99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
SB1296

 

Introduced 2/18/2015, by Sen. John G. Mulroe

 

SYNOPSIS AS INTRODUCED:
 
New Act

    Creates the Insured's Independent Counsel Act. Provides that if an insurer has a duty to defend an insured under a policy of insurance and a significant and actual conflict of interest arises that imposes a duty on the insurer to provide independent counsel to the insured, unless the insured waives the right to independent counsel in writing, the insurer shall provide independent counsel to the insured. Provides that the phrase "significant and actual conflict of interest" excludes specified circumstances. Adds provisions governing: the selection of independent counsel; retention of other counsel by an insured; duties of the independent counsel; privileged information; waiver of the right to select independent counsel; and cooperation between the insurer, insured, and independent counsel.


LRB099 10112 HEP 30335 b

 

 

A BILL FOR

 

SB1296LRB099 10112 HEP 30335 b

1    AN ACT concerning insurance.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. Short title. This Act may be cited as the
5Insured's Independent Counsel Act.
 
6    Section 5. Provision of independent counsel required.
7    (a) If an insurer has a duty to defend an insured under a
8policy of insurance and a significant and actual conflict of
9interest arises that imposes a duty on the insurer to provide
10independent counsel to the insured, the insurer shall provide
11independent counsel to the insured as provided in this Act
12unless the insured waives the right to independent counsel in
13writing.
14    (b) For purposes of this Act, "significant and actual
15conflict of interest" does not include:
16        (1) claims or facts in a civil action for which the
17    insurer denies coverage;
18        (2) the mere issuance of a reservation of rights letter
19    by the insurer;
20        (3) a claim of damages in excess of the policy limits;
21        (4) a claim of punitive damages; or
22        (5) any other conflict that is not significant and
23    actual.
 

 

 

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1    Section 10. Independent counsel selection.
2    (a) If a significant and actual conflict of interest arises
3that requires appointment of independent counsel, the insurer
4shall provide the insured with a list of 3 attorneys, from
5separate law firms, who are independent of the insurer's
6approved law firm panel. The insured must select one attorney
7from the list to defend the insured.
8    (b) An independent counsel retained under this Act must
9have:
10        (1) at least 10 years of experience in civil litigation
11    that includes defense experience in the general subject
12    areas at issue in the civil action; and
13        (2) malpractice insurance.
14    (c) The insurer may also require that the independent
15counsel follow any guidelines the insurer has in place for
16counsel it retains in the defense of similar civil actions in
17the ordinary course of business. The obligation of the insurer
18to pay the fee charged by the independent counsel is limited to
19the rate that is actually paid by the insurer to an attorney in
20the ordinary course of business in the defense of a similar
21civil action in the community in which the claim arose or is
22being defended. In providing independent counsel, the insurer
23is not responsible for the fees and costs of defending an
24allegation for which coverage is properly denied and is
25responsible only for the fees and costs to defend those

 

 

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1allegations for which the insurer either reserves its position
2as to coverage or accepts coverage. The independent counsel
3shall keep detailed records allocating fees and costs
4accordingly.
5    (d) An insurance policy may contain a provision that
6provides a method of selecting independent counsel which
7complies with this Section.
 
8    Section 15. Other counsel. Any counsel the insured may
9retain in addition to the independent counsel selected under
10Section 10 of this Act shall be hired at the insured's sole
11expense.
 
12    Section 20. Duties of independent counsel; privileged
13information. Independent counsel hired under this Act shall
14timely consult with the insurer on all matters relating to the
15civil action and shall disclose to the insurer in a timely
16manner all information relevant to the civil action, except
17information that is privileged and solely relevant to disputed
18coverage. A claim of privilege is subject to review in the
19appropriate court. Information disclosed by the independent
20counsel or the insured does not waive another party's right to
21assert privilege or work product protection.
 
22    Section 25. Waiver of right to select independent counsel.
23An insured may waive the right to select independent counsel by

 

 

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1signing a statement that reads substantially as follows: "I
2have been advised of my right to select independent counsel to
3represent me in this lawsuit and of my right under State law to
4have all reasonable expenses of an independent counsel paid by
5my insurer. I have considered this matter fully and at this
6time I am waiving my right to select independent counsel. I
7have authorized my insurer to select a defense counsel to
8represent me in this lawsuit.".
 
9    Section 30. Cooperation between insurer, insured, and
10independent counsel. Independent counsel shall cooperate fully
11in exchanging information that is consistent with ethical and
12legal obligations to the insured. Nothing in this Act relieves
13the insured of the duty to cooperate fully with the insurer as
14required by the terms of the insurance policy.