"Place of Performance" Triumphs under Mississippi Choice of Law Rules For the Selection and Payment of Independent Counsel
Hartford Underwriters Ins. Co. v. Foundation Health Services, Inc., ___ F.3d ___, 2008 WL 946080 (5th Cir. (Miss.) 2008)
Affirming the district court decision, the court determined that Mississippi law permits appointment of “independent counsel” which, under Mississippi law, includes the requirement that the insurer reimburse an insured for the cost of independently retained counsel. Where the underlying suit was pending in Mississippi, its law applied under Mississippi choice-of-law rules even though insurance policy negotiations and contracting likely occurred in Louisiana.
In its analysis of the restatement §8-188, the place of Hartford’s relevant performance, Mississippi, was significant. The court found the close relationship between Hartford’s performance and Mississippi’s substantial interest in avoiding conflict of interest in its state’s court was implicated by the appointment of independent counsel.
We emphasize that we are only determining the law applicable to this narrow issue, and other disputes arising out of these insurance policies may be governed by the law of another state. See Boardman, 470 So.2d at 1031 (“We apply the center of gravity test to each question presented, recognizing that the answer produced in some instances may be that the law of this state applies and on other questions in the same case the substantive law of another state may be enforceable.”).Id. *9.
The court was able to make short shrift of the argument that independent counsel was not appropriate under Mississippi law because Mississippi law requires an insurer defending an insured under a reservation of rights to provide the insured with independent counsel because of the “built-in” conflict that is created. Twin City Fire Ins. Co. v. City of Madison, 309 F.3d 901, 905 (5th Cir.2002) (applying Moeller v. Am. Guar. & Liab. Ins. Co., 707 So.2d 1062, 1069 (Miss.1996)).
Id. at *2.
The logic of the court’s choice of law decision offers more than an invitation to secure a favorable Mississippi coverage law forum where a reservation of rights creates a conflict of interest entitling the insured to independent counsel. The logic of the court’s ruling also suggests that wherever the place of performance is that forum’s law should govern in deciding if there was a: (1) conflict of interest permitting the insured to secure independent counsel, (2) and/or to securing reimbursement for fees incurred pursuant to that forum’s rules. In virtually every forum, outside of California, that means a reasonableness test will apply to fee reimbursement for “independent counsel”.
A different result attended where an action was brought against a Pennsylvania insured in California and a conflict of interest arose between the law in those jurisdictions as to the duty to reimbursement a $1.2 million settlement for a malicious prosecution lawsuit pending in California. The court found an actual conflict between California and Pennsylvania law regarding the duty to indemnify settlement judgments on such an action under Ca. Ins. Code §533, finding that Cal Ins. Code §533 barred indemnity in such circumstances. See Downey Venture v. LMI Ins. Co., 66 Cal. App. 4th 478, 78 Cal. Rptr. 2d 142 (Cal. Ct. App. 1998) *6 but see U.S.A. Nutrasource, Inc. v. CNA Ins. Co., 140 F. Supp. 2d 1049, 1054 (N.D. Cal. 2001) (Hamilton) (“With regard to defendants' contention that indemnification of any damages incurred as a result of the Amrion case would have constituted a violation of California Insurance Code section 533, there was no finding of willful conduct because the case settled.”)
Photomedex, Inc. v. St. Paul Fire & Marine Ins. Co., No. 07-0025, 2008 WL 324025 (E.D. Pa. Feb. 6, 2008)
St. Paul was required to indemnify Photomedex in a malicious prosecution lawsuit and could not recoup payment of the settlement of the malicious prosecution lawsuit from Photomedex under California law. St. Paul, after investigating the malicious prosecution suit, decided to defend under a full reservation of rights. The court found that Pennsylvania not California law applied as a conflict arose between the law of those two states on the issue before. Looking to a true conflict test, the court stated Id. at *10:
Here, application of Pennsylvania’s law requiring St. Paul to indemnify PhotoMedex under the express provisions of the CGL coverage (see Policy, CGL 4-5) for the malicious prosecution settlement would hinder California’s codified governmental interest in discouraging wilful wrongs.
. . . Although Pennsylvania law has not directly held that insurers may indemnify malicious prosecutions cases, there is a strong indication that they lawfully may, see supra Part A.1. The governmental interest in enforcing the plain meaning of insurance policies as written serves the strong policy of protecting both insurers’ and insureds’ expectations. Application of California’s law will clearly hinder this governmental interest. Moreover, the California court in Downey recognized that its decision denying indemnification was in direct conflict with other states’ interests in enforcement of express insurance contract provisions.
Pennsylvania had substantial contacts with the strongest governmental interest in the policy’s coverage for the defense and indemnification of the malicious prosecution action. Although incorporated in Delaware, PhotoMedex did have its headquarters and principal location in Pennsylvania.
It refused to grant summary judgment to PhotoMedex as to the actual fee rate that St. Paul must pay to meet the reasonableness standard under Pennsylvania law. By default, it permitted California and its cumis standard to govern since the court found no material breach by St. Paul’s offer to pay $175 for counsel and $100 for paralegals for the underlying action pending in San Diego Co. Superior Court. PhotoMedex sought $685 for partners and $360 for senior associates incurred by its counsel, Morgan Lewis & Bockius.
