*The role between the insured and the insurer is defined by the insurance contract, any ambiguities being interpreted by the courts in favour of the insured. Florida, on the other hand, has enacted a law that requires a conflict of interest between the insurer and the insured if the insurer asserts a coverage defense through an RAR letter. Section 627.426 of the Florida Claims Administration Statute requires the insurer to obtain either: (1) a non-waiver agreement from the insured after “full disclosure of the specific facts and insurance provisions on which the coverage defense is invoked and the obligations, obligations and liabilities of the insurer during and after the dispute in question”; or (2) engage independent counsel “who is consensual to the parties.” 7 In previous blogs, I have discussed liability insurance, including the application of the insurance agreement and exclusions on the existence of coverage, as well as disputes in insurance disputes. A related issue concerns the rights of the insured and the insurer when the insurer hires a lawyer for the insured, when a covered or potentially covered claim or lawsuit is brought against the insured. This is called a “tripartite relationship” – the relationship between (1) the insurance company, (2) its insured, and (3) the lawyer hired by the insurance company to defend the insured under the insurance policy. The Moeller decision was made in the Twin City Fire Ins case. Co.c. more details. City of Madison, Miss., 309 F.3d 901 (5. Cir. 2002).

The Twin City court ruled that “the insured should be informed immediately of any potential conflict of interest between his interests and those of his insurance company so that he can competently consider hiring another lawyer.” If the insured is not informed in a timely manner of the possibility of a conflict of interest and the right to independent legal counsel, the insurer may be prevented from denying coverage, even if there are valid coverage defences. Alabama allows the insurer to control the defense under an MMR if certain criteria are met. The interests of the insurer and the insured may also conflict if the insured expects the best possible (and sometimes the most expensive) defense and the insurer expects a low-cost defense. In this scenario, extreme cost constraints may expose the defense attorney to liability for misconduct for inadequate preparation of the defense. The Office of the Attorney General of the Alabama State Bar has clarified that a defense attorney cannot allow an insurer to influence its exercise of professional judgment by providing legal services to the insured.24 This view is consistent with (third-party) representation of the law governing attorneys, and the ABA Model Rules for Professional Conduct. Both authorities prohibit a third party such as an insurer from interfering with the independent professional judgment of the defense attorney, regardless of the tripartite relationship. The best way to resolve this potential dilemma is to communicate openly with the insurer. By keeping the insurer informed of the status of the dispute, as well as the measures necessary to protect the interests of the insured, the advocate reduces the risk that the insurer will impose significant cost constraints on its litigation plan. In order to represent his clients effectively and competently, the lawyer must be able to exchange and obtain information from the insured and the insurer without fear that the opponent will receive such communications. Although exclusive communication between the insurer and the insured is generally not protected by any privilege, the tripartite relationship makes it possible to claim that the communication between the insured, the insurer and the lawyer is protected by solicitor-client privilege. At present, only a few States have formulated a clearly defined rule according to which professional secrecy applies in the tripartite relationship. California and Kentucky are two of these states.

In California, the Court of Appeals for the Fourth Circuit of Appeals in Bank of America, NA v. Superior Court held that both the insurer and the insured held solicitor-client privilege and that it was not necessary for the insured and the insurer to waive a subpoena requesting privileged documents. 212 Cal App 4. 1076 (2013). In this case, Bank of America (BOA) was insured under a lender security policy issued by Fidelity National Title Insurance Company. When BOA made a claim under the policy, Fidelity hired a lawyer to sue certain rights of BOA. The defendant in this lawsuit served a subpoena on Fidelity`s parent company and another title insurer requesting documents, including communications between counsel and Fidelity. Although BOA quashed the subpoena on the basis that the defendant had requested documents protected by solicitor-client privilege, Fidelity did not. The Supreme Court dismissed the application, and BOA and Fidelity filed an application for a warrant order. The Court of Appeal ruled that since Fidelity had hired a lawyer to represent BOA, a tripartite lawyer-client relationship had been established.

The court further noted that, since BOA and Fidelity were joint clients of that defence lawyer, it was not necessary for BOA and Fidelity to attempt to quash the summons, as it was sufficient that one of the co-holders of solicitor-client privilege had done so. The BOA`s decision confirmed the existence of the tripartite relationship and the extension of solicitor-client privilege to all communications between the insured, the insurer and the attorney in California. The court clarified that the nature of the lawsuit is not an issue and that solicitor-client privilege applies if the insurer retains counsel for its insured, whether that lawyer has been appointed to defend a lawsuit or pursue a claim on behalf of the insured. The issue of tripartite relations and solicitor-client privilege was also recently considered by the United States District Court for the Southern District of West Virginia, Charleston Division. For the first time under Kentucky law, this court considered whether communications between an insurer, an insured person and a lawyer are protected by solicitor-client privilege. In Ellis v. Arrowood Indemnity Co. The plaintiffs filed a malpractice lawsuit against two law firms, both of which had malpractice insurance. 2014 U.S. Dist. LEXIS 121913 (USDC WVa).

Arrowood hired a lawyer to represent one of the defendant law firms. The trial was split in two, and the first phase eventually resulted in a jury verdict in favor of the plaintiffs. A settlement was reached before the start of the second phase, but due to an undisclosed conflict between the judge and the plaintiffs` litigant, the verdict and settlement were overturned. Due to a delay while the parties were trying to reach a new settlement, the plaintiffs filed a lawsuit directly against the Arrowood. In this lawsuit, subpoenas were issued to the insured law firm and the lawyer hired by Arrowood to represent them to request communication between the lawyer and the insurer. Arrowood requested that the subpoenas be quashed. The court held that under Kentucky law, since an insured and an insurer are joint clients of attorneys hired by an insurer to represent an insured, the rules of joint representation apply and therefore there is professional secrecy with respect to confidential communication between the insurer, attorney and insured. (The court dismissed arrowood`s applications for cancellation on the sole ground that Arrowood had not filed a protocol of privilege and had failed to provide the court with the factual basis for determining whether solicitor-client privilege applied.) The Arrowood court enacted a new law in Kentucky ruling on an area of law previously undeveloped in that state.

The court clarified that Kentucky joined the majority in noting that the insurer, like the insured, is a client of the designated defense attorney. Even if the tripartite relationship and solicitor-client privilege are recognized, care must be taken to ensure that the privilege is not accidentally revoked. In this regard, all parties must be careful when transmitting information to natural or legal persons who are not considered customers in the context of this analysis. Such disclosure may be something as simple as copying these non-client third parties on otherwise privileged communications that could be argued by the opposition as a waiver of any solicitor-client privilege otherwise associated with it, which could make those communications detectable by the other party. “We would like to emphasize that the obligation that is now imposed on insurance companies is not onerous. It simply requires that, if an insurer intends to pursue a matter under a . The insurer must not only inform his insured of this circumstance, but also keep his insured informed of the progress of the case. 11 Cooperation between the public and private sectors is an integral part of InsuResilience Vision 2025. The Vision 2025 work plan identifies a series of short- and medium-term outcomes to mobilize risk expertise and capital for sustainable insurance markets and to develop new insurance solutions for government, sub-state and humanitarian actors.

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