In an insurance coverage dispute arising out of a traffic collision, in which defendants had the same insurance company, a subset of defendants retained and paid for independent counsel instead of the attorney chosen by the insurance company. The defendants then field a lawsuit in federal court seeking reimbursement for the cost of independent counsel as well as penalties under section 155 of the Illinois Insurance Code. The district court entered judgment for the defendants as to their request for declaratory relief but denied the section 155 claims. The Seventh Circuit affirmed in part and reversed in part, finding that while Illinois law creates a narrow exception to the insurer’s right to control its insured’s defense where there are actual, serious conflicts between the interests of the insurer and the insured no such conflict existed here so that the defendants were not entitled to record for the expense of hiring independent counsel. (EASTERBROOK, concurring and BRENNAN, specially concurring)
Federal 7th Circuit Court
Civil Court
Independent Counsel