(a) If the provisions of a policy of insurance impose a duty to defend upon an insurer and a conflict of interest arises which creates a duty on the part of the insurer to provide independent counsel to the insured, the insurer shall provide independent counsel to represent the insured, unless, at the time the insured is informed that a possible conflict may arise or does exist, the insured expressly waives, in writing, the right to independent counsel. An insurance contract may contain a provision which sets forth the method of selecting independent counsel consistent with this Section.

(b) For purposes of this Section, a conflict of interest does not exist as to all allegations or facts in the litigation for which the insurer denies coverage; however, when an insurer reserves its rights on a given issue and the outcome of that coverage issue can be controlled by counsel first retained by the insurer for the defense of the claim, a conflict of interest may exist. No conflict of interest shall be deemed to exist as to allegations of punitive damages or be deemed to exist solely because an insured is sued for an amount in excess of the insurance policy limits.

(c) When the insured has selected independent counsel to represent the insured, the insurer may exercise its right to require that the counsel selected by the insured possess certain minimum qualifications, which may include that the selected counsel have: (i) at least five (5) years in civil litigation practice, which includes substantial defense experience in the subject at issue in the litigation; and (ii) errors and omissions coverage.

The insurer=s obligation to pay fees to the independent counsel selected by the insured is limited to the rates which are actually paid by the insurer to attorneys retained by it in the ordinary course of business in the defense of

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similar actions in the community where the claim arose or is being defended. This Article does not invalidate other different or additional policy provisions pertaining to attorney=s fees or providing methods of settlement of disputes concerning those fees.

Any dispute concerning attorney=s fees not resolved by these methods shall be resolved by final and binding arbitration by a single neutral arbitrator selected by the parties to the dispute. In the event that the parties cannot agree upon the selection of a neutral arbitrator, then upon petition of any party to the dispute, the Superior Court of Guam shall designate a neutral arbitrator.

(d) When independent counsel has been selected by the insured, it shall be the duty of that counsel and the insured to disclose to the insurer all information concerning the action, except privileged materials relevant to coverage disputes, and to timely inform and consult with the insurer on all matters relating to the action. Any claim of privilege asserted is subject to in camera review by the Superior Court of Guam. Any information disclosed by the insured or by independent counsel is not a waiver of the privilege as to any other party, person or legal entity.

(e) The insured may waive its rights to select independent counsel by signing the following statement: >I have been advised and informed of my right to select independent counsel to represent me in this lawsuit. I have considered this matter fully and freely waive my right to select independent counsel at this time. I authorize my insurer to select a defense attorney to represent me in this lawsuit.=

(f) Where the insured selects independent counsel pursuant to the provisions of this Section, both the counsel provided by the insurer and independent counsel selected by the insured shall be allowed to participate in all aspects of the litigation. Counsel shall cooperate fully in the exchange of information that is consistent with each counsel=s ethical and legal obligation to the insured.

Nothing in this Section shall relieve the insured of the insured=s duty to cooperate with the insurer under the provisions of the insurance contract.

SOURCE: Added by P.L. 26-39:2.

NOTE: The Compiler has changed ASubdivision@ to Article in (c) para. 2 to reflect the fact that this Chapter of the GCA does not contain subdivisions, but does contain Articles.

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CH. 12 ADMINISTRATION