amendment," an act that removes vicarious liability of auto leasing companies.  The court, raising Law Firm's conflict sua sponte, held that Law Firm may represent only the leasing company in this action.  The court held, in effect, that the defendant/driver should have the opportunity to object to the leasing company's claim of no liability, lest the driver be left with the sole exposure to the plaintiff's claim.  In Govias v. Tejada, 2010 U.S. Dist. LEXIS 91576 (S.D.N.Y. Aug. 30, 2010), the court held that a conflict in this situation was cured with a written waiver from the driver.  In Stratton v. Wallace, 2012 U.S. Dist. LEXIS 108444 (W.D.N.Y. Aug. 2, 2012), the court held that the "Graves Amendment" may not help the leasing company where independent grounds are alleged against it.

        Emery v. Progressive Cas. Ins. Co., 2010 La. App. LEXIS 1212 (La. App. Sept. 10, 2010).  InsCo issued a casualty insurance policy to Employer.  The policy listed which vehicles would be covered.  Employee, while driving a vehicle not listed on the policy, rear-ended Injured Parties.  InsCo, knowing that the vehicle was not listed, and having issued a reservation of rights letter, nevertheless hired one lawyer to represent both InsCo and Employer.  InsCo did not hire a separate lawyer for Employer until 17 months after issuing the reservation of rights letter.  Employer moved for summary judgment against InsCo on the coverage issue.  The trial court granted the motion.  In this opinion the appellate court affirmed.  The court held that providing only one lawyer to both defendants waived the policy defense.

        Collick v. Weeks Marine, Inc., 2011 U.S. Dist. LEXIS 42950 (D.N.J. April 20, 2011).  Plaintiff was injured at a construction site.  Plaintiff sued Contractor and Sub-Contractor ("Sub").  Before the accident, Sub had agreed to purchase liability insurance, under which Contractor would be an additional insured.  When this action began, the insurance company ("InsCo") denied a defense to Contractor.  Contractor then brought a third-party action against InsCo.  InsCo hired Law Firm to defend Sub.  Contractor moved to disqualify Law Firm because it was representing Sub and InsCo.  In this opinion the magistrate judge denied the motion because Contractor failed to show any conflict between Sub and InsCo.  Among other things, the judge rejected Contractor's claim that Law Firm's representation created an appearance of impropriety, noting that "appearance of impropriety" had been removed from the New Jersey Rules in 2004.

        In re Zuber, La. Att'y Discipl. Bd., 101 So. 3d 29 (La. 2012).  Law Firm was retained by an insurance company ("InsCo") to represent Doctor in a medical malpractice case.  Under the applicable insurance policy InsCo had complete discretion on the defense and settlement of the case.  Doctor had no right to dictate the terms of settlement.  Law Firm negotiated a settlement and notified Doctor of the settlement only after it was agreed to.  Law Firm had failed to inform Doctor of an impending mediation, at which settlement would be discussed.  In this report the Disciplinary Board recommended that one lawyer in law firm be admonished and that another be publicly reprimanded, both for violating La. Rule 1.4.

        New York State Urban Dev. Corp. v. Ritco Int'l Inc., 2011 N.Y. Misc. LEXIS 5685 (N.Y. Sup. Ct. Nov. 30, 2011).  This is not a case involving an insurance policy, but rather about indemnification provisions in a contract of sale.  The facts and procedure are complex, but one point of possible relevance to this audience concerns the right of an indemnitor to control the defense of a case where the indemnitee and indemnitor have a conflict of interest.  In this opinion the court found a conflict and ruled that the indemnitee had the right to hire its own counsel.

        Great Am. E&S Ins. Co. v. Quintairos, Prieto, Wood & Boyer, P.A., 100 So. 3d 420 (Miss. 2012).  Nursing Home was sued by the estate of a patient.  Nursing Home's primary carrier hired Law Firm.  Law Firm supplied reports to the primary carrier and to Excess Carrier.  Law firm allegedly botched the defense causing Excess Carrier to pay money.  Excess Carrier brought this malpractice case against Law Firm, alleging malpractice and equitable subrogation.  The trial court granted in total Law Firm's motion to dismiss.  The appellate court reversed finding that Excess Carrier had adequately pleaded both theories, 100 So. 3d 453 (Miss. App. 2012).  In this opinion the supreme court held that the case could proceed as to equitable estoppel only. Several of the issues were of first impression in Mississippi.  [Author's Note: this summary may be overly simplified, but insurance defense and coverage lawyers will recognize it as a case they should read.]

