Discusses “Insurance Coverage Litigation: Who Pays The Legal Bills?”
Part 4 of 4
The last panel of NALFA’s 2011 Attorney’s Fees Conference on November 17, 2011 discussed “Insurance Coverage Litigation: Who Pays the Legal Bills?” The panelists in Panel No. 4 were Andre E. Jardini (of KPC Legal Audit Services, Inc.), Susan P. White (of Manatt Phelps & Phillips, LLP), and Susan J. Field (of Musick Peeler & Garrett, LLP).
Ms. White stated that “independent” or “2860” counsel refers to Cumis counsel independently selected by an insured when a coverage conflict is involved, with such counsel not being captive or not being panel counsel. Not all reservations of right create a right to independent counsel, with the facts turning on what is involved in resolving the coverage dispute. Usually, a controversy over whether a claim was timely made does not trigger Cumis counsel rights unless a statute of limitations defense is at issue.
Ms. Field discussed the MGA/Bratz litigation frequently, because many coverage and insurance defense issues were involved. She indicated that no 2860 issues arose until the insurance carrier was actually defending the matter. Ms. Field also indicated that insurers challenged the 2860 qualifications of a criminal defense attorney who had a couple of civil trials but was chosen to defend MGA, even though this counsel contributed to the ultimate success of MGA in the overall litigation.
Mr. Jardini stated that before panel counsel is appointed in defending an insured, the insurer generally will pay for a short period of non-insurance counsel representation while a tender decision is pending.
Ms. Field indicated that it is prudent for Cumis counsel to report often in order to insure that bills get paid, although independent counsel does not have to comply with insurance company billing guidelines. However, given that many companies have similar billing guidelines for representing attorneys, it is not a bad idea to pay serious attention to them or comply with them given their similarity to corporate analog rules.
Mr. Jardini stressed that an insurer cannot require “pre-approval” of how independent counsel will strategically manage a litigation case.
Ms. Field opined that 2860 arbitrators will look at insurance company guidelines, but that “crazy” ones will be disregarded. Throughout the panel presentation, she suggested that independent counsel try to negotiate out any differences rather than trying the luck of the draw at arbitrations.
Ms. White and Ms. Field informed attendees that insurance panel counsel hourly rates are not the same as 2860 rates (the usual rates for competent, qualified counsel in similar actions in the venue community). Ms. White stressed that the similarity of the actions was the focal concern in this area.
Ms. White stated that section 2860 did not invalidate other insurance provisions for pre-arbitration resolution of the case. However, 2860 arbitrations do not involve coverage issues and case law suggests that they focus on whether the hourly rates are proper rather than the necessity/reasonableness of fees (although this latter concern is sometimes arbitrated if the parties agree to do so).
Mr. Jardini chimed in that discovery is often not permitted in 2860 arbitrations, so that it might be better to negotiate a resolution of disputes--something that Ms. Field emphasized throughout.
Ms. White noted that 2860 only applies to “duty to defend” policies, explaining the difference in claims made and D&O “advance payment” policies. She did end things by suggesting that policy holders might be better to opt for 2860 arbitration rather than go to court, although no attorney’s fees are available to a prevailing party in this type of arbitration (unlike court, where Brandt fees are available as damages).
Ms. White also discussed the recent Janopaul+Blocks decision, which is examined in our November 21, 2011 post.
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