Source: http://dutytodefend.com/answer-sheet-to-ethical-compliance-questionnaire/
Timestamp: 2019-04-22 08:37:23+00:00

Document:
This Annotated Questionnaire is intended to assist users to assess responses received from dependent counsel to an Ethical Compliance Questionnaire. Each question from the Ethical Compliance Questionnaire is repeated below, followed by a statement of what the editor considers to be the legally correct answer or if dependent counsel has a genuine choice, an answer that should be preferred by the policyholder, a brief explanation of why the question may be important, and references to additional legal research supporting the correct or preferred answer. Dependent counsel who disagree with any of the authorities that support a response may get a head start to refute the editor’s conclusions. Italicized authorities in parentheses refer to articles that may be found in the Table of Contents at DutytoDefend.com.
The Ethical Compliance Questionnaire should be used in coordination with a Coverage Questionnaire, the insurer’s responses to the Coverage Questionnaire and the Annotated Coverage Questionnaire.
The Questionnaire is structured in two parts. If dependent counsel answers the first four questions “Yes”, then he/she should: 1) comply with Rule 3-310 by explaining in writing the full implications of the insurer’s reservation of rights; 2) confirm that the insurer must pay for independent counsel if the policyholder chooses; 3) will promptly solicit from the claimant an offer to settle within my policy limit that should either settle the case or “pop” the policy limit; and 4) take personal responsibility to not reveal confidential coverage information to the insurer nor do anything else to adversely affect coverage. Policyholders should seriously consider trusting dependent counsel who so agree.
If dependent counsel does not answer “Yes” to all of the first four questions, then he or she is requested to respond to additional questions which should illuminate the policyholder’s rights.
Will you explain to me the full implications of my insurer’s reservation of rights to deny coverage and your joint representation of us?
Has a conflict of interest arisen which creates a duty on the part of my insurer to provide independent counsel to me?
Will you promptly solicit from the claimant an offer to settle within my policy limit?
A trustworthy response is “yes”. A “no” response may be a strong indicator that dependent counsel favors the insurer’s interests over those of the policyholder. While the insurer has a contractual right to (Control Settlement) and dependent counsel cannot make an offer without the client’s authority, dependent counsel can solicit the plaintiff to make an offer, triggering the insurer’s (Duty to Settle) An insurer must attempt “in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.” (Ins. Cd. 790.03(h)(5).) “It is reasonably clear that California courts will interpret the California statute as imposing upon an insurance company the duty actively to investigate and attempt to settle a claim by making, and by accepting, reasonable settlement offers once liability has become reasonably clear.” (Pray v. Foremost Ins. Co. (9th Cir. 1985) 767 F.2d 1329, 1330.) The law “requires that the insurer at the very least must itself consider and determine whether or not a settlement offer is in the best interest of the insured. If in failing to consider, accept, or make a reasonable settlement offer there has been actual bad faith on the part of the insurer, there is an obvious breach of duty to the insured. . . . There is a clear implicit consensus in the cases on this subject that the duty to consider and weigh all the factors bearing upon the advisability of a settlement in the interests of the insured is upon the insurance carrier. Obviously this legal duty is exercised normally in conjunction with the judgment of counsel defending the cases against the insured.” (Garner v. American Mut. Liab. Ins. Co. (1973) 31 Cal.App.3d 843, 848.) “[T]he duty to accept reasonable settlements . . . would indeed be meaningless if it did not entail a duty to negotiate toward a reasonable settlement.” (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 906.) “We therefore conclude that a formal settlement offer is not an absolute prerequisite to a bad faith action in the wake of an excess verdict when the claimant makes a request for policy limits and the insurer refuses to contact the policyholder about the request.” (Boicourt v. Amex Assur. Co. (2000) 78 Cal.App.4th 1390, 1399.) However, there is a split in authority regarding the insurer’s obligation to initiate a settlement offer. “An insured’s claim for ‘wrongful refusal to settle’ cannot be based on his or her insurer’s failure to initiate settlement overtures with the injured third party, but instead requires proof the third party made a reasonable offer to settle the claims against the insured for an amount within the policy limits.” (Graciano v. Mercury General Corp. (2014) 231 Cal.App.4th 414, 427 (citations and ellipses omitted, emphasis original).) Nonetheless, dependent counsel’s (Duty of Undivided Loyalty) to the policyholder should prompt dependent counsel to request that the plaintiff make a reasonable settlement offer.
