Court Opinion

ID: 9582815
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:31:37.975168+00
Date Added: 2024-06-11T13:38:33.839434
License: Public Domain

MOORE, Justice,
concurring in part and dissenting in part.
In its decision today, the court holds-that an insured has the right to reject the counsel appointed by the insurer and to unilat*1122erally select replacement counsel whenever dual representation creates a potential conflict of interest. Under the guise of balancing the interests of the insured and the insurer, the court completely abrogates the insurer’s right to participate in the insured’s defense. Neither existing case law nor sound policy mandates such a drastic curtailment of the insurer’s contract rights. Although I agree that the insured is entitled to select independent counsel in conflict of interest situations, I believe the insurer retains the right of reasonable approval. Such a rule accommodates both the important interest of the insured in controlling the litigation and the legitimate interest of the insurer in assuring that the defense will be competently handled by qualified counsel in a cost-effective manner.
Most courts agree that an insured may reject insurer-selected counsel when the insurer assumes the defense under a reservation of rights because of a coverage question.1 See Ronald E. Mallen, A New Definition of Insurance Defense Counsel, 53 Ins.Couns.J. 108, 113 (Jan. 1986). Most courts also conclude that the presence of a conflict of interest does not relieve an insurer of its obligation to pay defense costs under its duty to defend. See Babcock & Wilcox Co. v. Parsons Corp., 430 F.2d 531, 538 (8th Cir.1970). The critical issue, which few courts have identified, is whether, in this context, an insured has the unilateral right to select replacement counsel when the insurance agreement gives the insurer the right to defend the insured. This is a matter of first impression in Alaska.2 I would hold that the insurer has the right to approve the counsel selected by the insured, but that the insurer may not unreasonably withhold such approval.3
The court simply fails to recognize that Employers has both a contractual right as well as the contractual duty to defend CHI.4 An insurer’s right to control the defense is “a valuable one in that it reserves to the insurer the right to protect itself against unwarranted liability claims and is essential in protecting its financial interest in the outcome of litigation.” 7C John A. Appleman, Insurance Law and Practice § 4681 (Walter F. Berdal ed., rev. *1123ed. 1979). Such an important right should not be ignored in the analysis. Although the insurer’s right to control the litigation must yield to the insured’s right to independent representation when a conflict arises, this does not mean that the insurer’s right to defend is completely extinguished.
Although the court purports to align itself with what it considers to be the “majority view,” an analysis of the cases it relies on reveals that most courts which have recognized the insured’s “right to independent counsel” have not explicitly analyzed the scope of this right or fully considered its impact on the rights of the insurer.
Two cases cited by the court, while speaking of a “right to independent counsel,” implicitly recognize the right of an insurer to participate in the defense of its insured. The courts in both American Family Life Assur. Co. v. U.S. Fire Co., 885 F.2d 826 (11th Cir.1989), and San Diego Navy Fed. Credit Union v. Cumis Ins. Soc’y, Inc., 162 Cal.App.3d 358, 208 Cal. Rptr. 494 (1984), required an insurer to pay the cost of “independent counsel” selected by the insured to act as co-counsel with an attorney selected by the insurer.5 Neither case stands for the proposition that an insured has a unilateral right to select exclusive defense counsel when a coverage dispute creates a conflict of interest.6 In fact, American Family Life includes a partial quote from Appleman which recognizes the right of an insured “to refuse to accept an offer of counsel appointed by the insurer,” 885 F.2d at 831 (citing 7C Appleman, supra, § 4685.01), but omits that part of the sentence which recognizes the insurer’s *1124right to approve of substitute counsel.7
Some courts and commentators recognize that cases permitting an insured to select “independent counsel” do not define what is meant by that term. See, e.g., Federal Ins. Co. v. X-Rite, Inc., 748 F.Supp. 1228, 1228 n. 1 (W.D.Mich.1990) (“ ‘Independent Counsel’ is a term which has not been defined in the case law.”); Allan D. Windt, Insurance Claims and Disputes — Representation of Insurance Companies and Insureds § 4.20 at 179 (2d ed. 1988). Courts have used the phrase in a variety of contexts,8 some of them diametrically opposed. Commentators have stated that “[t]he right to independent counsel means an attorney of the insured’s choice.” Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 28.16 at 418 (3d ed. 1989). On the other hand, courts have also recognized “a right in the insurer to determine whether to provide independent counsel of its choosing or to reimburse the insured for counsel of its choice.” Federal Ins. Co., 748 F.Supp. at 1228 (citing nine cases for this proposition). Because there is disagreement as to what the right to independent counsel entails, and because many cases recognize the insurer’s right to select replacement “independent counsel,” or at a minimum, to participate in the defense of the insured alongside counsel selected by the insured, it is questionable whether the view espoused by the court represents a “majority view,” statements by courts and commentators to that effect notwithstanding.
