Opinion ID: 1249568
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Heading Rank: 3

Heading: Does CHI have the unilateral right to select independent counsel?

Text: We answer this question in the affirmative. Most cases which recognize the right to independent counsel express the view that the insured has the right to select independent counsel of its choice. American Family Life Assur. Co. v. United States Fire Co., 885 F.2d 826, 831 (11th Cir.1989) (if insured had rejected conflicted counsel, insurer would have been obligated to pay for defense conducted by insured) (interpreting Georgia law); Rhodes v. Chicago Ins. Co., 719 F.2d 116, 120-21 (5th Cir.1983) (When a reservation of rights is made ... the insured may ... pursue his own defense [and the] insurer remains liable for attorneys' fees) (interpreting Texas law); Previews Inc. v. California Union Ins. Co., 640 F.2d 1026 (9th Cir.1981) (the insurer's obligation to defend extends to paying the reasonable value of the legal services and costs performed by independent counsel selected by the insured) (interpreting California law); San Diego Navy Fed. Credit Union v. Cumis Ins. Soc'y, 162 Cal. App.3d 358, 208 Cal. Rptr. 494, 501-02 (1984) (the insurer must pay the reasonable cost for hiring independent counsel by the insured); Maryland Casualty Co. v. Peppers, 64 Ill.2d 187, 355 N.E.2d 24, 31 (1976) (The insured has the right to be defended ... by an attorney of his own choice who shall have the right to control the conduct of the case.); Illinois Masonic Medical Ctr. v. Turegum Ins. Co., 168 Ill. App.3d 158, 118 Ill.Dec. 941, 943, 522 N.E.2d 611, 613 (1988) (where a conflict of interest exists the insured, rather than the insurer, is entitled to assume control of the defense of the underlying action; ... the insurer must underwrite the reasonable costs incurred by the insured in defending the action with counsel of his own choosing.); Prashker v. United States Guar. Co., 1 N.Y.2d 584, 154 N.Y.S.2d 910, 915, 136 N.E.2d 871, 876 (1956) (the selection of the attorneys to represent the assureds should be made by them rather than by the insurance company, which should remain liable for the reasonable value of the services); Allstate Ins. Co. v. Noorhassan, 158 A.D.2d 638, 551 N.Y.S.2d 942, 944 (1990) (the insured should be permitted to select their own attorney [and the insurer] is liable for the reasonable value of the services); Gorman v. Pattengell, 145 A.D.2d 411, 535 N.Y.S.2d 402, 404 (1988) (the insured is entitled to retain, at her insurer's expense, an attorney with no business connection to her insurance carrier and who will defend solely her interests); see also Mallen, supra, at 118 (The right to independent counsel means an attorney of the insured's choice.); Smyth, supra, at 938 (Most courts appear to allow the insured to select independent counsel when a conflict of interests arises.). Under this line of authority the insurance company is obligated to pay the reasonable cost for hiring independent counsel by the insured. Cumis, 208 Cal. Rptr. at 506; see also Mallen, supra, at 120. A recent California case, Center Foundation v. Chicago Insurance Co., 227 Cal. App.3d 547, 278 Cal. Rptr. 13 (App. 1991), has noted that the insured's right to select independent counsel is subject to the implied covenant of good faith and fair dealing. In context, this means that the insured must act reasonably to select an attorney who is capable of presenting an effective defense and who will bill reasonably for his or her services. The court stated: In our view, the duty of good faith imposed upon an insured includes the obligation to act reasonably in selecting as independent counsel an experienced attorney qualified to present a meaningful defense and willing to engage in ethical billing practices susceptible to review at a standard stricter than that of the marketplace. Conduct arguably acceptable in the ordinary attorney-client relationship where the latter pays the former from his own pocket is not necessarily appropriate in the tripartite context created when independent counsel undertakes to represent the insured at the expense of the insurer. Center Foundation, 278 Cal. Rptr. at 21 (footnote omitteed). A few cases support Employers' argument that it should have the right to approve of CHI's choice for independent counsel. In Employers' Fire Insurance Co. v. Beals, 103 R.I. 623, 240 A.2d 397, 404 (1968), the court approved of the solution suggested in Prashker, that the insured should be allowed to select independent counsel. However, the Beals court added the proviso that counsel selected by the insured should be approved by the insurer and that [s]uch approval, however, should not be unreasonably withheld. Id. 240 A.2d at 404. Fireman's Fund Insurance Co. v. Waste Management of Wisconsin, 777 F.2d 366 (7th Cir.1985) (apparently interpreting Wisconsin law), involves an atypical fact pattern. The question whether the insurer should have approval rights for independent counsel was not the issue; however, the case does contain dicta which states that giving the insurer the right to approve or disapprove of independent counsel selected by the insured is fair, sensible and reasonable. Id. at 370. We conclude that the insured should have the unilateral right to select independent counsel and that this right should be subject to the implied covenant of good faith and fair dealing. [14] In our view the covenant of good faith and fair dealing in this context requires that the insured select an attorney who is, by experience and training, reasonably thought to be competent to conduct the defense of the insured. Such a result, in our view, fairly balances the interest of the insured  being defended by competent counsel of undivided loyalty  with the interests of the insurer  having the defense of the insured conducted by competent counsel. The insurer is only required to pay the reasonable cost of the defense. See, e.g., Turegum, 118 Ill.Dec. at 943, 522 N.E.2d at 613 (insurer must underwrite reasonable costs incurred by the insured in defending the action); Noorhassan, 551 N.Y.S.2d at 944 (same). This provides a measure of protection for insurers against overbilling  and overlitigating  by independent counsel. In the present case the record is unclear as to whether it is reasonable for CHI to select von Gemmingen as independent counsel. On remand, a hearing should be conducted promptly in order to determine this question. If the trial court finds that von Gemmingen is a reasonable selection, a declaration should be entered that he may conduct the defense of CHI as independent counsel. If the court finds that he is not a reasonable selection, the court should so declare and CHI should proceed to select qualified counsel. For the above reasons the judgment of the superior court is REVERSED and this case is REMANDED for further proceedings and entry of a declaration in accordance with this opinion. MOORE, J., concurs in part and dissents in part. COMPTON, J., dissents.