If you do anything in handling the lawsuit or reveal any confidential information to my insurer that adversely affects by coverage, will you pay for my resulting loss?
Have you read the complaint, my policy, all reservation(s) of rights, and my insurer’s responses to a Coverage Questionnaire?
A trustworthy response is “yes”. A “no” response may be a strong indicator that dependent counsel, like an ostrich, desires to ignore rather than resolve conflicts of interest an may not that informed written consent is required to achieve (Limited Scope of Representation). Some dependent counsel misconceive their role in conflict of interest resolution, falsely claiming that it would “create” a conflict of interest for them to become involved in coverage matters. But the correct analysis is very simple: The insurer’s reservation of rights “creates” conflicts of interest. (“[W]hen coverage is disputed, the interests of the insured and the insurer are always divergent.” (San Diego Navy Fed. Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358, 375 (Cumis).) Once the insurer creates potential conflicts of interest, dependent counsel is ethically compelled to fulfill a (Duty to Analyze Conflicts) because (Dependent Counsel Is Not Exempt from Rule 3-310.) Studied ignorance of potential conflicts may help dependent counsel to defend disciplinary proceedings, but it may render the lawyer ill equipped to protect the policyholder.
In order to competently conduct the policyholder’s defense, counsel must understand the pleadings, including reading the complaint. In order to avoid prejudicing the policyholder’s interests, dependent counsel must be fully apprised of full scope of all coverage issues. “Determination of the duty to defend depends, in the first instance, on a comparison between the allegations of the complaint and the terms of the policy.” (Scottsdale Ins. Co. v. MV Transp. (2005) 36 Cal.4th 643, 654.) Dependent counsel must inform the policyholder/client “of the relevant circumstances and of the actual and reasonably foreseeable adverse consequences” of representing both the insurer and the policyholder. (Rule 3-310(A).) Dependent counsel must understand the coverage issues in order to avoid prejudicing the policyholder’s coverage with the insurer. Thus, dependent counsel must read and understand the policy, the insurer’s reservation of rights letter(s), all coverage correspondence and the insurer’s responses to the Coverage Questionnaire in order to avoid wrongful disclosure of confidential coverage information, and other coverage harmful litigation tactics.
Do all grounds upon which my insurer has reserved its rights to deny coverage have nothing to do with the issues being litigated in the liability dispute?
A trustworthy response may be “yes” or “no”. “There is no talismanic rule that allows a facile determination of whether a disqualifying conflict of interest exists. Instead, ‘[t]he potential for conflict requires a careful analysis of the parties’ respective interests to determine whether they can be reconciled . . . or whether an actual conflict of interest precludes insurer-appointed defense counsel from presenting a quality defense for the insured.’” (Gulf Ins. Co. v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2000) 79 Cal.App.4th 114, 131 (Berger, Kahn).) An untrustworthy response is “I don’t know” or “I can’t get involved”. In the 33 years since the Cumis case was published, California has developed a rich body of law establishing a standard to determine whether a reservation of rights creates a (Disqualifying Conflict of Interest). “[W]hen the reservation of rights is based on coverage disputes that have nothing to do with the issues being litigated in the underlying action there is no conflict of interest, and no duty to appoint independent counsel.” (Long v. Century Indemnity Co. (2008) 163 Cal.App.4th 1460, 1470 (Long) (citation and ellipsis omitted).) Dependent counsel is both better equipped then a lay client and ethically compelled to take the initiative to analyze potential conflicts of interest. Both dependent counsel and a reserving insurer have a (Duty to Advise of the Policyholder’s Right to Independent Counsel). See, Disqualifying Conflicts of Interest and Cumis Test. Dependent counsel has a fiduciary (Duty of Undivided Loyalty) to the policyholder, discharge of which requires the lawyer to do this analysis and explain it to the policyholder.
Does my insurer’s reservation of rights create for you any potential or actual disqualifying conflict of interest?
