Opinion ID: 1359312
Heading Depth: 2
Heading Rank: 2

Heading: The Trial Court Denied the Robertsons Counsel Who Was Independent in Fact, Which Resulted in Their Interests Going Unrepresented.

Text: In CHI of Alaska, Inc. v. Employer's Reinsurance Corp., 844 P.2d 1113 (Alaska 1993), this court held that when there is an irreconcilable conflict between the insured and the insurer, the insured should have the unilateral right to select ... counsel. Id. at 1121. The court noted that this view is in accord with that of most states. Id. at 1117. In making this observation, the court cited cases from a number of jurisdictions and the remarks of commentators. `The prevailing view is that the presence of a [conflict] issue enables the insured to reject appointed counsel, select his own lawyer and control the defense at the expense of the insurer.' Id. at 1117 n. 8 (quoting Ronald E. Mallen, A New Definition of Insurance Defense Council, Ins.Couns.J., Jan. 1986, at 108, 113) (emphasis added). `[T]he attorney who represents the insured owes him an undeviating allegiance whether compensated by the insurer or the insured... .' Id. at 1116 (quoting Farmers Ins. Co. of Ariz. v. Vagnozzi, 138 Ariz. 443, 675 P.2d 703, 708 (1983)) (emphasis added). The rationale compelling the result in CHI was the recognition that the interests of the insurer may not be coextensive with those of the insured. Therefore, the insured is entitled to an attorney who is independent of the insurer's interests in fact. Inherent in the notion of CHI counsel is the premise that the attorney owes undeviating allegiance to the client. Yet in this case the court reneges on its promise in CHI. The Robertsons were deprived of an attorney with undeviating allegiance to their cause, and the independent-in-fact representation that CHI counsel is to provide. The necessity of undeviating allegiance is a special concern in this case, which is a paradigm of conflicting interests that inevitably undermine independent counsel's undeviating allegiance. This court has noted previously the legitimate problem often present in intra-family tort litigation: the interests of the insured tort-feasor and the insurer may be in conflict. Aydlett v. Haynes, 511 P.2d 1311, 1315 n. 8 (Alaska 1973). Accordingly, we have stated that in such a case the trial judge must take care to assure that the actual interests of all parties are fairly represented. Id. at 1315 n. 8. This case demands this special precaution. The fiction that troubled Justice Dimond in Drickersen was that one family member was suing another with the intent of collecting a judgment from that relative. In reality it is the insurer that will pay the judgment, and the family unit or a member of the family unit that will collect it. Therefore, in a case of intra-family litigation, there are typically three sets of conflicting interests: (1) those of the injured person, here the Estate, that wants to establish liability in order to obtain a judgment, (2) those of the insurer, who wants to escape the imposition of some or all of this liability, and (3) those of the insured family member. The insured family member may have purchased the insurance policy for a variety of reasons, just as insurance is marketed on a variety of bases. One reason, and basis, may have been to ensure that the family will be able to compensate adequately a victim of a family member's tortious conduct. This motivation may be particularly strong where the insured has a close personal relationship with the victim. Therefore, as in the case of the Robertsons, it may be in the interest of the insured family member to be found liable. [2] Despite the Robertsons' desire to pursue such a goal, the trial court prevented the Robertsons' independent counsel from so doing. Instead, the trial court directed Allstate to retain independent counsel for the Robertsons. The trial court then ordered independent counsel to present a classic [insurance] defense designed to avoid Allstate's liability. This goal was in keeping with the interests of Allstate, but not necessarily those of the Robertsons. [3] While the trial judge recognized the unusual alignment of parties often present in intra-family tort litigation, she distinguished between the Robertsons' independent counsel representing his clients as plaintiffs versus defendants. The judge stated that the Robertsons were not their independent counsel's clients as plaintiffs. They're his clients as defendants... . [I]f that defense were not being provided [by the Robertsons' independent counsel] there could be concern with regard to adversity to the extent that his clients wanted this lawsuit to proceed. [4] (Emphasis added.) These conflicting interests were so strong that throughout the entire case the