However, if, as the court apparently believes, an insured’s interest in fair representation requires the complete abrogation of an insurer’s right to participate in the defense, the insurer’s right should at least be addressed in terms of established principles of contract law. In interpreting a contract, a court must give effect to the reasonable expectation of the parties. Peterson v. Wirum, 625 P.2d 866 (Alaska 1981); Fairbanks N. Star Borough v. Tundra Tours, Inc., 719 P.2d 1020 (Alaska 1986) (in order to give effect to the parties’ reasonable expectations, a court should look to the contract language, relevant extrinsic evidence and case law interpreting similar provisions). Clearly, the insurance agreement here gave Employers a reasonable expectation that it would have some control over the defense. Even if the right to defend provision is deemed ambiguous and is therefore construed against the insurer, see Puritan Life Ins. Co. v. Guess, 598 P.2d 900 (Alaska 1979), it is not necessary to extinguish the right entirely. Rather, the right to defend provision can and should be interpreted in a way which balances the interests of both the insurer and the insured.
As one court has stated when considering the scope of an insurer’s contractual right to defend in conflict situations:
Unless “right to defend” is to be deemed mere surplusage, ... it must be viewed as conferring upon [the insurer] some prerogative with respect to the defense beyond simply paying expenses. This prerogative cannot, in a conflict of interest situation, include an absolute right to control the litigation. On the other hand, [the insured’s] apparent presumption that the conflict of interest, posing a potential of prejudice to its interests, automatically and completely negated all prerogative, is not reasonable.
... [The] “right to defend” can hardly be deemed to contemplate anything less *1125than participation in selection of counsel, which contractual right ought to be enforced unless contrary to public policy.
Federal Ins. Co., 748 F.Supp. at 1229; see also New York State Urban Dev. Corp. v. VSL Corp., 738 F.2d 61, 65-66 (2d Cir. 1984). Here, Employers’ right to participate in CHI’s defense should encompass, at a minimum, the right to have a role in the selection of defense counsel.
Courts which have recognized the right of the insurer to participate in the selection of substitute counsel do not agree as to the latitude an insurer should have. In Federal Ins. Co., the court concluded that, under Michigan law, an insurer is entitled to select replacement counsel, but its selection must be made with the utmost of good faith. 748 F.Supp. at 1229. On the other hand, in Employers’ Fire Ins. Co. v. Beals, 240 A.2d 397 (R.I.1968), the court held that an insured may elect to choose its own counsel, but that the insurer has a right to approve of the counsel selected by the insured. The Beals court stated:
Because the insurer has a legitimate interest in seeing that any recovery based on finding of negligence on the part of its insured is kept within reasonable bounds, and since the total expense of this defense is to be assumed by the insurer under its promise to defend, we believe that ... the engagement of an independent counsel to represent the insured should be approved by the insurer. Such approval, however, should not be unreasonably withheld.
240 A.2d at 404; see Fireman’s Fund Ins. Co. v. Waste Management of Wis. Inc., Ill F.2d 366, 370 (7th Cir.1985) (approving parties’ agreement to allow insured to select replacement counsel subject to insurer’s approval as the most “fair, sensible, and reasonable way for both parties to terminate [conflict of interest] dispute and to get on with trial of the [cases against insured] on their merits”). This approach is also recommended by a noted commentator on insurance law who stated:
[W]here a conflict of interest exists between the insurer and the insured in the conduct of the defense of the action brought against the insured, the insured has the right to refuse to accept an offer of the counsel appointed by the insurer and insurer’s desire to control the defense must yield to its obligation to defend the policyholder; and where a conflict of interest exists the engagement of independent counsel to represent the insured should be approvéd by the insurer to assure the employment of competent counsel. Such approval should not be unreasonably withheld.
7C Appleman, supra, § 4685.01 (footnotes omitted).
The majority dismisses these authorities without analysis, summarily concluding that the insurer’s interests are sufficiently protected by the implied covenant of good faith and fair dealing inherent in all contracts. Principally relying on a recent California court of appeals decision; Center Found. v. Chicago Ins. Co., 227 Cal.App.3d 547, 278 Cal.Rptr. 13 (1991), the majority observes that the covenant of good faith and fair dealing 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.”9 (emphasis added) The majority asserts that the implied covenant “provides a measure of protection for insurers against overbilling — and overlitigating — by independent counsel.”
Unfortunately, the majority fails to specify by whose standards the competency of replacement counsel should be measured. *1126In the absence of any objective criteria by which to judge whether replacement counsel is “reasonably competent,” I believe that this “measure of protection” is both inadequate and unworkable.
Although I have found no cases discussing what constitutes an insurer’s reasonable withholding of approval of substitute counsel chosen by the insured, I believe that an insurer should approve of an insured’s selection of counsel where the attorney is qualified to handle the case and where there is no reason to expect that the attorney will be unable to maintain a professional working relationship with the insurance company.