A trustworthy response is “Yes”. With any reservation of rights, “the interests of the insured and the insurer are always divergent.” (Cumis, supra, 162 Cal.App.3d at 375.) But, “not every conflict of interest triggers an obligation on the part of the insurer to provide the insured with independent counsel at the insurer’s expense.” (James 3 Corp. v. Truck Ins. Exchange (2001) 91 Cal.App.4th 1093, 1101 (James 3).) “A [lawyer] shall not, without the informed written consent of each client: Accept representation of more than one client in a matter in which the interests of the clients potentially or actually conflict.” (Rule 3-310(C)(1)(2) (ellipses omitted). When a policyholder sues an insurer, it often has the burden of proof (Evid. Code § 500) to establish the existence of a breach of contract, including that the insurer’s reservation of rights created a disqualifying conflict of interest. In many reported opinions, policyholders have failed to carry this burden. (See, Compendium of Cases: Failure of Proof of Disqualifying Conflicts of Interests.) As a result, in the (Dynamic Concepts Line of Cases), several courts have held that “[a] mere possibility of an unspecified conflict does not require independent counsel. The conflict must be significant, not merely theoretical, actual, not merely potential.” (Dynamic Concepts, Inc. v. Truck Ins. Exchange (1998) 61 Cal.App.4th 999, 1007 (Dynamic Concepts).) However, dependent counsel has the burden of complying with Rule 3-310 before starting work. Rule 3-310 explicitly requires dependent counsel to analyze potential conflicts, make written disclosure and obtain informed written consent. Compare, the (Dynamic Concepts Line of Cases) to the (Cumis Line of Cases).
Have you analyzed the relevant circumstances and the actual and reasonably foreseeable adverse consequences to me of my insurer’s reservation of rights?
Would my insurer be affected substantially by resolution of the lawsuit?
A trustworthy response is “yes” – as a matter of law. “A [lawyer] shall not accept or continue representation of a client without providing written disclosure to the client where: The [lawyer] has or had a legal, business, financial, professional, or personal relationship with another person or entity [such as a liability insurer] the [lawyer] knows or reasonably should know would be affected substantially by resolution of the matter.” (Rule 3-310(B)(3) (ellipsis omitted).) A liability insurance policy is a contract of indemnity. “Upon an indemnity against liability, the [policyholder] is entitled to recover [from the insurer] upon becoming liable [to an injured plaintiff by entry of judgment].” (Civ. Code § 2778(1) (ellipsis omitted).) The (Binding Effect of Liability Suit on Coverage Dispute) is that the insurer will become bound by the findings that the policyholder is liable to the plaintiff and the amount of the plaintiff’s damages. Standard policy language is: “We will pay those sums that the Insured becomes legally obligated to pay as damages” by entry of judgment. Thus, a liability insurer will always be “affected substantially be resolution” of the liability dispute. Winning or losing the liability dispute and losing it on covered or non-covered grounds will substantially affect the insurer’s interests. Some insurer’s argument that the amount of money at stake is not “substantial” is sheer sophistry.
Are you required to disclose to me potential conflicts of interest?
A only trustworthy response is “yes”. “A [lawyer] shall not accept or continue representation of a client without providing written disclosure to the client where [t]he [lawyer] has a legal, business, [or] financial relationship with another entity [that] would be affected substantially by resolution of the matter. [Disclosure means] informing the client of the relevant circumstances and of the actual and reasonably foreseeable adverse consequences to the client. A [lawyer] shall not, without the informed written consent of each client: Accept representation of more than one client in a matter in which the interests of the clients potentially or actually conflict.” (Rule 3-310(A)(B)(C) (ellipses omitted).) (“[W]hen coverage is disputed, the interests of the insured and the insurer are always divergent.” (Cumis, supra, 162 Cal.App.3d at 375).) Trying to make “a distinction between “potential” and “actual” conflicts of interest which is invalid and unworkable.” (Id. at 371, fn.7.) “The potential for conflict requires a careful analysis of the parties’ respective interests.” (Dynamic Concepts, supra, 61 Cal.App.4th at 1007).
Do you promise to advise me regarding all settlement negotiations of the lawsuit?
Will you preserve my secrets and not disclose to my insurer privileged information relevant to coverage disputes?
Do you have an attorney-client relationship with my insurer?
