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Wednesday, June 27, 2012

POTOMAC INSURANCE COMPANY OF ILLINOIS VS. PENNSYLVANIA MANUFACTURERS' ASSOCIATION INSURANCE COMPANY, ET AL. A-3164-09T2


POTOMAC INSURANCE COMPANY OF ILLINOIS VS. PENNSYLVANIA
MANUFACTURERS' ASSOCIATION INSURANCE COMPANY, ET AL. 
 A-3164-09T2

In this opinion, we determined that one co-insurer's settlement of coverage litigation with the insured does not necessarily bar another co-insurer's claim against the settling co-insurerfor defense costs in the underlying action.  However, we also hold that the attorneys who filed and defended the coverage suit had an obligation under the entire controversy doctrine to disclose the potential claim for defense costs by the non-party co-insurer.  

In this case, the attorney who filed the coverage action on behalf of the insured was retained and controlled by the co-insurer which subsequently filed the action seeking contribution to defense costs.  Consequently, we reversed that portion of the order on appeal that awarded counsel fees to that insurer in the subsequent action, based upon the failure to disclose the potential subsequent action. 4-13-12