Page 51 - Reservation of Rights - Special Edition

favorable to the insured. Accordingly, there was no estop- pel. Nationwide Mut. Ins. Co. v. Aetna Cas. Sur. Co., 159 S.E.2d 268 (N.C. Ct. App. 1968).
Conditional Tender of Defense
An insured is not required to accept a conditional tender of defense by the insurer under a reservation of rights. Such a refusal is sometimes justified because of the insured’s fear that the insurer may not be motivated to provide a vigorous defense despite its duty to use good faith in its undertaking. The insurer’s conditional tender of defense does not absolve it of its duty to defend. The insured may reject a condi- tional offer to defend and still seek indemnity for the costs incurred in its own defense. Nat’l Mortg. Corp. v. Am. Title Ins. Co., 255 S.E.2d 622 (N.C. Ct. App. 1979), rev’d on other grounds, 261 S.E.2d 844 (N.C. 1980).
Conflicts of Interest and Independent Counsel
North Carolina has no statutory requirement for Cum-
is counsel, nor have any higher courts addressed the possibility of an insured›s right to independent, self-selected representation at the insurer›s expense. However, caselaw has discussed the nature of the tripartite relationship be- tween the insurer, the insured, and the attorney retained
by the insurer to represent the insured. See Nationwide Mut. Fire Ins. Co. v. Bourlon, 617 S.E.2d 40 (N.C. Ct. App. 2005), aff’d, 625 S.E.2d 779 (N.C. 2006). Courts have con- firmed that an insurer who undertakes to provide a defense- even under reservation of rights-owes a duty to the insured to act diligently and in good faith. Connor v. State Farm Mut.
Ins. Co., 143 S.E.2d 98 (N.C. 1965).
Additionally, the North Carolina State Bar emphasizes the insurer-retained counsel’s role in respecting possible conflicts of interest in counsel’s representation of both the insurer and the insured. See, e.g., N.C. State Bar, RPC 92, 111, 112 (“Representation of Insured and Insurer”), RPC 91 (“Conflict Between Insured and Insurer”).
Thus, it appears that North Carolina courts trust that the insurer-retained counsel will honor their ethical obligations to the insured, such that the insured has no need for a right to independently-selected counsel.
Time for Providing Insured with Coverage Position/ Reservation of Rights
• Failing to affirm or deny coverage within a reasonable time after proof of loss constitutes an unfair claim settle- ment practice. N.C. Gen. Stat. Ann. § 58-63-15 (2006).
• North Carolina has not implemented any rules provid- ing specific timelines for communications with insureds.
• The best practice is to accept or deny coverage within 30 days after receipt of proof of loss.
• If claims filed with a third party administrator or insurer are not paid within 30 days, the administrator or insurer must send a status report to the claimant within that time period. 11 N.C. Admin. Code 21.0106.
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