A trustworthy response is “yes”. While the existence of an (Attorney Client Relationship) is usually a question of fact, “defense guidelines, with the negotiated hourly rate, and subsequent correspondence, along with the subsequent dealings between the [defense counsel] and [an insurer], reflected an agreement between them and an attorney-client relationship as a matter of law.” (Berger, Kahn, supra, 79 Cal.App.4th at 127.) If an insurer or dependent counsel disclaim an attorney-client relationship, the policyholder should ask that they disclose the foundational facts do describe their relationship.
Have you been hired in your capacity as a lawyer to discharge my insurer’s promise to defend me in the lawsuit?
Have you been hired to protect my insurer’s interests in the lawsuit?
Do you have a legal, business, financial, professional, or personal relationship with my insurer?
Do you have duties to my insurer of undivided loyalty, disclosure, competent representation, and confidentiality?
A trustworthy response is “yes”. There are four primary and several secondary duties all lawyers owe to their clients (Compendium of Attorney Duties). Dependent counsel owes to the insurer a (Duty of Competent Representation), (Duty of Disclosure), (Duty of Undivided Loyalty), and (Duty of Confidentiality).
Will you allow my insurer to do anything to interfere with your independence of professional judgment or your anticipated client-lawyer relationship with me?
A trustworthy response is “no”. Dependent counsel “shall not accept compensation for representing [the policyholder] from one other than the client [such as an insurer] unless: (1) There is no interference with the [lawyer’s] independence of professional judgment or with the attorney client relationship.” (Rule 3-310(F)(1).) The policyholder has a legitimate interest in being informed about this compensation arrangement because the policyholder may be ultimately responsible to pay for it . The insurer may sue the policyholder for reimbursement of defense costs (Buss Defense Cost Reimbursement) and sue independent counsel (Hartford Cas. Ins. Co. v. J.R. Marketing (2015) 61 Cal.4th 988, 992 (J.R. Marketing) [“We conclude that under the circumstances of this case, the insurer may seek reimbursement directly from Cumis counsel”). If dependent counsel fails to comply with Rule 3-310(F), arguably the policyholder and Cumis counsel may seek reimbursement of defense costs from dependent counsel who unethically failed to comply with Rule 3-310(F).
Has my insurer disclosed to you any litigation guidelines?
A trustworthy response is “yes”. Liability insurers routinely impose on their “panel” of pre-approved counsel a complex system of controls to manage the costs of defense, commonly called “litigation guidelines”. Such management is generally proper so long as no conflict exists between the insurer and policyholder. However, “we question the wisdom and propriety of so-called ‘outside counsel guidelines’ by which insurers seek to limit or restrict certain types of discovery, legal research, or computerized legal research by outside attorneys they retain to represent their insureds where there is a potential for an uncovered claim. . . . Under no circumstances can such guidelines be permitted to impede the attorney’s own professional judgment about how best to competently represent the insureds. If the attorney’s representation is to be limited in any way that unreasonably interferes with the defense, it is the insured, not the insurer, who should make that decision.” (Dynamic Concepts, supra, 61 Cal.App.4th at 1009, fn.9.) The existence of such guidelines is one of the factors which may establish an attorney-client relationship between dependent counsel and the insurer “as a matter of law.” (Berger, Kahn, supra, 79 Cal.App.4th at 127.) An attorney who disclaims the existence of an attorney-client relationship with the insurer but who confesses to existence of litigation guidelines should be distrusted, and perhaps fired. (Client May Fire Attorney).
Has my insurer asked you to obtain its approval to incur expenses or do any work in the lawsuit?
Will you accept compensation from my insurer to represent me?
A trustworthy response is “yes”. Lawyers are in business and are entitled to be paid for their services. However, “[a lawyer] shall not accept compensation for representing a client from one other than the client unless: (1) There is no interference with the [lawyer]’s independence of professional judgment or with the client-lawyer relationship; and (2) Information relating to representation of the client is protected as required by Business and Professions Code section 6068, subdivision (e) [confidential information]; and (3) The [lawyer] obtains the client’s informed written consent.” (Rule 3-310(F)(3).) Again, the insurer may sue the policyholder (Buss Defense Cost Reimbursement) and independent counsel (J.R. Marketing, supra,61 Cal.4th at 992 [“We conclude that under the circumstances of this case, the insurer may seek reimbursement directly from Cumis counsel”) for reimbursement of defense costs. If dependent counsel fails to comply with Rule 3-310(F), arguably the policyholder and Cumis counsel may seek reimbursement of defense costs from dependent counsel who unethically failed to comply with Rule 3-310(F).
