1. © 2015 Tressler LLP
Presented by:
One Beacon, Chicago
Todd M. Rowe
INDEPENDENT COUNSEL
April 2016

2. © 2015 Tressler LLP
San Diego Navy Federal Credit Union v. Cumis Insurance Company,
162 Cal.App.3d 358 (1984)
“CUMIS” Counsel
Civil Code §2860 now supersedes Cumis
Maryland Casualty Co. v. Peppers, 64 Ill.2d 187, 355 N.E.2d 24.
“CUMIS”/“PEPPERS” COUNSEL
2

3. © 2015 Tressler LLP
» Fla. Stat. § 627.426(2). Claims administration.
» Murphy v. Urso, 88 Ill.2d 444 (1981)
» Public Service Mut. Ins. Co. v. Goldfarb, 53 N.Y.2d 392
(1981)
» Employers Cas. Co. v. Scott Elec. Co., 513 S.W.2d 642
(Tex.App. 1974)
INDEPENDENT COUNSEL
3

4. © 2015 Tressler LLP
Conflict ALWAYS exists under any
ROR at all.
Kansas Bankers Surety Co. v. Lynass, 920 F.2d 546, 549 (8th Cir.
1990) (South Dakota Law); Continental Ins. Co. v. Bayless &
Roberts, Inc., 608 P.2d 281, 289 (Alaska 1980); Salonen v.
Paaneneu, 320 Mars. 568; 71 NE2d 227, 231 (1947); Moeller v.
American Guar. and Liability Ins. Co., 707 So.2d 1062, 1070
(Miss. 1996).
RESERVATION OF RIGHTS
4

5. © 2015 Tressler LLP
Conflict exists when Reservation creates
a loyalty issue.
“. . . only necessary in cases where the defense attorney’s duty to the
insured would require that he defeat liability on any ground and his
duty to the insurer would require that he defeat liability only upon
grounds which would render the insurer liable.” Goldfarb.
“ . . . When the facts to be adjudicated in the liability lawsuit are the
same facts upon which coverage depends, the conflict of interest will
prevent the insurer from conducting the defense.” Northern Country
Mut. Ins. Co. v. Davalos, 140 S.W.3d 685, 689 (Tex. 2004)
RESERVATION OF RIGHTS
5

6. © 2015 Tressler LLP
ROR not necessarily a conflict.
“In Washington, there is simply no presumption . . .
that a reservation of rights creates an automatic
conflict of interest. Therefore, the insurer has not
obligation before-the-fact to pay for its insured’s
indecently hired counsel. Johnson v. Continental Cas.
Co., 788 P.2d 598, 601 (Wash.Ct.App. 1990)
RESERVATION OF RIGHTS
6

7. © 2015 Tressler LLP
Situations when independent
counsel is not required…
» Punitive Damages?
» Damages Exceed Policy Limits?
» Conditions – notice, cooperation, voluntary payments?
» Insured?
» Timing of loss, occurrence, claim, injury?
RESERVATION OF RIGHTS
7

8. © 2015 Tressler LLP
Obligation to NOTIFY the Insured of a Conflict situation:
Stoneridge Development Co., Inc. v. Essex Ins. Co., 382
Ill.App.3d 731 (2008) (If the insurer defends the insured
without disclosing the conflict of interest in its
reservation of rights, the insurer will be estopped from
raising coverage defenses).
NOTICE
8

9. © 2015 Tressler LLP
» Insured’s right
» Subject to approval by the insurer – Not Unreasonably
Withheld:
› Competence
› Experience
› E&O Coverage
› Rates
SELECTION
9

10. © 2015 Tressler LLP
REASONABLE AND NECESSARY
» NOT Panel Counsel Rates
» NOT subject to company guidelines (Independent
means Independent)
» MUST be established As Soon As Possible!!!
RATES
10

11. © 2015 Tressler LLP
» Experience, reputation, ability
» Other attorneys for similar work in similar venue
» Rates charged to other clients
» Relationship with the insured
» Skill needed/provided
» Time limitations
» Amount of work necessary
» Amount at issue
» Rate changes
RATES
11

12. © 2015 Tressler LLP
To The Insured:
Complete loyalty to the INSURED as client.
INDEPENDENT COUNSEL OBLIGATIONS
12

13. © 2015 Tressler LLP
To The Insurer:
» Reporting
» Provide all materials that are not privileged
» Participation and Cooperation
Insurer has the right to have an attorney of its own
choosing participate in all phases of the litigation :
Maryland Casualty Co. v. Peppers, 64 Ill.2d 187, 355
N.E.2d 24.
INDEPENDENT COUNSEL OBLIGATIONS
13

14. Thank you.
© 2015 Tressler LLP
Todd M. Rowe
312.627.4180
trowe@tresslerllp.com