Independent Counsel

In Chapter 6 of my upcoming book The Art of Adjusting: Writing Down the Unwritten Rules of Claims Handling, I discussed the requirement to retain a second (or third, depending on how you look at it) attorney if a reservation of rights letter is sent to the insured. The reasoning for this is the believe that coverage issues create a conflict of interest between the insurer and the insured.

 

As a side note, the duty to provide independent counsel arises when there is a material conflict of interest between the insurer and the insured. This means the insurer reserves its right to deny coverage based on the result of a disputed issue.

Scroll to the bottom of the chart for more information. 

 

This chart is current as of the date I wrote it, but adjusters should be familiar with their state’s rules. I cannot guarantee the accuracy of the list. Because laws and regulations can change without notice, an attorney should be contacted if there are any questions regarding this chart. These materials are provided for informational and educational purposes only and do not constitute legal advice or legal opinions because I am not an attorney.

State
Independent Counsel Needed
Alabama
No
Alaska
Yes
Arizona
No
Arkansas
Maybe
California
Yes—Commonly called Cumis Counsel
Colorado
No
Connecticut
No
Delaware
Maybe
District of Columbia
Maybe
Florida
Yes
Georgia
Maybe
Hawaii
No
Idaho
No
Illinois
Maybe
Indiana
No
Iowa
Maybe
Kansas
Yes
Kentucky
No
Louisiana
Maybe
Maine
No
Maryland
Yes
Massachusetts
Yes
Michigan
Maybe
Minnesota
Maybe
Mississippi
Yes—Commonly called Moeller Counsel
Missouri
Yes
Montana
Yes
Nebraska
No
Nevada
Yes
New Hampshire
Yes
New Jersey
Yes
New Mexico
Yes
New York
Maybe
North Carolina
No
North Dakota
No
Ohio
Maybe
Oklahoma
Maybe
Oregon
No
Pennsylvania
Yes
Rhode Island
Yes
South Carolina
No
South Dakota
Yes
Tennessee
No
Texas
Yes
Utah
Maybe
Vermont
No
Virginia
No
Washington
No
West Virginia
No
Wisconsin
Yes
Wyoming
Maybe

Alabama

There is no requirement for independent counsel.

 

Alaska

If there is a conflict between the insurer and the insured, independent counsel is needed. Alaska has determined that the following do not constitute a conflict of interest: (1) a claim for punitive damages; (2) a claim of damages in excess of the policy limits; (3) claims in a lawsuit where the carrier denies coverage, unless the insurer reserves its right on the issue for which coverage is denied. See Alaska Stat. §21.89.100(b) and (c).

 

Arizona

There is no requirement for independent counsel.

 

Arkansas

There is no requirement for independent counsel according to the State of Arkansas. However, Federal District courts in Arkansas believe that the insured has a right to select independent counsel. 

 

California

The California legislature adopted Cal. Civ. Code Ann. § 2860 to address an insured's right to independent counsel. This codified the court decision in San Diego Navy Fed. Credit Union v. Cumis Ins. Soc'y, 208 Cal. Rptr. 494 (Cal. Ct. App. 1984) which prompted adjusters everywhere to ubiquitously refer to independent counsel as “Cumis counsel.”

 

There are times when a conflict does not exist per California such as when punitive damages or demands in excess of policy limits are claimed. Not every reservation of rights letter creates a conflict of interest; the conflict is created when coverage is dependent on the facts in the lawsuit.

 

Finally, there are several caveats regarding independent counsel such as Cumis counsel must have at lease “five years of civil litigation practice which includes substantial defense experience in the subject at issue in the litigation” and the insured may waive his right to independent counsel.

 

Colorado

There is no requirement for independent counsel.

 

Connecticut

There is no requirement for independent counsel.

 

Delaware

There is no requirement for independent counsel, but a trial court opined that if there is a conflict of interest, the insurer should provide independent counsel. Confusingly, the court referred to the attorney assigned by the insurer as “independent counsel.”

 

District of Columbia

If an insured can prove a conflict of interest exists, then he is entitled to independent counsel.

 

Florida

While Florida recognizes the right to independent counsel, it believes the ethical rules governing attorneys are sufficient to protect the insured. Therefore, both the insured and the insurer must be “mutually” agreed to the choice of the attorney. In the instance of a reservation of rights for late notice, the insured may have the ability to choose his counsel without agreement of the insurer. See Fla. Stat. § 627.426(2) regarding the insurer’s ability to deny the claim.

 

Georgia

There is no requirement for independent counsel per the State of Georgia, but like Arkansas, the Eleventh Circuit Court of Appeals opined there is a need for independent counsel. The court stated it relied on George law but didn’t quote which law it was referring to.

 

Hawaii

There is no requirement for independent counsel.

 

Idaho

There is no requirement for independent counsel.

 

Illinois

Illinois appears to be conflicted in this matter, and it is best to consult coverage counsel. While the Appellate Court of Illinois refused to opine that a reservation of rights automatically creates a conflict of interest, it also stated that the insurer’s right in negating coverage does not create an adequate conflict to prevent it from defending the insured.

 

Indiana

There is no requirement for independent counsel.

 

Iowa

There is no requirement for independent counsel. However, there is a court case which stated that if the insured is prejudiced by the insurer’s defense, a conflict could exist and independent counsel could be needed. See First Newton Nat’l. Bank v. General Cas. Co., 426 N.W.2d 618, 630 (Iowa 1988) (citing Howard v. Russell Stover Candies, Inc. 649 F.2d 620, 625 (8th Cir. 1981).

 

Kansas

The Supreme Court of Kansas held that if there is a conflict of interest between the insured and the insurer as discussed in the reservation of rights letter, the correct way to resolve the issue is for the insurer to hire independent counsel to defend the insured.

