REPORT TITLE:
Insurers


DESCRIPTION:
Requires an insurer to provide an insured with independent
counsel when a conflict of interest arises on a claim under an
insurance policy.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO INSURERS. 


BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Chapter 431:13, Hawaii Revised Statutes, is
 
 2 amended by adding a new section to be appropriately designated
 
 3 and to read as follows:
 
 4      "§431:13-     Conflict of interest; provision of independent
 
 5 counsel.  (a)  It shall be deemed a conflict of interest between
 
 6 an insurer and its insured when a policy of insurance imposes
 
 7 upon an insurer the duty to defend and/or indemnify an insured,
 
 8 and the insurer defends a claim against the insured under a
 
 9 reservation of its right to deny or contest coverage.  No
 
10 conflict of interest shall be deemed to exist solely because a
 
11 claim for punitive damages or a claim for amounts in excess of
 
12 the insured's policy limits has been brought against the insured.
 
13      (b)  When a conflict of interest arises between an insurer
 
14 and its insured, the insurer shall inform the insured of the
 
15 conflict of interest and provide the insured with independent
 
16 legal counsel selected by the insured to represent the insured on
 
17 the insured's claim.  The insured may waive its right to be
 
18 provided with independent counsel by signing a statement with
 
19 wording substantially similar to the following:
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1      "I have been advised and informed of my right to select
 
 2      independent counsel, to be paid by the insurer, to represent
 
 3      me in this claim or lawsuit.  I have been advised that there
 
 4      is a potential conflict between my interest and the interest
 
 5      of my insurer.  I have considered this matter fully and
 
 6      freely waive my right to select independent counsel at this
 
 7      time.  I authorize my insurer to select a defense attorney
 
 8      to represent me in this claim or lawsuit.  I have been
 
 9      advised that I should contact independent counsel, to be
 
10      paid by the insurer, before signing this waiver."
 
11      (c)  The insurer's obligation to pay the independent
 
12 counsel's fees is limited to the reasonable attorneys' fees and
 
13 costs typically charged in the community in which the claim arose
 
14 or is being defended, for an attorney with similar experience or
 
15 of similar reputation.  Any dispute concerning attorneys' fees
 
16 charged by the independent counsel shall be submitted to the
 
17 court in which the action was filed, or a court of competent
 
18 jurisdiction if no action was filed.
 
19      (d)  An insurer may require that the independent counsel
 
20 representing the insured possess a minimum of: 
 
21      (1)  Five years of civil litigation experience including
 
22           substantial experience handling claims or cases of the
 
23           same nature or type as brought against the insured; and
 

 
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                                     S.B. NO.           S.D. 1
                                                        
                                                        

 
 1      (2)  Errors and omissions coverage of no less than $50,000.
 
 2      (e)  Where independent counsel has been selected by the
 
 3 insured pursuant to this section, the independent counsel and the
 
 4 insured shall disclose to the insurer all information concerning
 
 5 the claim or legal action, except materials relevant to coverage
 
 6 disputes, and shall timely inform and consult with the insurer on
 
 7 all other matters.  Any information disclosed by the insured or
 
 8 the independent counsel shall not be deemed a waiver of the
 
 9 privilege as to any other party.
 
10      (f)  Where independent counsel has been selected by the
 
11 insured pursuant to this section, both the counsel provided by
 
12 the insurer and the independent counsel selected by the insured
 
13 shall be allowed to participate in all aspects of the litigation.
 
14 Counsel shall cooperate fully in the exchange of information
 
15 consistent with each counsel's ethical and legal obligations to
 
16 the insured.  Nothing in this section shall affect the insured's
 
17 duty to cooperate with the insurer under the terms of the
 
18 insurance agreement."
 
19      SECTION 2.  New statutory material is underscored.
 
20      SECTION 3.  This Act shall take effect upon its approval.