Court Opinion

ID: 9582816
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:31:37.980542+00
Date Added: 2024-06-11T13:38:33.843347
License: Public Domain

COMPTON, Justice,
dissenting.
I agree with Justice Moore’s analysis of the court’s opinion. While I prefer his solution to that selected by this court, I believe a third alternative selected by the superior court is preferable to either. Also, I wish to emphasize what I find particularly disturbing with the court’s solution.
Since the court abrogates entirely a contractual right, the language of the insurance contract ought at least be reviewed. It provides:
SECTION II
DEFENSE AND SETTLEMENTS. The Corporation, in the Insured’s name and behalf, shall have the right to investigate, defend and conduct settlement negotiations in any claim or suit.
The Corporation shall not settle any claim without the consent of the Insured. Should the Insured refuse to consent to any settlement recommended by the Corporation and elect to contest the claim, or continue any legal proceedings in connection with such claim, the Corporation’s liability for the claim shall not exceed the amount in excess of the Insured’s deductible for which the claim could have been so settled, or the applicable limit of liability, whichever is less, plus the costs and expenses incurred with its consent up to the date of such refusal.
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 the Corporation, except with the written consent of the Corporation.
(Emphasis supplied).
The court holds that the insurer forfeits the right even to participate in the selection of counsel, encompassed in the insurer’s right to defend, (1) despite its contractual right to do so; and (2) despite the fact that as to covered claims, it is undisputed that *1130the insurer’s money is at risk, not the insured’s.1
Justice Moore has highlighted the flaw in the court’s effort to legitimize its result by proclaiming the result to be in keeping with the “majority view.” As the result is not dictated by case law, what compels the court to hold that the insurer has forfeited its contractual right to select counsel to defend covered claims for which its money is at risk?
The court points to perceived problems with selection of counsel hired by insurers to conduct the defense of their insured. These “appointed” counsel may tend to favor the insurer’s interests, not the insured’s, because of longstanding ties between the insurer and counsel. Appointed counsel may consciously or subconsciously ‘slant’ efforts in favor of the insurer to receive future business from the insurer. Ongoing contractual relationships, strong financial ties, and sincere friendships between the insurer and appointed counsel will influence counsel’s conduct.
To cure this problem, the court first implies a contractual right in the insured to select “independent” counsel to represent the insured on both covered and reserved claims. To modify this implied right, the court then applies the implied covenant of good faith and fair dealing. The insured must “select an attorney who is, by experience and training, reasonably thought to be competent to conduct the defense of the insured.” “[TJhought” by whom to be competent? The court does not give an answer.
I do not doubt the potential for conflict of interest problems to intrude into relationships between the insurer, the insured and appointed counsel. Yet given the court’s view of the willingness of counsel to follow the dollar and not the Code of Professional Responsibility, why does the court not apply the same standard to independent counsel selected by the insured? If counsel selected by the insured ‘slants’ efforts in favor of the insured, is this a less disturbing result? If ongoing contractual relationships, strong financial ties, and sincere friendships between the insured and independent counsel influence counsel’s conduct, is this a less disturbing result? Worse, if an insured does not happen to be a significant factor in independent counsel’s financial wellbeing, counsel selected by the insured may (consciously or subconsciously) curry favor with the insurer in order to establish an ongoing contractual, financially rewarding relationship with the insurer. Is this a less disturbing result? The dollar still comes out of the same pocket. Once the Code of Professional Responsibility is discarded as setting ethical guidelines for the profession, no attorney/client relationship is safe from manipulation.
The alternative suggested by Justice Moore, but rejected by the court, does not contemplate selection of counsel by an insurer. The insured would select counsel, subject to the insurer’s approval. Approval could not be unreasonably withheld. Counsel would be paid for by the insurer. Yet in the court’s view, permitting the insurer to approve independent counsel selected by the insured would still taint counsel.
In my view the interests of both the insurer and insured would be better served if this court, the insurer, and the insured acknowledged the irremedial conflict created when reserved claims are asserted against the insured. The insured should be entitled to select counsel, paid for by the insurer, to represent it on the reserved claims, subject only to the insured’s contractual obligation to cooperate with the *1131insurer.2 The insurer will thereby satisfy its obligation to defend the insured against any claim, while at the same time exercising its contractual right to defend against covered claims for which its money is at risk. The insured will be assured of the loyalty of its counsel. Counsel will not have to wonder whether their client is the insurer or insured. We do not need to strip the insurer of its contractual right to defend covered claims because of a jaded view of an industry.3
' While the court is correct in pointing out the potential for conflicts when multiple counsel cooperate in a single defense, such conflicts are not unique to insurance defense litigation. Problems of cooperation and strategy are present whenever there are multiple defendants. In this case there are two real parties in interest; the insurer for the covered claims, and the insured for the reserved claims. There is no reason to treat insurance defense litigation differently than other multiple defendant litigation.
I am disturbed that the court is willing to embrace a solution that abrogates entirely a contractual right. This is particularly so because the court rejects reasonable alternatives which would give some effect to the contractual provision. Neither case law nor reason provides more than token support for the court’s solution. The court determines what it perceives to be the necessary result, apparently on the basis of its view of an industry. It reforms the contract accordingly. Contract law does not give a court such license. I would affirm the superior court.

. Interestingly the court affords CHI a right which it did not believe it had, and which it claimed not to be asserting if it did. In a letter from Lee Houston of Clement-Houston Insurance, Inc. (CHI of Alaska, Inc.) to counsel initially selected by Employers, Houston remarks:
I said, as I am repeating here, that we preferred having our own lawyer. Now — you are twisting this around to indicate we have terminated you. This is not true. I doubt the policy gives us authority to unilaterally dismiss counsel ... and we are not going to try to do so.
Houston doubted too much. Not only did CHI have the right to unilaterally dismiss counsel selected by Employers, but also it had the unfettered right to unilaterally select counsel regardless of its policy with Employers.

. Section X of the insurance contract provides in part:
The Insured shall cooperate with the Corporation, and, upon the Corporation's request, shall attend hearings and trials and assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits.

. This is not to say that there must be multiple counsel. The insurer may accept the insured’s choice of counsel to represent its interests, or the insured may accept the insurer’s choice of counsel to represent its interests. This would be a matter of choice, not contract.