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Volume48
MonthAugust
Year2011
TitleIndependent Counsel in Insurance
Author(s)Douglas R. Richmond
First Page857
AbstractMention the term ?independent counsel? to many lawyers and they think immediately of the process whereby the Attorney General of the United States requests a panel of federal judges to appoint an Independent Counsel to investigate and prosecute crimes by government officials. Business lawyers may think of ?independent counsel? in the context of counsel for independent directors on a corporate board in connection with select matters. For most litigators, however, the term ?independent counsel? describes a lawyer engaged to defend an insured at a liability insurer?s expense in a case in which the liability insurer has lost the right to control the defense because of a conflict of interest. Independent counsel makes all decisions concerning the defense, shares an attorney-client relationship solely with the insured, and is loyal only to the insured; the insurer simply pays independent counsel?s fees. The loss of defense control is a major economic and tactical concern for insurers. If insurers must accept independent counsel in even a small percentage of the cases in their litigation portfolios, that still means that a material number of cases involve independent counsel, since approximately 80 percent of civil litigation in the United States involves liability insurance.

The concept of independent counsel in insurance raises a number of questions. What qualifies a lawyer to serve as independent counsel? Who selects independent counsel? On what basis should independent counsel be compensated? Must independent counsel accept the same financial and administrative constraints that insurers impose on their regular counsel? What is the relationship between the insurer and independent counsel? What professional duties does independent counsel owe, and to whom do they owe them? There is very little authority to guide courts and lawyers facing these issues. This Article maps the critical contours of independent counsel in insurance in a way never been done before, beginning in Part II with the characterization of independent counsel, including their selection. Importantly, I explain why insurers should be able to select independent counsel for insureds, which is currently (but incorrectly, I argue) the clear minority position. My reasons for changing the law are grounded in the realities of modern law practice. Part III examines independent counsel?s compensation. I argue that independent counsel?s compensation must be reasonably limited in accordance with Model Rule of Professional Conduct 1.5(a). Part IV discusses independent counsel?s relationship with the insurer in the case being defended. I explain why?contrary to many lawyers? and courts? understanding?lawyers serving as independent counsel owe a number of duties to the insurers? paying them notwithstanding their ?independence.? Finally, Part V addresses the professional responsibilities of independent counsel.