In ascertaining whether an attorney is qualified, it may be useful to look to the statute of a state which has turned to the legislature to resolve this issue. California Civil Code Section 2860(c)10 provides in part:
When the insured has selected independent counsel to represent him or her, the insurer may exercise its right to require that the counsel selected by the insured possess certain minimum qualifications which may include that the selected counsel have (1) at least five years of civil litigation practice which includes substantial defense experience in the subject at issue in the litigation, and (2) errors and omissions coverage.
While I would not adopt this standard as a per se rule in Alaska, I believe that section 2860(c) provides reasonable guidance as to whether an insurer must approve of its insured’s selection of substitute counsel.
Here, it is undisputed that attorney Von Gemmingen graduated from law school in May, 1985. When this dispute arose in late 1989, he had been practicing law for approximately four years. Nothing in the record indicates that he had substantial defense experience in the types of disputes at issue in the suit against CHI. For these reasons, I would hold that Employers did not unreasonably withhold its approval of CHI’s choice of attorney.
Apparently, the court believes that any participation by the insurer in the appointment of independent counsel automatically taints the outcome. However, it is far from clear that the scope of the conflict of interest problem in the defense context is so broad and the frequency of harm to the insured so great as to warrant such a drastic curtailment of the insurer’s contract rights. None of the authorities cited by the court address the prevalence of the problem in quantifiable terms, nor do they address effectiveness of malpractice actions, disciplinary actions, or insurance bad faith actions in remedying the problem. As one commentator has noted, “[t]he validity of the assumption that there exists a severe risk that an insurer will favor its coverage interests over the insured’s liability has not been critically examined.” Mal-len, supra, at 108. The same can be said of the assumption that there is a severe risk that defense attorneys will favor the interests of the insurer over the insured.11 Assuming without conceding that these *1127risks are great, conflict of interest concerns would be a compelling policy reason for permitting an insured to reject counsel selected by the insurer. They would also be a reason for allowing the insured to select a new attorney at the insurer’s expense. But it goes too far to ignore the insurer’s contractual right to defend and to hold that these perceived dangers warrant allowing an insured to unilaterally select substitute counsel regardless of the attorney’s qualifications.
In Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 288-91 (Alaska 1980), we discussed the conflicts which can arise between the interests of the insured and the insurer where coverage may be an issue and the insurer defends under a reservation of rights. We noted that when an insurer knows it can assert a coverage defense, it may only offer a token defense of the insured. Id. at 289. We further noted that where coverage depends on which theory of recovery in the suit against the insured is successful, an insurer might conduct the defense in a way which steers the case toward liability based on an uncovered theory. Id. The situations discussed in Continental represent two distinct areas of conflict — those between an insured and its insurer and those between the insured and its attorney. When this important distinction is made, an attorney’s ethical obligations in these situations are clearly delineated by the Alaska Code of Professional Responsibility.
A potential conflict of interest between the insurer and the insured arises when, as in this case, a plaintiff brings an action against an insured which is based on both covered and uncovered theories of liability. When the complaint alleges both negligent conduct, which is covered under the policy, and intentional conduct, which is not covered, it would be in the best interest of the insurer if liability were ultimately found based on intentional conduct. In such a case, an attorney selected by the insurer to defend the insured would be under an ethical obligation to disclose the effect of this conflict “on the exercise of [the attorney’s] independent professional judgment on behalf of each.” Alaska Code of Professional Responsibility DR 5-105. Unless “it is obvious that [the attorney] can adequately represent the interest of each” and “each consents to the representation after full disclosure,” the attorney would be required to decline the employment.12 Id. Whether the attorney declines, accepts, or withdraws from the employment, he would be obligated to preserve the confidences of the insured. Alaska Code of Professional Responsibility DR 4-101.
The conflict between the insured and the insurer is to be distinguished from that which arises between the insured and the attorney under these circumstances. As commentators have stated:
In this situation, ... separate counsel retained by the insurance company is under the less-than-subtle influence of the insurance company. Insurance companies concentrate their legal representation into a few firms. The attorney, wishing to maintain the insurer’s business, does not want to aggravate the company. Furthermore, the insurance counsel has close ties and a long-term relationship with the insurer, while he has only a transient relationship with the insured. These factors could, unconsciously, dilute the loyalty of the most honest attorney.