Do you represent my insurer in any matter separate from the lawsuit?
Have you been hired to protect my interests in the lawsuit?
A trustworthy response is “yes”. There are at least two reasons to ask this question: 1) to establish dependent counsel has a dual-client relationship with the insurer and the policyholder; and 2) to confirm that the lawyer is not a traitor. “Coverage counsel” represents only the insurer to undermine the policyholder’s coverage. “Monitoring counsel” represents only the insurer to keep track of progress of the plaintiff’s liability dispute and to report confidential information. “By its very nature the duty assumed by [the insurer] to defend its assured against suits must necessarily be classified as a delegable duty, understood by all parties as such, for [the insurer] had no authority to perform that duty itself and, in fact, was prohibited from appearing in the California courts. Since a carrier is not authorized to practice law, it must rely on independent counsel for the conduct of the litigation.” (Merritt, supra, 34 Cal.App.3d at 880-81.) A “yes” answer constitutes a commitment by dependent counsel to fulfill all duties of an attorney to the policyholder. (Compendium of Attorney Duties).
Do you have duties to me of undivided loyalty, disclosure, competent representation, and confidentiality?
In addition to the four primary duties of competent representation, disclosure, undivided loyalty, and confidentiality, California has recognized secondary duties owed by dependent counsel. The (Duty to Analyze Conflicts) and the (Duty to Advise of Policyholder’s Right to Independent Counsel) includes an obligation to make written disclosure of a conflict of interest analysis.
If I consent to your representation, will you follow my directions regarding the conduct of my defense?
A trustworthy response is “yes”. This question goes to the core of the conflict of interest issue: “Who’s the boss?” How will dependent counsel handle a situation in which he or she receives conflicting instructions from two clients? As discussed above, dependent counsel cannot ethically favor the interests of the insurer over the interests of the policyholder. Requiring dependent counsel to make this promise creates a basis upon which the policyholder may enforce any breach by imposing civil liability on dependent counsel. “The relation between them is such that the client is justified in seeking to dissolve that relation whenever he ceases to have absolute confidence in either the integrity or the judgment or the capacity of the attorney.” (Fracasse v. Brent (1972) 6 Cal.3d 784, 790 (Fracasse); Client May Fire Attorney).
Are you required to have my consent and authority to represent me in the lawsuit?
A trustworthy response is “yes”. [T]he attorney-client relationship is created by some form of contract, express or implied, formal or informal.” (Nichols v. Keller (1993) 15 Cal.App.4th 1672, 1683-1684 (Nichols).) “We have concluded that a client should have both the power and the right at any time to discharge his attorney with or without cause.” (Fracasse, supra, 6 Cal.3d at 790.) “A [lawyer] shall not, without the informed written consent of each client: Accept representation of more than one client in a matter in which the interests of the clients potentially or actually conflict.” (Rule 3-310(C)(1)(2).
Withholding consent should not violate the (Policyholder’s Duty to Cooperate) under the policy, as the meaning of that clause will depend on interpretation of its specific language. (Contract Interpretation). While there are many reported California opinions that speculate in dicta that X behavior by a policyholder would “probably violate” the cooperation clause (Compendium of Cases: Cooperation), there are no reported California opinions that litigate and hold that a policyholder violates the cooperation clause by declining to accept conflicted dependent counsel appointed by a reserving insurer. (Cooperation Clause Violation: A Limited Defense). Quite to the contrary, a majority of other jurisdictions adopt a “per se” rule that any reservation of rights permits the policyholder to reject a defense offered by a reserving insurer through dependent counsel. (50 State Survey – Does an Insurer’s Reservation of Rights Require It to Pay Independent Counsel?).
If you propose to limit the scope of your representation of me, do you need to obtain my informed written consent?
