allocation oct2013 defense allocation final

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 LLP949.336.1234lmorrison@tresslerllp.com

Lawrence A. HobelCovington & Burling LLP415.591.7028lhobel@cov.com