Sampson A. Brown & John L. Romaker, Cumis, Conflicts and the Civil Code: Section 2860 Changes Little, 25 Cal.W.L.Rev. 45, 54 (1988) (footnotes omitted). Here again, the attorney’s duties are clear. If *1128the exercise of the attorney’s professional judgment on behalf of the insured may be affected by these interests, an attorney can only accept the employment if the client consents after full disclosure. Alaska Code of Professional Responsibility DR 5-101(A). Furthermore, the attorney is prohibited from permitting the insurer to “direct or regulate his professional judgment” in representing the insured. Alaska Code of Professional Responsibility DR 5-107(B). A breach of these ethical obligations may subject an attorney to disciplinary actions and may serve as the basis for a legal malpractice action, thus serving as a deterrent to the kinds of abuses which concern the court. Absent a showing that the Code of Professional Responsibility and the threat of legal malpractice actions are ineffective in preventing such abuses, the broad prophylactic rule adopted by the court seems superfluous.13
In further support of its conclusion, the majority voices its concern over the danger that an insurer might gain access to information not otherwise available to it which could be used to its advantage in the coverage dispute. In Continental we discussed this danger in the policy defense context. 608 P.2d at 291. However, in the context of a coverage dispute, I believe this danger to be more imagined than real. It is difficult to imagine a case or set of facts where information tending to defeat coverage would be unavailable to the insurer. Under most insurance agreements, the insured has a duty to cooperate with the insurer.14 “The duties of the insured have been held to require a fair, frank and truthful disclosure of information reasonably demanded by the insurer, for the purpose of enabling it to determine whether or not there is a genuine defense.” 8 John A. Appleman & Jean Appleman, Insurance Law and Practice § 4774 (1981). In addition, facts tending to defeat coverage will most likely be developed in the liability trial and will be discoverable by the insurer in subsequent coverage litigation.15 Even confidential attorney-client communications may be discoverable by an insurer under certain circumstances. See, e.g., Glacier Gen. Assur. Co. v. Superior Court, 95 Cal.App.3d 836, 157 Cal.Rptr. 435 (1979). See generally John P. Ludington, Annotation, Insured-Insurer Communications As Privileged, 55 A.L.R. 4th 336, 354-59 (1987).
Of course this does not mean the insured’s attorney is free to share any confidential or privileged information with the insurer. Regardless of whether defense counsel is selected by the insured or the insurer, the attorney is bound by the same ethical duties regarding confidentiality. See Alaska Code of Professional Responsibility DR 4-101. In those rare cases where such a breach of confidentiality actually occurs, the law affords adequate protection and recourse to the insured. An attorney who breaches a client’s confidentiality may be subject to discipline for a violation of his professional responsibility or to a suit by the insured for legal malpractice. Of more significance to the insured, an insurer who relies on breach of confidentiality by defense counsel to assert non-coverage may be subsequently estopped from denying coverage based on policy exclusion. See Parsons v. Continental Nat’l Am. Group, 113 Ariz. 223, 228, 550 P.2d 94, 99 (1976). Such remedies serve as adequate protection of the insured and as a strong disincentive *1129to both insurers and defense counsel to compromise the insured’s interest.
Other considerations prevent me from supporting the rule adopted today. First, “[t]ypically, the coverage issue [and resulting conflict of interest are] not created by the insurer but by the allegations of the claimant. Often those allegations bear little relationship to reality.” Mallen & Smith, supra, § 23.16. In light of this, a rule which operates to deprive an insurer of its contractual right to participate in the defense whenever the insurer reserves its rights unnecessarily penalizes the insurer. Second, an insurer may be required to issue a reservation of rights letter or risk its right to later challenge coverage of the claim under the policy. See Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 289 n. 13 (Alaska 1980). The insurer should not be forced to sacrifice its right to participate in the selection of counsel in order to preserve its right to subsequently contest coverage. Third, because an insurer, under agency principles, may be subject to liability for the malpractice of the attorney which represents the insured, see Mallen & Smith, supra, § 23.6, it is fair and reasonable that the insurer should have a role in selection of counsel. Finally, the rule adopted by the court today presupposes that no counsel selected or approved of by an insurer can represent an insured without consciously or unconsciously compromising the insured’s interests in favor of those of the insurer. My confidence in the integrity of the members of the Alaska Bar will not allow me to support the adoption of a rule of law based on such an assumption.
In summary, I would hold that CHI was within its rights to reject the tender of a defense by Employers and was entitled to select replacement counsel, subject to the reasonable approval of Employers. Here, Employers’ approval of Von Gemmingen was not unreasonably withheld. Nonetheless, because I conclude that the insured has the right to select replacement counsel subject to the reasonable approval of the insurer, CHI cannot be forced to proceed with defense counsel selected by Employers. Accordingly, I concur in the reversal but dissent from the court’s reasoning and the rule of law which it adopts.