 

Kentucky

There is no requirement for independent counsel.

 

Louisiana

If an insured can prove a conflict of interest exists, then he is entitled to independent counsel. The main issue, as with all the states which permit independent counsel, revolves around determining if a conflict of interest is created when comparing the allegations in the suit to the policy and if the insurer provides a “less than vigorous defense” to the insured.

 

Maine

There is no requirement for independent counsel.

 

Maryland

A reservation of rights does not automatically create a conflict, but independent counsel must be appointed in the event of an actual conflict. Similar to Alaska, demands for amounts in excess of policy limits do not automatically create a conflict.

 

Massachusetts

Massachusetts’ Supreme Judicial Court held that a reservation of rights creates a conflict, and the insurer will pay for the insured’s independent counsel.

 

Michigan

If an insured can prove a conflict of interest exists, then he is entitled to independent counsel.

 

Minnesota

An actual conflict of interest, rather than the appearance of a conflict, is the trigger for independent counsel. The Minnesota courts advise insurers to file a Declaratory Judgement Action on the coverage issue prior to trial in order to avoid the issue of a conflict of interest.

 

Mississippi

Mississippi’s Supreme Court, like Massachusetts, believes that a reservation of rights letter creates a per se conflict of interest, but the conflict is only for the claim parts which the insurer has reserved rights on. See Moeller v. Am. Guarantee & Liab. Ins. Co., 707 So. 2d 1062, 1071 (Miss. 1996).

 

Missouri

Insurers must provide independent counsel to the insured. The insured may reject the insurer’s defense under a reservation of rights; if he does, the insurer has three options: (1) defend without a reservation of rights; (2) withdraw from defending the insured; or (3) file a Declaratory Judgment Action to determine coverage.

 

Montana

Insurers must provide independent counsel to the insured based on the Montana Supreme Court. See Safeco Ins. Co. v. Liss, 2005 Mont. Dist. LEXIS 1073, at *40–*41 (Mont. Dist. Ct. Mar. 11, 2005 and State Farm Fire and Cas. Co. v. Schwan, 308 P.3d 48 (Mont. 2013).

 

Nebraska

There is no requirement for independent counsel.

 

Nevada

In 2015 Nevada’s Supreme Court, inspired by California’s Cumis rule, stated the insurer is obligated to provide independent counsel when there is a conflict.

 

New Hampshire

If there is a conflict of interest, the insurer must provide independent counsel to the insured.

 

New Jersey

If there is a conflict of interest, the insurer must provide independent counsel to the insured. When a reservation of rights is issued, the insurer can only control the defense with the insured’s consent; therefore, it is possible that independent counsel does not have to be used.

 

New Mexico

New Mexico seems to agree with other states in that if there is a conflict, and the insured objects to the reservation of rights, the insurer can pay for independent counsel or insist the insured himself pay for the independent counsel. See Rhode Island.

 

New York

If the insurer defends under a reservation of rights, the insured is permitted to have independent counsel. Earlier court decisions opined that independent counsel was not needed in unless the defense counsel was placed in a conflict of serving two masters with opposing interests. It would be beneficial to discuss with coverage counsel.

 

North Carolina

There is no requirement for independent counsel.

 

North Dakota

There is no requirement for independent counsel.

 

Ohio

If there is a conflict of interest, the insurer must provide independent counsel to the insured. The Ohio Appeals Court did not say that a reservation of rights automatically grants independent counsel, though.

 

Oklahoma

Oklahoma is very nearly word for word like New York. It is best to speak with coverage counsel.

 

Oregon

There is no requirement for independent counsel.

 

Pennsylvania

If there is a conflict of interest, the insurer must provide independent counsel to the insured. Punitive damages are uninsurable in Pennsylvania, and a denial does not represent a conflict of interest requiring that the insurer provide independent counsel to the insured.

 

Rhode Island

New Mexico seems to agree with other states in that if there is a conflict, and the insured objects to the reservation of rights, the insurer can pay for independent counsel or insist the insured himself pay for the independent counsel. See New Mexico.

 

South Carolina

There is no requirement for independent counsel. Like Florida, South Carolina believes the South Carolina Rules of Professional Conduct for attorneys bars her from representing parties with conflicting interests; so, it is the attorney’s ethical duty to determine if a conflict exists.

 

South Dakota

If there is a conflict of interest, the insurer must provide independent counsel to the insured.

 

Tennessee

There is no requirement for independent counsel. Again, Tennessee believes an attorney’s Rules of Professional Conduct bars her from representing parties with conflicting interests. Interestingly, if the insured hires independent counsel himself, he is not entitled to reimbursement for that attorney’s costs.

 

Texas

If there is a conflict of interest, the insurer must provide independent counsel to the insured. Not only must the insurer pay for the independent counsel but also a non-waiver does not allow the insurer to shirk its payment responsibility. There are some carve outs to this rule such as when the insurer defends unconditionally.

 

Utah

Utah has a conflicted view of independent counsel, and it is best to discuss with coverage counsel. The Eighth Circuit Court of Appeals believes it is impossible for an attorney to “adequately and fairly represent two parties in litigation,” but does not believe a reservation of rights creates a conflict.

 

Vermont

There is no requirement for independent counsel.

 

Virginia

There is no requirement for independent counsel.

 

Washington

There is no requirement for independent counsel.

 

West Virginia

There is no requirement for independent counsel.

 

Wisconsin

If there is a conflict of interest, the insurer must provide independent counsel to the insured. An actual conflict of interest based on opposing defenses of the insured and the coverage analysis of the insurer must exist.

 

Wyoming

It is best to discuss with coverage counsel. There are no cases on this issue, but a 1995 court case opined that when an insurer reserves rights it loses the right to control the defense.