        Nautilus Ins. Co. v. Dubin & Assocs., Inc., 2012 U.S. Dist. LEXIS 89066 (N.D. Ill. June 27, 2012).  InsCo brought this action seeking a declaration that its policy does not cover an underlying personal injury claim.  One defense was that InsCo was estopped from denying coverage because InsCo had a conflict of interest and should have notified Insured that Insured had a right to hire its own counsel at InsCo's expense.  In a fact-intensive analysis, the court rejected that defense.  The opinion is a fairly lengthy discussion of when an insurance company has such a conflict, particularly in the Seventh Circuit, the Northern District of Illinois, and Illinois state courts.

        Sierra Pac. Indus. v. American States Ins. Co., 2012 U.S. Dist. LEXIS 107761 (E.D. Cal. Aug. 1, 2012).  This is a spat between an insured ("Insured") and insurance company ("InsCo") arising from a forest fire.  The dispute is whether there is a conflict enabling Insured to hire its defense counsel at higher rates than InsCo normally pays to "panel counsel."  The case is still at the pleadings stage, so not much can be said about it.  However, in denying Insured's motion for judgment on the pleadings the court reiterated the following, citing cases: (1) the fact that an insurance company disputes coverage does not entitle the insured to its own counsel; (2) to justify such counsel the conflict must be "significant, not merely theoretical, actual, not merely potential;" and (3) the fact that the value of the case may exceed limits does not create a conflict.

        Fries v. Teaford Co., Inc., 2012 U.S. Dist. LEXIS 128748 (N.D. Fla. Sept. 11, 2012).  Two consolidated actions.  One is a wrongful death suit by a decedent's estate against Company.  Company had a liability insurance policy issued by InsCo.  The other action is a suit by InsCo against Company and the estate for a declaration that the death was subject to a policy exclusion.  In the latter action two lawyers ("Lawyers") are representing jointly Company and the estate.  InsCo moved to disqualify Lawyers because they have a conflict.  In this brief opinion the court granted the motion.

        Sanchez v. American Family Mut. Ins. Co., 2012 U.S. Dist. LEXIS 140171 (D. Nev. Sept. 28, 2012).  Plaintiffs sued their insurance company ("InsCo") under its under insured motorist coverage.  From 2003 to 2010 Plaintiffs' lawyer ("Lawyer") had represented InsCo in 18 different matters, including under insured motorist matters.  InsCo moved to disqualify Lawyer.  In this opinion the magistrate judge denied the motion.  First, the court noted that InsCo had not shown what, if any, confidential information Lawyer had obtained in the 18 cases that would apply to this case.  Second, the court rejected a playbook approach following Comment [3] to Nevada's version of MR 1.9, which, like the Model Rule Comment, does not find disqualifying "general knowledge of a former client's policies and practices."

        Dervisholli v. Cervenak, 2012 ONSC 7137 (CanLII) (Ont. Super. Ct. Dec. 17, 2012).  Dervisholli ("D") was in an auto accident with Cervenak ("C").  C had liability coverage with InsCo.  D had medical coverage with Insco.  D sued C for damages.  InsCo retained Law Firm to defend C in the liability claim and to represent Insco in connection with D's claim for accident benefits.  According to the court, Law Firm was using documents submitted by D to InsCo for the accident benefits, to defend C.  D moved to disqualify Law Firm from defending C.  In this opinion the court granted the motion even though different lawyers in Law Firm were handling the two claims separately.

        Perkins v. Am. Transit Ins. Co., 2013 U.S. Dist. LEXIS 6703 (S.D.N.Y. Jan. 15, 2013).  Jae Jun Park was in an auto accident and was sued by the occupants of the other vehicle.  Park's carrier, InsCo, hired three different law firms at various times to defend Park.  The result was a verdict against Park that greatly exceeded his coverage.  Park filed bankruptcy.  In this case bankruptcy trustee sued InsCo and the three law firms.  We will deal only with the case against one of the law firms.  That firm was apparently something akin to a captive of InsCo, handling all InsCo's pretrial work.  The trustee claimed this was a conflict of interest. In rejecting that claim the court, in this opinion, said such arrangements are common among casualty carriers.  The court also said it was not necessary to characterize precisely the relationship between the law firm and InsCo.  Thus, we cannot be sure of the firm's captive status.