. The mere reservation of rights in response to a third party complaint alleging covered and uncovered conduct does not in and of itself create a conflict of interest warranting withdrawal of counsel selected by the insurer. Because the liberal rules of pleading permit third party plaintiffs to allege a variety of legal theories, the pleading alone should not be permitted to precipitate a conflict of interest between an insurer and the insured requiring withdrawal of the attorney chosen by the insurer. Nor should the mere fact that an attorney has previously been utilized by an insurer have this effect. Clearly, under the circumstances of this case, an attorney has an obligation to make the insured and the insurer aware of the potential for conflict and to proceed with the representation only with the consent of both. Alaska Code of Professional Responsibility DR 5-105. This is a continuing duty so the appropriateness of representation will have to be constantly monitored by counsel.

. CHI, citing National Indem. Co. v. Flesher, 469 P.2d 360, 367-68 n. 22 (Alaska 1970) and Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281, 291 n. 17 (Alaska 1980), contends that we have previously held that an insured has a right to select independent counsel in a conflict of interest situation. Neither of the passages cited by CHI constitutes a holding of this court, as the issue the court decides today was not before us in either Continental or Flesher. These passages are thus not dispositive of this issue.

. Other alternatives also balance the interests of the insurer and the insured. For example, the insured could agree to proceed with an attorney of its choice to serve as co-counsel to the insurer-selected attorney. Here, because CHI rejected this alternative, I limit my discussion to the approach to be taken when the insured rejects the co-counsel approach.

