allocation oct2013 defense allocation final
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Insurance Allocation Strategies 2013
October 28-29, 2013
final
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Defense Allocation Issues When Independent Counsel is Triggered
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Lawrence A. HobelCovington & Burling LLPOne Front StreetSan Francisco, CA 94111
Linda B. MorrisonTressler LLP18100 Von Karman Ave., Suite 800Irvine, CA 92612
The Posse
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When Can the Insured Select Counsel and When Does the Insurer Select?
◦ Common situations and standards
◦ Statutory provisions
Defending with the Insured’s Choice of Counsel
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Who selects counsel if one insurer is entitled to control the defense, and another is not?
How are defense fees and costs shared?
Common areas of dispute◦ Rates ◦ Share of defense
When Multiple Insurers Defend
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Insurer pays “reasonable” fees and costs incurred in the defense of the insured
Disputes over Counsel Selection and Rates ◦ Time/skill required◦ Complexity of issues◦ Novelty of issues◦ Fees customarily charged in locality◦ Nature/length of attorney relationship with clientABA Model Rules of Professional Conduct,
Rule 1.5(A)
Defending Insurer Obligated to Pay “Reasonable” Fees and Costs
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Lawyer Activities ◦ Case Staffing
Partners / associates Multiple attorneys undertaking overlapping
tasks or appearing at same hearing Work delegation Value of time spent in relation to impact on
case Experts
Who, how many, rates and “approvals” E Discovery
Providers/rates Jury Simulations
Red Flag Issues for Insurers
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Block billing◦ Per se inappropriate, presumptively inappropriate or presumptively
acceptable.
Clarity of entries◦ Privilege Issues◦ Nit-picking vs. too vague
Paralegal Work vs. Administrative Cost
Cost Categories
Client professionals and staff
Other Common Billing Disputes
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Under what circumstances can the insurer require compliance with guidelines that insurer imposes on counsel it retains?
Can guidelines preclude insurer payment if counsel believes activities are necessary to defense of insured?
Is insurer obligated to pay when independent counsel’s bills do not comply with guidelines?
Insurer Litigation Guidelines – Do They Apply to Independent Counsel?
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Disputes Over Whether Appropriate◦ Most insurers:
Dependent on circumstances and claims Not unreasonable per se; but can be hard to manage Firms should have discrete roles to minimize overlap
and duplication Consider specific specialties, expertise of firms National Counsel and Coordinating Function may raise
issues
Multiple Law Firms Defending Insured
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Can insurer apportion “unreasonable” fees to insured?
Must insurer pay entire defense and seek to apportion later?
If insurer pays amounts determined to be “unreasonable” or not necessary to defense of insured, can it later recover from—
Insured? Insured’s counsel?
Disputes Over Reasonableness – Insured Sharing?
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Must insurer pay for defense fees incurred◦ For joint activities benefitting both insured and non-
insureds?◦ For activities solely benefitting non-insureds?
Who bears burden of allocating?
When Counsel Defends Insureds AND Non-Insureds
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Impact of indemnity agreements◦ Can additional insured indemnitee
recover rate differential from named insured if defense already provided?
◦ If so, is insurer obligated to reimburse named insured for additional fees?
Don’t Bring a Knife to a Gunfight - Defending an Additional Insured When Indemnity
Agreements Involved
Additional insured entitled to full defense Statute may limit rates insurer pays to defend
additional insured
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Negotiate At Outset◦ Rates◦ Guidelines Applicability
Evaluate whether issues can be resolved by audit process or independent auditor
Establish mechanism for resolving disputes◦ Arbitration as required by some statutes absent agreement?◦ Mediation
At set intervals after submission of bills if disputes arise? Binding?
Litigation
Resolving Defense Allocation Issues with Insured
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Defending insurer seeks to recover from non-defending insurer
Non-defending insurer not allowed to second guess defense
Non-defending insurer bound by defending insurer’s decision to provide independent counsel
Contribution Actions by InsurersWho Draws First and Who is the Last Insurer
Standing??
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Riding Off Into the Sunset – What Is On the Horizon?
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Linda B. MorrisonTressler [email protected]
Lawrence A. HobelCovington & Burling [email protected]