        University of Miami v. Great Am. Assur. Co., 112 So. 3d 504 (Fla. App. 2013).  Swim Camp Co. licensed to use University's pool for Camp's youth activities .  Camp purchased liability insurance from InsCo.  University was named an additional insured.  Camper was injured and sued Camp and University.  InsCo hired Law Firm No. 1 to defend both University and Camp.  University immediately hired it own law firm ("No. 2) claiming there was a conflict, both under Florida indemnification and contribution law and under the indemnification provisions of the license agreement.  The case settled.  This case concerned University's right to reimbursement of the cost of hiring its own law firm.  In this 2-1 decision the appellate court found for University.  The dissent was spirited.  [Note: we have no idea who was right.]

        Gordon v. Shafiq, 2013 N.Y. Misc. LEXIS 1886 (N.Y. Sup. Ct. May 7, 2013).  In this skirmish over the settlement of an insurance defense matter the plaintiff moved to disqualify the opposing lawyer because that lawyer represented both the insured defendant and the insurer, and the settlement was an "aggregate" one.  The plaintiff did not cite Rule 1.8(g).  In this opinion the court, citing only Rule 1.7(a)(1), and not elaborating on the aggregate point, denied that motion, saying that the insurer has the right to control the defense, and, thus, there was no conflict.

        E. 51st St., Dev. Co., LLC v. Ill. Union Ins. Co., 2013 N.Y. Misc. LEXIS 4142 (N.Y. Sup. Ct. Sept. 11, 2013).  This is one of many cases arising out of the collapse of a tower crane in Midtown Manhattan in 2008.  The litigation includes the building owner, multiple contractor parties, insurance companies, guarantors, law firms and others.  This particular opinion appears to involve whether one of the parties could retain independent counsel at an insurance company's expense.  The relationships are so many and so complex that we do not understand the precise issues or outcome.  Moreover, the opinion appears to have limited, if any, precedential value.  So, if you wish to sort through things on your own, be our guest.

        Carbone v. Potouridis, 2014 N.J. Super. Unpub. LEXIS 319 (N.J. App. Div. Feb. 19, 2014). A was a passenger in a car driven by B. B’s car was insured by InsCo. B crashed the car, and A and B were killed. A’s estate sued B’s estate, obtaining a judgment. A’s estate moved to disqualify Lawyer, who was hired by, and paid by, InsCo to represent B’s estate. The trial court denied the motion. In this opinion the appellate court affirmed. This is where things get murky. Evidently, A’s estate objected to the fact that Lawyer was advising B’s estate on whether to assign its rights against InsCo (presumably for bad faith). Basically the court held that Lawyer’s duty was to B’s estate and the fact that InsCo selected Lawyer and paid Lawyer did not create an impermissible conflict. There were also indications that B’s estate consented to the conflict.

        In-House Defense Counsel. Golden v. State Farm Mut. Auto. Ins. Co., 745 F.3d 252 (7th Cir. 2014). Insured was in an accident. Insurer defended Insured using in-house counsel. Insurer paid the $3,600 judgment against her. Insured brought this class action because Insurer did not disclose at inception that it would use in-house counsel. At the beginning of the underlying accident case, use of in-house counsel was explained to her. The trial court dismissed the complaint in this case. In this opinion the Seventh Circuit affirmed. Basically, the court held that normally there is nothing wrong with using in-house counsel to defend insureds and that the insurer need not disclose its intent to do so at the inception of the policy.

        Mt. Vernon Fire Ins. Co. v. VisionAid, Inc., 2015 WL 1038012 (D. Mass. March 10, 2015). Employer fired Employee. Employee sued Employer for unlawful termination. Employer turned the case over to its employment practices carrier, InsCo, which appointed Law Firm to defend. Employer wanted Law Firm to assert a counterclaim against Employee for “misappropriation of funds.” Much of this opinion is about whether the policy obligates InsCo to pursue the counterclaim. At one point Employer claimed that Law Firm had a conflict because somehow the counterclaim and defense of the original claim were inconsistent. The court rejected that claim, calling it “counter-intuitive.”