Robertsons retained personal counsel to advise them in dealings with independent counsel, who was representing them in the proceedings. Otherwise stated, the Robertsons were compelled to retain an attorney to advise them on how to deal with the attorney who ostensibly was advocating their interests! In its motion to intervene in the proceedings, Allstate itself implicitly recognized this conflict, acknowledging that this suit [by the Estate] is advancing the real interests of the Robertsons. (Emphasis added.) However, in the same motion Allstate also argued that [t]he lawyer representing the Robertsons as defendants clearly cannot represent the Robertsons' interests as plaintiffs. [5] The trial court, in ordering independent counsel for the Robertsons and directing him to conduct a classic [insurance] defense, did so because of the ... inherent potential for conflict given ... the participation of the Robertson[s] in their defense, that ... counsel who reported directly to Allstate could be in a position of on one hand representing the Robertson[s] and on the other hand establishing some kind of policy defense based on non-cooperation. It further did so in order to ensure that Allstate did not have access to information that it could later use against the Robertsons. But these are only two facets of the potential harm this court attempted to guard against in CHI. We also recognized that the insured's attorney should have full access to the client so that the defense may be effectively conducted. CHI, 844 P.2d at 1119. The CHI court concluded that the ability of the insured's attorney to control the litigation, independently of the insurer's desires, was critical. See id. 1117-18. In the instant case, the trial court could have pursued an alternate approach that would have acknowledged the obvious adversity, and ensured that all interests were represented without the conflict. Under such a scheme, three attorneys would independently advocate the interests of the plaintiff, the insurer and the insured. [6] Based on this court's decision in CHI, it would have been permissible for the Robertsons, through CHI counsel, to pursue their own interests. They were required only to comply with their contractual obligation to cooperate with their insurer, and not breach any implied covenant of good faith and fair dealing. In this case, however, the trial court directed the Robertsons' independent counsel to present a case that advocated the interests of Allstate. This approach resulted in substantial error. As this court repeatedly notes, in the course of following these instructions the Robertsons' independent counsel was forced to intentionally impeach his own clients' testimony, testimony that indicated that they took responsibility for negligently causing their son's death. This impeachment was intended to destroy the Robertsons' credibility with the jury. In a case where the testimony of the Robertsons was critical, the effect of this taint cannot be underestimated. Because of the trial court's instructions, the Robertsons were denied CHI 's mandate of an attorney independent-in-fact and its inherent promise: the undeviating allegiance of one's own attorney and the ability to control the defense. In spite of this court's previous admonition that care must be taken to assure that the actual interests of all the parties are fairly represented, the Robertsons' perspective was not heard. Had the Robertsons' testimony not been impeached by their attorney, it is not difficult to see that the jury's verdict probably would have been different. Therefore, substantial error exists. See Loof v. Sanders, 686 P.2d 1205, 1209 (Alaska 1984) (In order to assess if an error is substantial, `the members of this court must necessarily put themselves ... in the position of the jury to determine whether, as reasonable men, the error committed probably affected their verdict.' (quoting Love v. State, 457 P.2d 622, 631 n. 15 (Alaska 1969)). This court's opinion also has troublesome implications beyond the instant case. The failure to hold that CHI counsel should have been retained to pursue the Robertsons' interests permits a continuation of the fiction that Justice Dimond warned against in Drickersen. See Drickersen, 604 P.2d at 1088-89 (Dimond, J., concurring). If separate counsel is not available to represent each set of conflicting interests, our warning to take care to assure that the actual interests of all parties are fairly represented, Aydlett v. Haynes, 511 P.2d 1311, 1315 n. 8 (Alaska 1973) (emphasis added), will have gone unheeded. [7] Yet despite these two separate, significant concerns regarding the Robertsons' lack of CHI counsel, the court is content to dismiss these problems summarily in a footnote. [8] Op. at 208-09 n. 12.