Opinion ID: 1249568
Heading Depth: 1
Heading Rank: 2

Heading: Does the two-counsel scheme proposed by Employers and approved by the superior court satisfy CHI's right to independent counsel?

Text: We answer this question in the negative. The trial court was of the view that neither CHI nor Employers was bound by any determination of fact made in the underlying tort suit concerning whether CHI's conduct was negligent or intentional. From this the trial court concluded that Employers' two-counsel scheme would solve the conflict of interest between the insurer and the insured. [11] The view that issues determined in the initial action as to which a conflict of interest exists between insurer and insured may be subsequently relitigated appears to be sensible and in accordance with a number of authorities. [12] That view, however, does not resolve all conflicts of interest between insurer and insured. It does not alleviate the access of appointed counsel to information in possession of the insured which may be used against the insured in subsequent coverage litigation: This solution overlooks the fact that, during the initial litigation, the insured may transmit information to counsel that the insurer could use in subsequent litigation to the insured's disadvantage. A heavy burden of silence falls on the attorney the insurer selects to defend the insured. Berch & Berch, supra, at 32 n. 23. The fact that personal counsel for CHI is acting as co-counsel with counsel appointed by the insurer also does not eliminate this conflict. Appointed counsel has and should have full access to the client so that the defense may be effectively conducted. Moreover, even where the facts in conflict may be relitigated, the opportunity to direct a case through witness selection, interrogation, and discovery may afford a dispositive advantage in subsequent litigation: In such cases, the insured's attorney has the opportunity to develop the facts through discovery and to shape the case for, and present the evidence at, the trial. So even though the insured or the insurer may relitigate the coverage issue in a subsequent proceeding, controlling the defense in the main proceeding could be critical. Testifying under oath in the main proceeding may freeze in the witnesses' minds one version of the facts. Very little latitude may remain in subsequent proceedings to mold the evidence bearing upon coverage. Id. at 37-38. [13] We conclude therefore that the two-counsel solution does not satisfactorily resolve the conflicts which have given rise to the right to independent counsel.