Insurance Code §790.03(h), known as the unfair claims practices act, defines “unfair methods of competition and unfair and deceptive acts or practices in the business of insurance [if] [k]nowingly committ[ed] or perform[ed] with such frequency as to indicate a general business practice.” The statute then specifies a series of unfair practices and regulations that flesh out behavioral requirements of a liability insurer. The terms of an insurance policy impose enforceable duties on an insurer. Case law also specifies an array of duties owed by an insurer to its policyholder.
Perform legal services with competence?
Maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client?
Render a full and fair disclosure to the client of all facts which materially affect his or her rights and interests?
The response should be “yes”. “The duty of a fiduciary embraces the obligation to render a full and fair disclosure to the beneficiary of all facts which materially affect his rights and interests.” (Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 188-89 (Neel); Duty of Disclosure.) “[A] lawyer who, while purporting to continue to represent an insured and who devotes himself to the interests of the insurer without notification or disclosure to the insured, breaches his obligations to the insured and is guilty of negligence.” (Betts v. Allstate Ins. Co. (1984) 154 Cal.App.3d 688, 716 (Betts).) Dependent counsel has an obligation to: adequately communication with clients (Calvert v. State Bar (1991) 54 Cal.3d 765, 782); respond to inquiry (Rule 3-500); return telephone calls (In re O.S. (2002) 102 Cal.App.4th 1402, 1410-1411); disclose one’s own malpractice (Rest.3d Law Governing Lawyers § 20, Comment c.); disclose “interest in the subject matter of the representation.” (Rule 3-310(B)(4)); and “volunteer opinions when necessary to further the client’s objectives. . . even though they fall outside the scope of the retention [because the lawyer] is more qualified to recognize and analyze the client’s legal needs.” (Nichols, supra, 15 Cal.App.4th at 1684-1685.
Protect a client in every possible way, devote one’s entire energies to a client’s interests and not assume any position adverse or antagonistic to a client, nor be required to choose between conflicting duties without the client’s informed written consent?
The response should be “yes”. “It is an attorney’s duty to protect his client in every possible way, and it is a violation of that duty for him to assume a position adverse or antagonistic to his client without the latter’s free and intelligent consent given after full knowledge of all the facts and circumstances. The rule is designed not alone to prevent the dishonest practitioner from fraudulent conduct, but as well to preclude the honest practitioner from putting himself in a position where he may be required to choose between conflicting duties, or be led to an attempt to reconcile conflicting interests, rather than to enforce to their full extent the rights of the interest which he should alone represent.” (Anderson, supra, 211 Cal. at 116 (ellipses omitted); Duty of Undivided Loyalty.) “The mandatory rule of disqualification in cases of dual representations involving unrelated matters – analogous to the biblical injunction against ‘serving two masters’ (Matthew 6:24) – is such a self-evident one that there are few published appellate decisions elaborating on it.” (Flatt v. Superior Court (1994) 9 Cal.4th 275, 286).
Analyze whether an insurer’s reservation of rights creates a duty for the insurer to provide independent counsel to the policyholder?
Disclose to a policyholder and insurer all facts and circumstances to enable them to make intelligent decisions regarding continued representation?
Claim that the scope of representation of the policyholder is limited to the defense of a liability claim without informed written consent?
Advise a policyholder that it would create a conflict of interest to become involved in a coverage contest between a liability insurer and its policyholder?
The response should be “no”. “[W]hen coverage is disputed, the interests of the insured and the insurer are always divergent.” (Cumis, supra, 162 Cal.App.3d at 375); When dual clients have potentially conflicting interests, dependent counsel must take the initiative to analyze the clients’ potential conflicts of interest, make written disclosure to, and obtain informed written consent from both before starting work. (Rule 3-310). “Canons of Ethics impose upon lawyers hired by the insurer an obligation to explain to the insured and the insurer the full implications of joint representation in situations where the insurer has reserved its rights to deny coverage.” (Cumis, supra, 162 Cal.App.3d at 375); Thus, dependent counsel does not “create” a conflict of interest, the reservation of rights does – and dependent counsel may not ethically accept or continue employment without complying with Rule 3-310.
Advise a policyholder to retain private counsel or consult the insurer’s claims agent to analyze any coverage contest with a liability insurer?
