Page 37 - Reservation of Rights - Special Edition

not be covered, that the insurer reserves the right to not indemnify the insured in the event a judgment is entered against it, and also typically references the allegations against the insured. City of Grosse Pointe Park v. Mich. Mun. Liab. & Prop. Pool, 702 N.W.2d 106 (Mich. 2005).
A notice of reservation of rights should contain a specific reference to the language of the policy which forms the basis of the coverage defense, or the reservation of rights may be deemed ineffective. Meirthew v. Last, 135 N.W.2d 353 (Mich. 1965).
An insurer’s second reservation of rights letter independently served as a timely and substantively adequate reservation of rights sufficient to avoid estoppel because that letter made clear that, notwithstanding the insurer’s offer to defend the insured, it was proceeding with its rights reserved, including the right to invoke certain policy exclusions. Amerisure Mut. Ins. Co. v. Carey Transp., Inc., 578 F. Supp. 2d 888 (W.D. Mich. 2008).
Reimbursement of Defense Costs
The reservation of rights letter also typically reserves the right to seek reimbursement for defense costs if it later is established that those costs were incurred in defending non- covered claims. The insurer may be able to recoup those defense costs. See, e.g., Travelers Prop. Cas. Co. v. R.L. Polk & Co., No. 06-12895, 2008 WL 786678 (E.D. Mich. S. Div. Mar. 24, 2008).
Conflicts of Interest and Independent Counsel
In Michigan, there is no statutory provision mandating the use of “independent” counsel for the defense of claims
for which the insurer may contest its duty to indemnify.
“No attorney-client relationship exists between an insur- ance company and the attorney representing the insurance company’s insured. The attorney’s sole loyalty and duty is owed to the client, not the insurer.” Michigan Millers Mut. Ins. Co. v. Bronson Plating Co., 496 N.W.2d 373, 378 (Mich. Ct. App. 1992),aff’d, 519 N.W.2d 864 (Mich. 1994), overruled
in part on other grounds, Wilkie v. Auto-Owners Ins. Co., 664 N.W.2d 776 (Mich. 2003). Therefore, any counsel retained by the insurer for the benefit of the insured is considered independent counsel.
Furthermore, “[t]he insured has no absolute right to select the attorney himself, as long as the insurer exercises good faith in its selection and the attorney selected is truly inde- pendent.” Cent. Michigan Bd. of Trustees v. Employers Rein- surance Corp., 117 F. Supp. 2d 627, 635 (E.D. Mich. 2000). If the insured shows that the insurer did not exercise good faith in the selection of counsel, then the insurer has failed in its duty to defend. Further, if the selected counsel was not truly independent, the insurer will be liable for breach of contract. Id.; see also Lapham v. Jacobs Tech., Inc., Nos. 295482, 295489, 2011 WL 2848802 (Mich. Ct. App. July 19, 2011).
2018 ReseRvation of Rights - special edition
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