Strategies, Challenges, and Answers

Oral Arguments Re: Nevada Independent Counsel Leave Many Questions Unanswered

Cumis AggregateOn May 5, 2015, the parties made their final arguments to the Nevada Supreme Court on the issues of independent counsel in Nevada.  State Farm Mut. Auto. Ins. Co. v. Hansen, Nevada Supreme Court Case No. 64484.  Neither attorney strayed far from his script.  The justices asked only a few questions leaving us to guess at what the final decision may be.

State Farm’s attorney acknowledged that since insurance panel counsel represents both the insured and the insurance company that conflicts can arise.  He said that individual attorneys are fully capable of determining when a conflict has arisen.  As anticipated by William Barker HERE, the attorney advocated that the court reject Cumis and adopt a methodology similar to the one followed in Washington.  Tank v. State Farm, 105 Wn.2d 381, 715 P.2d 113 (1986).  In that state, when a conflict arises, the insurance company still gets to pick the attorney but there is no dual representation.  When actual coverage conflicts arise, the assigned defense attorney represents only the insured and not the insurance company.  State Farm’s attorney emphasized how the Cumis decision created years of chaos in California insurance defense litigation handling and that it took an act of the California legislature to straighten out the problems.  Pointing to that chaos, State Farm’s attorney argued that the court should not step in, but should allow the issues to be resolve by the attorneys or by legislature if necessary.

Counsel for the policyholder argued that the Supreme Court should make a hard and fast rule as to what would trigger the right to independent counsel.  He said that even the most ethical attorneys cannot be expected to make clear-headed decisions on whether a conflict exists because the ongoing relationship between that attorneys and the insurance company that pays their bills would cloud those attorneys’ judgment.  I was surprised that no one asked the policyholder’s counsel about State Farm’s arguments.  Is there an acceptable alternative to the independent counsel rule established by Cumis that would not create the implementation problems that California experienced?  Who gets to decide when there was a conflict sufficient to give rise to such duty?  If it the court making that decision, doesn’t that further burden an already burdened court?  If the state adopts Cumis, who gets to select the “independent counsel”?  Couldn’t the insurance company hire someone off of its regular panel and tell that attorney that he or she does not represent the insurance company?  Who gets to decide how much that “independent counsel” gets paid?  How much, when and what does the “independent counsel” have to report to the insurance company so it can make decisions on possible settlements?  Wouldn’t all of these issues be resolved if the “independent counsel” issue were left to the legislature to decide?

If you have questions about whether your company owes its policyholder an “independent counsel”, please contact Mike Mills at 702-240-6060×114 to discuss.