The response should be “no”. While it is appropriate for dependent counsel to advise a policyholder to seek the advise of independent counsel to confirm or reject advise given, dependent counsel may not delegate to some other lawyer, the duty to comply with Rule 3-310. The duty to comply with Rule 3-310 is non-delegable. A client cannot give “informed written consent” without the lawyer first making written disclosure of the lawyer’s analysis of potential conflicts of interest. Arguably a policyholder who does seek independent coverage advise at the urging of ethically conflicted dependent counsel may claim the fees and costs of such advise as damages from dependent counsel.
Advise a policyholder that an insurer’s reservation of rights does not necessarily create a conflict of interest for dependent counsel to represent the policyholder, without making written disclosure of the lawyer’s analysis?
Advise a policyholder that dependent counsel does not have an attorney-client relationship with the insurer?
Advise a policyholder that the tripartite relationship among insurer, counsel, and policyholder permits dual representation regardless of potential conflicts of interest?
The response should be “no”. The so called tripartite relationship may be harmonious only absent any conflict of interest. “The three parties may be viewed as a loose partnership, coalition or alliance directed toward a common goal, sharing a common purpose which lasts during the pendency of the claim or litigation against the insured.” However, the harmony of the tripartite relationship exists only “absent a conflict of interest [and] [s]o long as the interests of the insurer and the insured coincide.” (Gafcon, supra, 98 Cal.App.4th at 1406.
Advise a policyholder that rules of comparative fault may reduce cross-claims of damage without advising the policyholder that there is not setoff when cross-claims of damage are insured?
Refuse to read the policy or the insurer’s reservation of rights letter?
Advise a policyholder that no conflict of interest exists that warrants that the insurer to provide independent counsel worth worrying about, without disclosing dependent counsel analysis?
Disclose to a policyholder that the insurer’s duty to provide independent counsel to the policyholder depends on whether the insurer’s reservation of rights creates a disqualifying conflict of interest?
The response should be “yes”. Civil Code § 2860 provides that “[i]f . . . a conflict of interest arises which creates a duty on the part of the insurer to provide independent counsel to the insured, the insurer shall provide independent counsel to represent the insured.” Both dependent counsel and a reserving insurer have a (Duty to Advise of the Policyholder’s Right to Independent Counsel). The legal test in California to determine whether a reservation of rights creates a (Disqualifying Conflict of Interest) is well established. “[W]hen the reservation of rights is based on coverage disputes that have nothing to do with the issues being litigated in the underlying action there is no conflict of interest, and no duty to appoint independent counsel.” (Long, supra, 163 Cal.App.4th at 1470 (citation and ellipsis omitted); Cumis Test).
Disclose to a policyholder that the Cumis case states that “Canons of Ethics impose upon lawyers hired by the insurer an obligation to explain to the insured and the insurer the full implications of joint representation in situations where the insurer has reserved its rights to deny coverage”?
The response should be “yes”. “Canons of Ethics impose upon lawyers hired by the insurer an obligation to explain to the insured and the insurer the full implications of joint representation in situations where the insurer has reserved its rights to deny coverage. If the insured does not give an informed consent, [dependent] counsel must cease to represent both. Moreover, divergent interests brought about by the insurer’s reservation of rights [require that] the insurer must pay the reasonable cost for hiring independent counsel by the insured. The insurer may not compel the insured to surrender control of the litigation.” (Cumis, supra, 162 Cal.App.3d at 375 (citations and ellipses omitted).) Dependent counsel has a Duty to Advise and a Duty to Advise of the Policyholder’s Right to Independent Counsel.
Accept compensation from an insurer for representing a policyholder and allowing the insurer to interfere with the lawyer’s independence of professional judgment?
Accept compensation from an insurer for representing a policyholder and allowing the insurer to interfere with the with the client-lawyer relationship between dependent counsel and the policyholder?
All of your correspondence with my insurer regarding the lawsuit?
All writings describing the terms of your engagement by my insurer?
The names of all cases and the total dollar amount paid by my insurer to you or your firm for each of the last three years?
50 State Survey Do Conflicts of Interest Arising from a Liability Insurer’s Reservation of Rights Require Payment of Independent Counsel?
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