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Finley v. Home Insurance Company12/30/1998
insured, it shall be the duty of that counsel and the insured to disclose to the insurer all information concerning the action except privileged materials relevant to coverage disputes, and timely to inform and consult with the insurer on all matters relating to the action. . . ."
"(e) The insured may waive its right to select independent counsel by signing the following statement: "I have been advised and informed of my right to select independent counsel to represent me in this lawsuit. I have considered this matter fully and freely waive my right to select independent counsel at this time. I authorize my insurer to select a defense attorney to represent me in this lawsuit.""
"(f) Where the insured selects independent counsel pursuant to the provisions of this section, both the counsel provided by the insurer and independent counsel selected by the insured shall be allowed to participate in all aspects of the litigation." Cal. Civil Code ยง 2860 (West 1998).
Thus, in California, where a "conflict of interest" arises due to an insurer's tender of a defense under a reservation of rights, the insured may have the right to select independent counsel to represent the insured in the action.
The Finleys argue that HIGA had a duty to pay for Bernstein's services. In support of their argument, the Finleys assert that "a conflict automatically arises whenever an insurer (1) accepts a defense under a reservation of rights; and (2) there are multiple claims in the complaint; and (3) the litigation of those claims has the potential of relieving the insurer of liability under its policy." Therefore, relying on Cumis and an interpretation of the requirements of the Hawaii Rules of Professional Conduct (HRPC) in the event of a conflict of interest, the Finleys assert that HIGA is required to pay for Bernstein's services as "independent counsel." In order to determine whether HIGA was obligated to pay for additional counsel, we must determine the options available to an insured faced with a tender of a defense under a reservation of rights. Specifically, we must determine whether insureds should have the right to reject the attorney selected by the insurer and select their own counsel, whose reasonable fees would be paid by the insurer.
2. The insured does not have the right to select counsel to represent its interests solely due to an insurer's reservation of rights.
There is no consensus on this issue nationwide. Reasonable minds can and do differ on the best resolution of the conflict inherent in the tripartite relationship among the insurer, the insured, and insurance defense counsel. The magnitude of the difficulty in resolving the issue is reflected in the volume of litigation nationwide and, in the instant case, the number of amicus curiae briefs representing divergent views. Upon balancing the respective pros and cons of suggested solutions to the issue, we are convinced that the best result is to refrain from interfering with the insurer's contractual right to select counsel and leave the resolution of the conflict to the integrity of retained defense counsel. Adequate safeguards are in place already to protect the insured in the case of misconduct. If the retained attorney scrupulously follows the mandates of the Hawaii Rules of Professional Conduct (HRPC), the interests of the insured will be protected. In the event that the attorney violates the HRPC, the insured has recourse to remedies against both the attorney and the insurer.
a. Under the HRPC, the sole client of the retained attorney is the insured.
The notion that the attorney retained by the insurer to represent the insured is barred from the representation
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