 |
 |
to fill out a simple form to connect to Employee Leasing Services in your area.
|
|
|
|
|
Finley v. Home Insurance Company12/30/1998
than for the insured's financial risk." 715 P.2d at 1137 (emphases in original).
Finally, the insurer's conduct of the defense of the insured may be undertaken in such a manner that the insurer is equitably estopped from denying indemnification based on the result of the claim. See, e.g., AIG Hawaii Ins. Co. v. Smith, 78 Haw. 174, 891 P.2d 321, reconsideration denied, 78 Haw. 421, 895 P.2d 172 (1995). In Smith, we held that there are certain circumstances under which the insurer's conduct of a defense of its insured is performed in such a manner as to create serious prejudice to the insured. Therefore, under these circumstances, the insurer is equitably estopped from denying indemnification for the judgment, despite the fact that the ultimate judgment is based on grounds outside the scope of coverage. " he party invoking equitable estoppel must show that 'he or she has detrimentally relied on the representation or conduct of the person sought to be estopped, and that such reliance was reasonable.' Such requirement, however, may be dispensed with in order to prevent manifest inJustice." Smith, 78 Hawaii at 179, 891 P.2d at 266 (emphasis in original) (citations omitted).
In Smith, the insured, Eric Castillo, tendered his defense to the insurer, AIG Hawaii Insurance Co., after an automobile accident. A complaint was filed naming Castillo as a defendant on August 16, 1988. After being given notice of the complaint, AIG sent Castillo a letter disclaiming coverage for punitive damages and for compensatory damages over the policy limits. AIG did not issue a reservation of rights as to compensatory damages within policy limits. AIG thereafter paid for counsel, who represented Castillo. On January 26, 1989, Castillo's deposition was taken. Then, in March 1989, based on information obtained through Castillo's deposition, AIG withdrew its defense.
In Smith, Castillo was prejudiced by AIG's conduct of his defense.
"Rather than obtain a reservation of rights or non-waiver of rights, AIG: (1) chose instead to assume unconditional control over Castillo's defense; (2) reaffirmed its intention to provide coverage for compensatory damages within the policy limits; and (3) allowed Castillo's deposition to be taken, potentially exposing him to criminal liability, without the benefit of independent counsel. Moreover, the information obtained by AIG's retained counsel during the discovery process, including information learned from Castillo's deposition, was presumably relayed to AIG and served as the basis for AIG's denying coverage and withdrawing Castillo's defense. AIG's actions effectively deprived Castillo of his right to: (1) obtain private counsel; (2) control his defense . . .; (3) explore possible settlement negotiations; and (4) control the manner and handling the lawsuit. AIG's actions further created an apparent conflict of interest due to the insurance company's attorney performing a dual role, that is, maintaining exclusive control of the defense of the claims against the insured while gathering information that could simultaneously be used by the insurer to deny coverage." Id. at 179-180, 891 P.2d at 266-267.
Therefore, we held that AIG was equitably estopped from denying coverage to Castillo because of its actions in conducting his defense.
Insurers and retained defense counsel must be aware of these potential liabilities in the conduct of the defense of an insured. We believe that the remedies discussed above are adequate deterrence against misconduct and safeguard the interests of the insured regardless of the fact that the attorney representing the insured is selected by the insurer. Although the availability of these remedies is relevant to o
Page 1 2 3 4 5 6 7 8 9 10 11 12 13 Hawaii Employee Leasing Services
Employee Leasing Services
|
| |
to fill out a simple form to connect to Employee Leasing Services in your area.
|
|