Simple becomes complex.

• Author: Mitchell, George H.
• Position: President's Page

IT SEEMS so simple and efficient. Joe Citizen purchases insurance to protect himself against liability to third parties injured through his negligence. The insurance company is obligated to furnish a defense to claims and to indemnify him to the extent of his coverage. If there is a claim, the :insurer retains defense counsel under provisions of the policy, and Joe agrees to cooperate in the defense.

This arrangement protects injured parties in that they are assured of being able to find monetary satisfaction of their claims or judgments; it protects insured persons against financial loss or possibly ruin; it provides a market for the insurer.

Looking at the tripartite relationship

This so-called tripartite arrangement has been studied and commented on for years in both legal literature and court decisions. But while there is a community of interest among the three parties in the vast majority of cases--some estimates are 95 percent--there are situations in which conflicts exist or possible conflicts can arise. Then the tripartite relationship is questioned.

Several years ago, the International Association of Defense Counsel, with the collaboration of the Defense Research Institute and financial assistance from the IADC Foundation, took the lead in commissioning a scholarly analysis of the nuances of this relationship. This project, undertaken by Professors Charles Silver of the University of Texas Law School and Kent Syverud, then of the University of Michigan Law School, produced a study entitled "The Professional Responsibilities of Insurance Defense Lawyers," published in 45 Duke Law Journal 255 (1995). An executive summary appeared in the October 1995 issue of Defense Counsel Journal, page 503.

The Silver-Syverud paper dealt with full coverage situations. As the project continues, Professor Silver has joined with Professor Ellen Smith Pryor of the Southern Methodist University School of Law to deal with excess exposure cases, which present the potential for conflicts of interest. Their paper will be published in the Texas Law Review.

Who is the client?

Into this tripartite relationship picture the latest entry is an April 28 decision from the Montana Supreme Court, In the Matter of Rules of Professional Conduct and Insurer Imposed Billing Rules and Procedures, 2000 Mt. 110. In an original application for a declaratory judgment, that court concluded that the insured is the sole (the court's emphasis) client of insured-retained defense...