dependent counsel

Dependent counsel” is the counterpart to “independent counsel.” Dependent counsel is selected and directed by the insurer, represents both the insurer and the policyholder, and depends on insurers as a principal source of continuing business. In contrast, Independent counsel is selected and directed by, and represents only the policyholder, is not hired by the insurer, and has no expectation of future business from the insurer. Dependent counsel are sometimes called: insurance defense counsel, insurer retained counsel, insurer appointed counsel, and panel counsel.

The phrase “dependent counsel” implies a continuing relationship between insurers and their lawyers that some courts have described as follows: “[a]s a practical matter . . . in reality, the insurer’s attorneys may have closer ties with the insurer and a more compelling interest in protecting the insurer’s position, whether or not it coincides with what is best for the insured” (Purdy v. Pacific Automobile Ins. Co.(1984) 157 Cal.App.3d 59, 76), “[i]nsurance companies hire relatively few lawyers and concentrate their business. A lawyer who does not look out for the Carrier’s best interest might soon find himself out of work.” (San Diego Navy Fed. Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358, 364), and “defense counsel and the insurer frequently have a longstanding, if not collegial, relationship” (Gulf Ins. Co. v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2000) 79 Cal.App.4th 114, 131). “In California, an attorney may usually, under minimum standards of professional ethics, represent dual interests as long as full consent and full disclosure occur.” (Lysick v. Walcom (1968) 258 Cal.App.2d 136, 147; See, also Ishmael v. Millington (1966) 241 Cal.App.2d 520, 528; Industrial Indem. Co. v. Great American Ins. Co. (1977) 73 Cal.App. 3d 529, 537.)

“Even the most optimistic view of human nature requires us to realize that an attorney employed by an insurance company will slant his efforts, perhaps unconsciously, in the interests of his real client – the one who is paying his fee and from whom he hopes to receive future business – the insurance company. Matthew 6:24 retains a particular relevancy, ‘No man can serve two masters’. . . . [T]he conflict situation cannot be eliminated so long as the insurance company selects the counsel. It is simply a matter of human nature.” (Union Ins. Co. v. Knife Co., Inc. 902 F. Supp. 877, 881 (W.D. Ark. 1995) (citations, quotation marks, and ellipses omitted).)

“Common logic dictates that counsel for [the insurer] would be inclined to bend his efforts, however unconsciously, toward establishing that any recovery by [the plaintiff] would be grounded on the theory of [the plaintiff’s] claim which was not covered by the policy.” (Howard v. Russell Stover Candies Inc., 649 F.2d 620, 625 (8th Cir. 1981) (Mo. law) (citations, quotation marks, and ellipses omitted).)

“[W]e simply cannot ignore the practical reality that the insurer may seek to exercise actual control over its retained attorneys in this context. . . . [I]t would be imprudent for this Court to hold that attorneys are independent contractors vis-à-vis insurers, but then to ignore the practical realities of that relationship when it causes injury.” (Givens v. Mullikin ex rel. Estate of McElwaney, 75 S.W.3d 383, 395 (Tenn. 2002) (citations, quotation marks, and ellipses omitted).)

“[A] ruling that required an insured to be defended by what amounted to his enemy in the litigation would be foolish. Thus, [the policyholder] should not be forced to use [the insurer]’s attorneys to defend against [the injured plaintiff]’ claims.” Amer. Family Mut. Ins. Co. v. W.H. McNaughton Builders, Inc., 843 N.E.2d 492, 501 (Ill. Ct. App. 2006) (citations, quotation marks, and ellipses omitted).)

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