. Section II of the contract of insurance between CHI and Employers provides that
[Employers], in Insured’s name and behalf, shall have the right to investigate, defend and conduct settlement negotiations in any claim or suit.
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The Insured shall not admit liability for, or make any voluntary settlement, or incur any costs or expenses in connection with any claim involving payment by [Employers], except with the written consent of [Employers].
Section III obligates Employers to pay "all expenses incurred in the defense of any claim or suit against Insured” alleging acts covered by the policy.

. In American Family Life, the court affirmed an award of attorneys’ fees to an insured who hired co-counsel to “monitor and aid in the defense" provided by the insurer. 885 F.2d at 831. In Cumis, the court held that the insurer must pay the fees of an attorney retained by the insured to act as co-counsel to the attorney selected by the insurer. 208 Cal.Rptr. at 497, 506.

. The other cases cited for the "majority view” do not hold that an insured has the unilateral right to select defense counsel to the exclusion of any right of the insurer to participate in the defense.
In Rhodes v. Chicago Ins. Co., 719 F.2d 116 (5th Cir.1983), an insured rejected the insurer’s tender of a defense under a reservation of rights and pursued its own defense. The party injured by the insured sued the insurer to collect damages assessed against the insured under a settlement approved by the state court. The Fifth Circuit reversed the grant of summary judgment for the insurer, finding unresolved issues of material fact. The right to "independent counsel” was not even an issue in the case; rather, the issue was whether the insurer had breached a duty to defend, and if so, the consequences of the breach. Id. at 119.
In Previews, Inc. v. California Union Ins. Co., 640 F.2d 1026, 1028 (9th Cir.1981), the court, interpreting California law, concludes with little discussion that a conflict existed, that the insured "was entitled to engage outside counsel,” and that the insurer was responsible for "reasonable value of the legal services and costs performed by independent counsel selected by the insured.”
In Maryland Casualty Co. v. Peppers, 64 Ill.2d 187, 355 N.E.2d 24, 30-32 (1976), the court held that an insured had the right to select independent counsel and control the case in cases of potential conflict of interest. However, the court also explicitly recognized the insurer’s right to have its attorney participate “in all phases of [the] litigation subject to the control of the case by [the insured’s] attorney.” Id. 355 N.E.2d at 31.
In Illinois Masonic Medical Ctr. v. Turegum Ins. Co., 168 IlI.App.3d 158, 118 Ill.Dec. 941, 948-49, 522 N.E.2d 611, 618-19 (1988), the court held that, under Maryland Casualty, an insured may select its own attorney and control its defense in conflict situations. The court also held that it was within the discretion of the replacement counsel to determine to what extent the counsel appointed by the insurer and rejected by the insured could also participate in the defense. Id
In Prashker v. U.S. Guar. Co., 1 N.Y.2d 584, 154 N.Y.S.2d 910, 136 N.E.2d 871 (1956), the question of the right of the insured to select independent counsel was not directly before the court. The court stated in dicta that in a conflict of interest situation, the insured, rather than the insurer, should select defense counsel. Id. 154 N.Y.S.2d at 915, 136 N.E.2d at 876. The court provided no analysis, reasoning, or authority to support its statement.
In Gorman v. Pattengell, 145 A.D.2d 411, 535 N.Y.S.2d 402, 404 (1988), the court summarily concluded, citing Prashker, that the insured is entitled to independent counsel at the insurer’s expense where there is a conflict of interest.
In Allstate Ins. Co. v. Noorhassan, 158 A.D.2d 638, 551 N.Y.S.2d 942, 944 (1990), the court stated without explanation or analysis that an insured has the right to select independent counsel and the insurer has the duty to pay for this defense whenever a potential conflict of interest arises.