Affirming the district court decision, the court determined that Mississippi law permits appointment of “independent counsel” which, under Mississippi law, includes the requirement that the insurer reimburse an insured for the cost of independently retained counsel. Where the underlying suit was pending in Mississippi, its law applied under Mississippi choice-of-law rules even though insurance policy negotiations and contracting likely occurred in Louisiana.
In its analysis of the restatement §8-188, the place of Hartford’s relevant performance, Mississippi, was significant. The court found the close relationship between Hartford’s performance and Mississippi’s substantial interest in avoiding conflict of interest in its state’s court was implicated by the appointment of independent counsel.
We emphasize that we are only determining the law applicable to this narrow issue, and other disputes arising out of these insurance policies may be governed by the law of another state. See Boardman, 470 So.2d at 1031 (“We apply the center of gravity test to each question presented, recognizing that the answer produced in some instances may be that the law of this state applies and on other questions in the same case the substantive law of another state may be enforceable.”).Id. *9.
The court was able to make short shrift of the argument that independent counsel was not appropriate under Mississippi law because Mississippi law requires an insurer defending an insured under a reservation of rights to provide the insured with independent counsel because of the “built-in” conflict that is created. Twin City Fire Ins. Co. v. City of Madison, 309 F.3d 901, 905 (5th Cir.2002) (applying Moeller v. Am. Guar. & Liab. Ins. Co., 707 So.2d 1062, 1069 (Miss.1996)).
Id. at *2.
The logic of the court’s choice of law decision offers more than an invitation to secure a favorable Mississippi coverage law forum where a reservation of rights creates a conflict of interest entitling the insured to independent counsel. The logic of the court’s ruling also suggests that wherever the place of performance is that forum’s law should govern in deciding if there was a: (1) conflict of interest permitting the insured to secure independent counsel, (2) and/or to securing reimbursement for fees incurred pursuant to that forum’s rules. In virtually every forum, outside of California, that means a reasonableness test will apply to fee reimbursement for “independent counsel”.
A different result attended where an action was brought against a Pennsylvania insured in California and a conflict of interest arose between the law in those jurisdictions as to the duty to reimbursement a $1.2 million settlement for a malicious prosecution lawsuit pending in California. The court found an actual conflict between California and Pennsylvania law regarding the duty to indemnify settlement judgments on such an action under Ca. Ins. Code §533, finding that Cal Ins. Code §533 barred indemnity in such circumstances. See Downey Venture v. LMI Ins. Co., 66 Cal. App. 4th 478, 78 Cal. Rptr. 2d 142 (Cal. Ct. App. 1998) *6 but see U.S.A. Nutrasource, Inc. v. CNA Ins. Co., 140 F. Supp. 2d 1049, 1054 (N.D. Cal. 2001) (Hamilton) (“With regard to defendants' contention that indemnification of any damages incurred as a result of the Amrion case would have constituted a violation of California Insurance Code section 533, there was no finding of willful conduct because the case settled.”)
Photomedex, Inc. v. St. Paul Fire & Marine Ins. Co., No. 07-0025, 2008 WL 324025 (E.D. Pa. Feb. 6, 2008)
St. Paul was required to indemnify Photomedex in a malicious prosecution lawsuit and could not recoup payment of the settlement of the malicious prosecution lawsuit from Photomedex under California law. St. Paul, after investigating the malicious prosecution suit, decided to defend under a full reservation of rights. The court found that Pennsylvania not California law applied as a conflict arose between the law of those two states on the issue before. Looking to a true conflict test, the court stated Id. at *10:
Here, application of Pennsylvania’s law requiring St. Paul to indemnify PhotoMedex under the express provisions of the CGL coverage (see Policy, CGL 4-5) for the malicious prosecution settlement would hinder California’s codified governmental interest in discouraging wilful wrongs.
. . . Although Pennsylvania law has not directly held that insurers may indemnify malicious prosecutions cases, there is a strong indication that they lawfully may, see supra Part A.1. The governmental interest in enforcing the plain meaning of insurance policies as written serves the strong policy of protecting both insurers’ and insureds’ expectations. Application of California’s law will clearly hinder this governmental interest. Moreover, the California court in Downey recognized that its decision denying indemnification was in direct conflict with other states’ interests in enforcement of express insurance contract provisions.
Pennsylvania had substantial contacts with the strongest governmental interest in the policy’s coverage for the defense and indemnification of the malicious prosecution action. Although incorporated in Delaware, PhotoMedex did have its headquarters and principal location in Pennsylvania.
It refused to grant summary judgment to PhotoMedex as to the actual fee rate that St. Paul must pay to meet the reasonableness standard under Pennsylvania law. By default, it permitted California and its cumis standard to govern since the court found no material breach by St. Paul’s offer to pay $175 for counsel and $100 for paralegals for the underlying action pending in San Diego Co. Superior Court. PhotoMedex sought $685 for partners and $360 for senior associates incurred by its counsel, Morgan Lewis & Bockius.
