Independent Counsel in Insurance

Mention the term independent counsel to many lawyers and they think immediately of the process whereby the Attorney General of the United States requests a panel of federal judges to appoint an Independent Counsel to investigate and prosecute crimes by government officials. Business lawyers may think of independent counsel in the context of counsel for independent directors on a corporate board in connection with select matters. For most litigators, however, the term independent counsel describes a lawyer engaged to defend an insured at a liability insurer\u27s expense in a case in which the liability insurer has lost the right to control the defense because of a conflict of interest. Independent counsel makes all decisions concerning the defense, shares an attorney-client relationship solely with the insured, and is loyal only to the insured; the insurer simply pays independent counsel\u27s fees. The loss of defense control is a major economic and tactical concern for insurers. If insurers must accept independent counsel in even a small percentage of the cases in their litigation portfolios, that still means that a material number of cases involve independent counsel, since approximately 80 percent of civil litigation in the United States involves liability insurance. The concept of independent counsel in insurance raises a number of questions. What qualifies a lawyer to serve as independent counsel? Who selects independent counsel? On what basis should independent counsel be compensated? Must independent counsel accept the same financial and administrative constraints that insurers impose on their regular counsel? What is the relationship between the insurer and independent counsel? What professional duties does independent counsel owe, and to whom do they owe them? There is very little authority to guide courts and lawyers facing these issues. This Article maps the critical contours of independent counsel in insurance in a way never been done before, beginning in Part II with the characterization of independent counsel, including their selection. Importantly, I explain why insurers should be able to select independent counsel for insureds, which is currently (but incorrectly, I argue) the clear minority position. My reasons for changing the law are grounded in the realities of modern law practice. Part III examines independent counsel\u27s compensation. I argue that independent counsel\u27s compensation must be reasonably limited in accordance with Model Rule of Professional Conduct 1.5(a). Part IV discusses independent counsel\u27s relationship with the insurer in the case being defended. I explain why--contrary to many lawyers\u27 and courts\u27 understanding--lawyers serving as independent counsel owe a number of duties to the insurers\u27 paying them notwithstanding their independence. Finally, Part V addresses the professional responsibilities of independent counsel

Mapping Territorial Limitations on Insurance Coverage

Globalization has come to financial markets and to innumerable industries. U.S. businesses export and import goods and products; many have done so for decades. Domestic companies that sell materials online almost certainly do some international business. American corporations have foreign facilities or operations. Americans travel internationally with relative ease. For those living in states that adjoin Canada or Mexico, international travel can be accomplished simply by driving across the border. At the same time, insurance policies sold in the United States frequently contain territorial limitations on coverage that superficially seem out of place when compared to many aspects of modern business and to individual habits or practices. The concept of globalization is in many instances missing from the pages of insurance policies, or is at the very least significantly circumscribed. For example, with narrow exceptions, a standard liability insurance policy provides coverage only if the underlying occurrence takes place in the United States (including its territories and possessions), Puerto Rico, or Canada, or in transit between their ports. Insurers territorially limit their coverages for rating purposes. Courts generally enforce geographic restrictions in insurance policies. But they do not always do so, and territorial limitations may in any event be a source of unpleasant surprises for insureds who, for one reason or another, thought they had coverage for an occurrence only to learn that they were uninsured by virtue of an accident’s location. Territorial limitations also pose analytical challenges for courts and lawyers in cases that involve allegedly tortious conduct that occurred both within and outside the specified coverage territory. Finally, and perhaps surprisingly, coverage territory clauses may frustrate insurers by potentially subjecting them to personal jurisdiction in remote or unexpected forums. In short, territorial limitations on insurance coverage represent an important but frequently overlooked or underappreciated aspect of insurance law. These limitations potentially test everyone concerned in the event of a loss. In an effort to shed some light on this important aspect of insurance law, this Article examines the key issues raised by territorial limitations in a fashion useful to courts, lawyers, and scholars alike

Walking a Tightrope: The Tripartite Relationship between Insurer, Insured, and Insurance Defense Counsel

This article examines conflicts of interest arising out of the unique tripartite relationship characterizing insurance defense. That examination necessarily includes a review of the sources of conflicts and a look at judicial and legislative actions and reactions. The avoidance and mitigation of potential conflicts of interest are also discussed. I. Introduction II. An Overview of the Problem III. Conflicts of Interest ... A. Reservation of Rights ... B. Claimed Damages Exceed Coverage ... C. Defense Costs Reduce Available Coverage ... D. Representation of Multiple Parties ... E. Counsel\u27s Defense Activities Generate Information Suggesting a Possible Coverage Defense ... F. Punitive Damages Are Claimed ... G. The Insurer Attempts to Limit Discovery to Reduce Expenses IV. Ethics Rules Governing Insurance Defense Counsel ... A. Model Rule 1.7 ... B. Model Rules 1.8(f) and 5.4(c) ... C. Fraud and Confidentiality: Model Rules 1.2, 1.16, and 1.6 V. Attempted Solutions to the Dual Client Dilemma VI. Proposed Resolution of Conflicts VII. Conclusio