. The full sentence from Appleman reads:
But it has been held that where a conflict of interest exists between the insurer and the insured in the conduct of the defense of the action brought against the insured, the insured has the right to refuse to accept an offer of the counsel appointed by the insurer and insurer’s desire to control the defense must yield to its obligation to defend the policyholder; and where a conflict of interest exists the engagement of independent counsel to represent the insured should be approved by the insurer to assure the employment of competent counsel. Such approval should not be unreasonably withheld.
7C Appleman, supra, § 4685.01 (emphasis added) (footnotes omitted).

. The "right to independent counsel” could be read narrowly to mean the right to reject an insurer’s choice of attorney. It could be read more broadly to encompass the right to select substitute or replacement counsel, either unilaterally or subject to the approval of the insurer.

. In Center Foundation, the insureds filed a claim for breach of contract against the insurer after the insurer refused to accept the independent counsel selected by the insureds when the insurer reserved the right to contest coverage. 278 Cal.Rptr. at 15-16. Under the California law operative at the time of the litigation, the court of appeals held that the implied covenant of good faith and fair dealing required the insured to act reasonably in selecting independent counsel. Id. at 21. The court concluded that the insurer therefore did not breach its obligations to the insured by asserting a right to approve the counsel they selected provided that such approval was not unreasonably withheld. Id. The Center Foundation court cited with approval the Beals decision and explicitly recognized the insurer’s right to approve the replacement counsel selected by the insured. Id. at 21 & n. 12.

. California Civil Code § 2860 was a legislative response to the flood of litigation spawned by the California court of appeals decision in the case of San Diego Navy Fed. Credit Union v. Cumis Ins. Soc’y, Inc., 162 Cal.App.3d 358, 208 Cal.Rptr. 494 (1984). See Sampson A. Brown & John L. Romaker, Cumis, Conflicts and the Civil Code: Section 2860 Changes Little, 25 Cal. W.L.Rev. 45 (1988). The Cumis court held that an insurer who assumed a defense under a reservation of rights must pay the reasonable cost of "independent counsel" hired by the insured. 208 Cal.Rptr. at 506. The Cumis decision created considerable confusion, led to abuses by insurers and attorneys selected by insureds, and probably had an adverse economic impact on the public. Brown & Romaker, supra, at 63-68.
The majority opinion is likely to have similar effects in Alaska and will probably require legislative intervention to ultimately bring fairness and order to this complex area of law.

. It seems an equally probable danger that an "independent" attorney selected by the insured would have an interest in favoring the insurer in the hope of establishing a continuing relationship with the insurer, while his relationship with the insured is likely to be transitory. After all, it is the insurer who pays "independent” counsel’s fees, too. The rule adopted by the majority does not address this danger and is a radical step which will be of doubtful effectiveness in resolving a problem which may be more pervasive in the minds of academicians than in the real world.

. DR 5-105 applies to the situation in which a lawyer represents two clients. In the circumstances discussed here, the attorney has but one client, the insured. See Tank v. State Farm Fire & Casualty Co., 105 Wash.2d 381, 715 P.2d 1133, 1137 (1986) ("Both retained defense counsel and the insurer must understand that only the insured is the client.”). Nonetheless, DR 5-105 is applicable by virtue of the obligations the attorney has toward the insurer as a result of the insurance agreement between insurer and insured. While we need not decide the scope of that obligation here, at a minimum it encompasses a duty to communicate with the insurer, to share non-confidential and unprivileged information regarding the case with the insurer, and to cooperate with the insurer in efforts to settle the case.

. While that case did not involve the same type of conflict of interest present here, this court's recent decision in Bohna v. Hughes, Thorsness, Gantz, Powell & Brundin, 828 P.2d 745 (Alaska 1992) suggests that existing law is adequate to remedy the abuses of attorneys and insurers who compromise the interest of the insured.

. The agreement between CHI and Employers provided:
[CHI] shall cooperate with [Employers], and upon [Employers] request, shall attend hearings and trials and shall assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits.

.In the typical coverage dispute case where the party suing the insured alleges both intentional and negligent conduct, the plaintiff has a strong interest in developing facts indicating intentional conduct, as this enhances the strength of the plaintiff's case and may be a basis for an award of punitive damages. Such facts would be discoverable by the insurer in subsequent coverage litigation with the insured.