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the attorney had an ethical obligation to advance only the insured›s interests.» 819 F.Supp.2d at 455 (emphasis in original).
When faced with the question of breach of a cooperation clause, however, the situation may change dramatically. If, in the course of the dual representation an actual conflict de- velops between the interests of the insured and those of the insurer, the lawyer must either withdraw entirely from the case or continue to represent one of the clients only. Various courts have condemned such dual representation in these circumstances, and several have held that when it occurred, the insurance company had waived its right to disclaim or was estopped to do so. Fidelity & Cas. Co. of New York v. McConnaughy, 179 A.2d 117 (Md. 1962).
Independent counsel is often required in situations involving conflicts of interest. Maryland does not have a Cumis statute like Section 2860(a) of the California Civil Code. However, Maryland case law has addressed the issue and reached virtually the same conclusion.
In Brohawn v. Transamerica Ins. Co., 347 A.2d 842 (Md. 1975), the Maryland Court of Appeals held that an insurer
is not relieved of its contractual obligation to defend the in- sured merely because an actual conflict of interest arises be- tween insurer and insured (such as a third party suit involv- ing covered and non-covered claims). The insurer’s assertion of reservation of rights does not necessarily create an actual conflict. See Perlberg, 819 F. Supp. 2d at 454; Driggs Corp. v. Pa. Mfrs.’ Ass’n Ins. Co., 3 F.Supp.2d 657, 659 (D.Md.1998).
When such an actual conflict of interest arises, the insurer
is obligated to (1) notify the insured of the existence and nature of the conflict and (2) give the insured the right to ei- ther accept an independent attorney assigned by the insurer or select an attorney himself to conduct his own defense. If
the insured selects his own lawyer to handle the case, the insurer is responsible for payment of reasonable costs associ- ated with that attorney’s representation. This issue is also ad- dressed in Southern Maryland Agricultural Ass’n v. Bituminous Casualty Corp., 539 F. Supp. 1295 (D.Md. 1982) (cited in the California Cumis decision).
Unlike the California Civil Code § 2860(a), the Court in Bro- hawn did not specifically provide that an insured may waive his right to independent counsel in writing in the case of a conflict of interest between insured and insurer.
Time for Providing Insured with Coverage Position/ Reservation of Rights
• Failing “to provide promptly on request a reasonable ex- planation of the basis for a denial of a claim” constitutes an unfair claim settlement practice. Md. Code Ann., Ins. § 27-303(6) (2006).
• Under property and casualty insurance policies, failing “to affirm or deny coverage within 15 working days
after receiving properly completed claim forms or other proofs of loss” constitutes an unfair claim settlement practice, “unless the provisions of Regulation .04B of this chapter apply or unless there is a time limit specified in the policy.” Md. Code Regs. 31.15.07.03(12).
• If an insurer has not completed its investigation within 45 days of notification, it must (1) write to the insured and provide the “actual reason” that additional time is necessary to investigate the claim, and (2) write the in- sured every 45 days thereafter until the insurer either af- firms or denies coverage. Md. Code Regs. 31.15.07.04(B) (2006).
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