After Withdrawing from Case, Insurer’s Defense Counsel Cannot Reenter Case Without Insured’s Consent
The Hawaii Intermediate Court of Appeals found that after defense counsel withdrew from the case after the trial court found no coverage. defense counsel could not reenter the case without the insured’s consent. Franco v. Reinhardt, 2023 Haw. App. LEXIS 63 (Feb. 28, 2023).
Fabio Reinhardt was driving a truck owned by his girlfriend, Reinette Kama, with Tiare Franco as a passenger. Reinhardt crashed the truck while driving and Franco died at the scene. The truck was insured by National Interstate Insurance Company, Inc. Franco’s estate sued Reinhardt for wrongful death. National retained defense counsel and issued a reservation of rights.
National filed a separate action for declaratory judgment to determine whether it owed a duty to defend and indemnify Reinhardt. The circuit court granted National’s motion for summary judgment, concluding there was no possibility of coverage for Reinhardt under the policy. Plaintiffs appealed the coverage action. Retained defense counsel for Reinhardt withdrew from further representation in the underlying case because there was no representation under the policy. Reinhardt continued to defend the underlying case pro se.
By the time trial in the underlying case took place, Reinhardt had disappeared. Without his participation in the trial, the jury returned a verdict in favor of plaintiffs and against Reinhardt. The circuit court entered a final judgment.
After final judgment was entered, the Intermediate Court of Appeals reversed the circuit court’s judgment in favor of National, finding there were genuine issues of material fact regarding whether Reinhardt reasonably believed he was entitled to operate the truck at the time of the accident. Following the reversal, National again retained the same law firm and attorney to represent Reinhardt under a reservation of rights. Retained counsel then filed a Motion to Set Aside the Final Judgment even though retained counsel had still not found Reinhardt. Plaintiffs responded with a Motion to Disqualify, arguing that retained counsel failed to obtain Reinhardt’s informed consent and waiver of any potential conflicts of interest, and that Reinhardt had no idea he was being represented in the underlying action. The circuit court granted the Motion to Set Aside and denied the Motion to Disqualify.
On appeal, the appellate court noted that Reinhardt had a right to refuse representation under a reservation of rights. Retained counsel did not establish an attorney-client relationship and was not authorised to file motions on Reinhardt’s behalf. Therefore, because retained counsel did not have the authority to file the Motion to Set Aside or appear in court on Reinhardt’s behalf, the circuit court erred in granting the Motion to Set Aside and denying the Motion to Disqualify Counsel.
