SNR Denton on Lennar Corp. v. Transamerica Insurance Co.: Does a Right to Independent Counsel Entitle the Policyholder to Two Lawyers?

SNR Denton on Lennar Corp. v. Transamerica Insurance Co.: Does a Right to Independent Counsel Entitle the Policyholder to Two Lawyers?

 William Barker  By William T. Barker, Partner, SNR Denton

Lennar Corp. v. Transamerica Insurance Co. addressed the novel question whether an policyholder entitled to independent counsel could both accept representation by the counsel selected by the insurer and insist on payment of its own selected counsel as co-counsel.  The court concluded that the policyholder does not have such a right.  Even though the case is unpublished and nonprecedential, the novelty of the question warrants examination of its analysis.

Lennar's insurers initially denied coverage, and Lennar defended through the Fennemore firm.  Gerling later offered a defense, but by the less-expensive Lorber firm.  Lennar insisted on having the two firms act as co-counsel, but Gerling refused to pay for Fennemore's work.  After all the underlying suits were resolved, the parties litigated over the insurers' obligations to do so.  As the commentary explains, the court of appeals concluded that applicable precedents

teach that an insured has the right to reject its insurer's choice of counsel and maintain its own under certain circumstances. But these cases do not stand for the proposition that an insured has the right to accept - partially or fully - insurer's choice of counsel in the role of co-counsel with the insured's choice of counsel.

The commentary also notes that the court of appeals suggested an unconventional approach that Lennar might have been entitled to adopt.  Lennar might have accepted Lorber's representation and

could reasonably have reshaped Fennemore's role to that of an independent guardian of its rights concerning coverage. But Lennar chose instead to have two lead defense attorneys equally participating in the decision-making and workload. Because such an arrangement was not justified by a conflict of interest - actual or potential - we find no legal authority upon which Lennar was entitled to reimbursement for Fennemore's continued service as co-counsel after it accepted Lorber's representation.

This commentary analyzes the issues presented and the options that are or might be available to policyholders.

William T. Barker is a partner in the Chicago office of SNR Denton, L.L.P., with a nationwide practice representing insurers in complex litigation, including matters relating to coverage, claims handling, sales practices, risk classification and selection, agent relationships, and regulatory matters. He is a member of the Editorial Board of the New Appleman on Insurance Law Library Edition and a Consulting Author of the New Appleman Insurance Law Practice Guide. He has published over 100 articles and speaks frequently on insurance and litigation subjects. He was a Contributing Editor and then Editor of Bad Faith Law Report until that publication merged with Insurance Litigation Reporter, where he is currently Senior Contributing Editor and Editorial Board Director. He has been described as the leading lawyer commentator on the connections between procedure and insurance. See Charles Silver & Kent Syverud, The Professional Responsibilities of Insurance Defense Lawyers, 45 Duke L.J. 255, 257 n.4 (1995). Mr. Barker is a member of the American Law Institute. Mr. Barker is the co- author of New Appleman Insurance Bad Faith Litigation, Second Edition.

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Download a free copy of the unenhanced version of the decision in Lennar Corp. v. TransAmerica Ins. Co., 2011 Ariz. App. Unpub. LEXIS 1386 (Ariz. Ct. App. 2011).

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