        Dervisholli v. Cervenak, 2015 ONSC 2286 (CanLII) (Super. Ct. Ont. April 24, 2015). Auto accident case. Plaintiff sued Defendant for injuries. State Farm was Defendant’s liability insurance carrier. Coincidentally, State Farm also insured Plaintiff for accident benefits. State Farm retained Lawyer to defend Defendant and to defend Plaintiff’s accident benefit claim. A judge disqualified Lawyer. In this opinion the Divisional Court affirmed. The court said Lawyer should not have had access to the information in Plaintiff’s accident insurance claim file.

        Landon v. Austin, 129 A.D.3d 1282 (N.Y. App. Div. 2015). Plaintiff was injured while working on Homeowner’s house. Plaintiff brought this action against Homeowner and against Homeowner’s construction company. Homeowner had homeowner’s insurance. Homeowner’s construction company had commercial liability insurance coverage issued by InsCo. InsCo hired Law Firm to defend the company. Homeowner, concerned about inadequate homeowner’s coverage, wanted to contend he was acting in his business capacity. Law Firm is taking the position that the company is not liable at all. For this reason, Homeowner moved to disqualify Law Firm. The trial court denied the motion. In this opinion the appellate court affirmed, holding that Homeowner had not demonstrated there was a conflict between the construction company and InsCo.

        Travelers Cas. & Sur. Co. of Am. v. DiPizio Constr. Co., Inc., 2015 WL 4078718 (W.D.N.Y. July 6, 2015). Contractor contracted with Harbor Owner to do work on the harbor. InsCo issued a performance bond on the project. A dispute arose concerning the project, and Contractor sued Harbor Owner in state court. InsCo had to make certain payments under the performance bond and brought this action against Contractor to recover those amounts. Pursuant to the performance bond, InsCo became assignee of Contractor’s claims against Harbor Owner, so InsCo intervened as plaintiff in the state court action. Law Firm represents InsCo in both the state court action and this case. Contractor moved to disqualify Law Firm in this case. In this opinion the magistrate judge denied the motion. The judge ruled that Law Firm was not representing Contractor in the state court action. Law Firm was really representing InsCo in the state court action by virtue of the assignment.

        Pabla v. Singh, 2015 ONSC 5156 (CanLII) (Ont. Super. Ct. Aug.17, 2015). Auto accident case. Driver A sued Driver B. Driver B third-partied City for bad road maintenance. City fourth-partied Contractor for not keeping the street maintained, and InsCo, whose policy insured both City and Contractor. The only issue in this opinion was whether the law firm hired by City had to report to, or take instructions from, InsCo. The court said no because the interests of City and Contractor were adverse.

        Lynch-Ballard v. LAMMICO Ins. Agency, Inc., 2015 WL 5613317 (La. App. Sept. 23, 2015). In this case Doctor sued her malpractice carrier (“InsCo”) for breach of contract. InsCo had settled a malpractice claim against Doctor, over her objection, within her policy limits. The trial court granted summary judgment to InsCo. In this opinion the appellate court affirmed. The court held that under the policy in question InsCo had the absolute right to settle a case within policy limits. The fact that Doctor objected to the settlement did not create a conflict entitling Doctor to hire her own lawyer at InsCo’s expense.

        Ibarra v. Ibrahim, 2016 ONSC 218 (CanLII) (Ont. Super. Ct. Jan. 8, 2016). InsCo hired Law Firm to defend Insureds. Insureds have not cooperated and have disappeared. Law Firm moved to withdraw as Insureds’ lawyer and moved that InsCo be added as “a statutory third party.” In this opinion the master ruled that Law Firm could withdraw from representing Insureds and could represent InsCo. InsCo had denied coverage. Law Firm gave no coverage opinion and received no confidences from Insureds. The master said that under these circumstances, disqualification of counsel is not “automatic.”

        T-12 Three, LLC v. Turner Constr. Co., 2017 WL 87059 (Cal. App. Unpub. Jan. 10, 2017). Hotel Owner, represented by Law Firm, sued defendants over construction defects. InsCo insured the defendants, including defendant, 5th Rock. InsCo moved to disqualify Law Firm because Law Firm represented 5th Rock in other matters. The trial court denied disqualification. In this opinion the appellate court affirmed because InsCo was not client of Law Firm and thus had no standing to bring the motion. The opinion does not say whether InsCo insured 5th Rock in those other cases. Evidently, it did not. Given the lack of standing, the court said it need not consider the validity of 5th Rock’s waiver, whether the conflict was “unwaivable,” or  whether InsCo waited too long to file the motion.

