99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
SB2801

 

Introduced 2/17/2016, 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, the insurer shall provide independent counsel to the insured unless the insured waives the right to independent counsel in writing. Defines "significant and actual conflict of interest". Adds provisions governing: the selection of independent counsel; retention of other counsel by either insurer or 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.


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A BILL FOR

 

SB2801LRB099 16796 EGJ 41143 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" means an insurance policy coverage issue
16upon which the insurer has reserved its rights and that the
17outcome of that insurance policy coverage issue can be
18controlled by the insured's counsel's defense of the lawsuit. A
19"significant and actual conflict of interest" does not include:
20        (1) claims or facts in a civil action for which the
21    insurer denies coverage;
22        (2) the mere issuance of a reservation of rights letter
23    by the insurer;

 

 

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1        (3) a claim of damages in excess of the policy limits;
2        (4) a claim of punitive damages; or
3        (5) any other conflict that is not significant and
4    actual.
 
5    Section 10. Independent counsel selection.
6    (a) If a significant and actual conflict of interest arises
7that requires appointment of independent counsel, the insurer
8shall provide the insured with a list of 3 attorneys who are
9independent of the insurer's approved law firm panel and meet
10the criteria set forth in subsection (b). The insured must
11either select one attorney from the list or select alternative
12counsel of its choosing who also meets the criteria set forth
13in subsection (b) to defend the insured.
14    (b) Independent counsel retained under this Act must have:
15        (1) significant defense litigation experience in the
16    general subject areas at issue in the civil action; and
17        (2) malpractice insurance.
18    (c) The insurer may also require that the independent
19counsel follow any guidelines the insurer has in place for
20counsel it retains in the defense of similar civil actions in
21the ordinary course of business. The obligation of the insurer
22to pay the fee charged by the independent counsel is limited to
23the rate that is actually paid by the insurer to an attorney in
24the ordinary course of business in the defense of a similar
25civil action in the community in which the claim arose or is

 

 

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1being defended. In providing independent counsel, the insurer
2may not be responsible for the fees and costs of defending an
3allegation for which coverage is properly denied and may only
4be responsible for the fees and costs to defend those
5allegations for which the insurer either reserves its position
6as to coverage or accepts coverage. The independent counsel
7shall keep detailed records allocating fees and costs
8accordingly. Nothing in this Section shall require the insured
9to hire separate independent counsel to defend the insured for
10counts for which coverage has been properly denied. Independent
11counsel may defend the insured on all counts filed against the
12insured.
13    (d) An insurance policy may contain a provision that
14provides a method of selecting independent counsel which
15complies with this Section.
 
16    Section 15. Other counsel. Any counsel the insured may
17retain in addition to the independent counsel selected under
18Section 10 of this Act shall be hired at the insured's sole
19expense.
 
20    Section 20. Duties of independent counsel; privileged
21information. Independent counsel hired under this Act shall
22timely consult with the insurer on all matters relating to the
23civil action and shall disclose to the insurer in a timely
24manner all information relevant to the civil action, except

 

 

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1privileged information solely related to the significant and
2actual conflict of interest. A claim of privilege is subject to
3review in the appropriate court. Information disclosed by the
4independent counsel or the insured to the insurer does not
5operate as a waiver of any applicable privilege or work product
6protection.
 
7    Section 25. Waiver of right to select independent counsel.
8An insured may waive the right to select independent counsel by
9signing a statement that reads substantially as follows: "I
10have been advised of my right to select independent counsel to
11represent me in this lawsuit and of my right under State law to
12have all reasonable expenses of an independent counsel paid by
13my insurer. I have considered this matter fully and at this
14time I am waiving my right to select independent counsel. I
15have authorized my insurer to select a defense counsel to
16represent me in this lawsuit.".
 
17    Section 30. Cooperation between insurer, insured, and
18independent counsel. Independent counsel shall cooperate fully
19in exchanging information that is consistent with ethical and
20legal obligations to the insured. Nothing in this Act is
21intended nor shall restrict independent counsel's exercise of
22professional judgment in rendering legal services for the
23insured or otherwise interfere with any ethical directive
24governing the conduct of counsel. Nothing in this Act relieves

 

 

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1the insured of the duty to cooperate fully with the insurer as
2required by the terms of the insurance policy.
 
3    Section 35. Insurer's counsel. The insurer has the right
4to retain its own counsel in addition to the independent
5counsel selected under Section 10 of this Act to associate in
6and participate in all aspects of the lawsuit at the insurer's
7own expense.