        Whirlpool Canada Co. v. Chavila Holdings Ltd., 2017 ONCA 81 (CanLII) (Ct. App. Ont. Jan. 31, 2017). Caution: we have greatly abbreviated the facts of this case. The case involves four adjacent parcels of contaminated real estate in western Toronto. Plaintiff owned one of the parcels. Defendants purchased all the parcels, including Plaintiff’s. As part of the purchase from Plaintiff, Defendants agreed to indemnify Plaintiff from damages resulting from the contamination and to defend Plaintiff in contamination actions. The current owner of the parcels brought an action against the prior owners for contamination. Plaintiff is not part of that action. However, the prior owners are seeking contribution and indemnity from Plaintiff. Plaintiff brought this action to challenge the Defendants’ choice of counsel. The application judge ruled there was no conflict. In this opinion the Court of Appeal, with one dissent, affirmed the application judge. Both the majority and minority opinions noted the analogy to insurance law. [Our note: both opinions weighed the relative positions of all the parties. To parse those discussions would be prohibitively time- and space-consuming. We will leave it to members of this audience to read and analyze these relationships if they think doing so would be helpful to them.]

        Mt. Vernon Fire Ins. Co. v. Visionaid, Inc., 2017 WL 2703949 (Mass. June 22, 2017). This opinion responds to certified questions from the First Circuit.  In its response the Massachusetts court concludes, with two judges dissenting, that where an insurance policy provides that the insurer has the “duty to defend any claim” initiated against the insured, the insurer's duty to defend does not require it to prosecute affirmative counterclaims on behalf of its insured.

        Punitive Damages and Independent Counsel. Med-Plus, Inc. v. American Cas. Co. Of Reading, PA, 2017 WL 3393824 (E.D.N.Y. Aug. 4, 2017). In this opinion the court held that under the law of New York and New Jersey, if the underlying insured case carries the possibility of punitive damages, the insured is entitled to independent counsel. In neither state may insurance companies cover punitive damage.

        Arden v. Forsberg & Umlauf, P.S., 2017 WL 4052300 (Wash. Sept. 14, 2017). Roff Arden shot and killed the Duffys’ puppy. The Duffys sued Roff under various tort theories, some alleging intentional misconduct and some claiming negligent conduct. Having a homeowners’ policy with Hartford, Roff turned the case over to Hartford. Ultimately, Hartford agreed to defend under a reservation of rights. Hartford hired Forsberg & Umlauf (“Forsberg”) to defend Roff. Ultimately, Hartford funded a settlement. Roff sued Forsberg for malpractice, saying that various delays were unreasonable and caused Roff injury. The trial court granted Forsberg summary judgment. The appellate court affirmed, holding that it was permissible for Forsberg to defend Roff even though Forsberg represented Hartford in other coverage cases. Second, the appellate court held that Forsberg did not have to disclose these representations to Roff. Last, the court held that Forsberg had no duty to pursue the settlement with the rapidity demanded by Roff. In this opinion the Washington Supreme Court affirmed, agreeing that Roff could show no damages. However, the Supreme Court disagreed somewhat with the appellate court's reasoning. The Supreme Court said that where the law firm has a long-standing relationship with the insurer, the possibility of a material limitation is present, thereby triggering the disclosure and consent duties contained in Washington Rules 1.9(a)(2) and 1.9(b).

        Tex. Op. 668 (Nov. 2017). InsCo assigns a staff lawyer ("Lawyer") to defend an insured in a personal injury case. The plaintiff also happens to be insured by InsCo. Unbeknownst to Lawyer, InsCo's adjuster takes a statement from the plaintiff. Lawyer obtains the statement in discovery. The statement is favorable to the defendant. InsCo may have been been guilty of bad faith in not informing the plaintiff that the statement may be used against the plaintiff. This opinion discusses whether Lawyer may continue in the case. The opinion appears to be very Texas-centric, so we will not discuss it further other than flagging it for Texas insurance defense lawyers.