includes a finding that the accident comes within the purview of the acts or omissions coverage as to Wehrli's work at Norwich. So viewed, no conflict could have occurred in defending Conrail.
Under the doctrine of collateral estoppel, an insurer that had a full and fair opportunity to litigate an underlying action is foreclosed from relitigating issues already considered and decided. See, e.g., Aetna Life and Casualty Co. v. McCabe, 556 F. Supp. 1342, 1348-49 (E.D. Pa. 1983); Dally v. Pennsylvania Threshmen & Farmers Mut. Casualty Ins. Co., 374 Pa. 476, 478-79, 97 A.2d 795, 796 (1953). Hartford relies on cases holding an insurer not to be in privity with its insured if unable to raise a defense precluding coverage because of its obligation to defend. These are an exception to the rule that an insurer is in privity with its insured. See Ranger Ins. Co., 800 F.2d at 331. The rationale is that the insurer could not adequately assert its own best legal position in the original action. Ranger Ins. Co., 800 F.2d 329, 331-32; Vaksman v. Zurich General Accident & Liab. Ins. Co., 172 Pa. Super. 588, 593, 94 A.2d 186, 189 (1953). Here, Hartford was able to urge that Wehrli was not responsible for Lubbe's injuries, and in defending Wehrli, that is exactly what it did. Hartford had no impetus at all to refrain from asserting Wehrli's lack of liability, a defense wholly consistent with the mutual interests of Wehrli and Hartford. See McCabe, 556 F. Supp. at 1349-51. The conflicts referred to in Ranger and Vaksman are not implicated in this case where the conflict is solely between insureds.
It is not unusual for an insurance carrier to insure opposing interests in a particular case. Here, Hartford could have provided a defense for both Wehrli and Conrail and protected its insurance company interests at the same time. Relitigation of the underlying claim in these circumstances would result in unnecessary and unreasonable expense, particularly inasmuch as Hartford already had its day in court on these issues. See Vaksman, 172 Pa. Super. at 591, 94 A.2d at 188.
Ordinarily, insurance policy conflicts of interest, whether between insurer and insured or between insureds, will not relieve the insurer of its duty to provide a defense. Such conflicts should be recognized and dealt with promptly. One appropriate resolution is for the insurer to obtain separate, independent counsel for each of its insureds, or to pay the costs incurred by an insured in hiring counsel. American Motorists Ins. Co. v. Trane Co., 544 F. Supp. 669, 686 (W.D. Wis. 1982), aff'd, 718 F.2d 842 (7th Cir. 1983) (a conflict of interest between the insured and insurer does not excuse the insurer of its duty to defend). Another is to defend pursuant to a reservation of rights agreement. McDowell-Wellman Eng'g Co. v. Hartford Accident & Indem. Co., 711 F.2d 521, 527 (3d Cir. 1983).
A declaratory judgment action may be filed immediately. In the present instance, Hartford took no steps to resolve the problem, believing no coverage to be due. It had a duty to provide competent counsel to represent Conrail's interests, American Contract Bridge League v. Nationwide Mut. Fire Ins. Co., 752 F.2d 71, 75 (3d Cir. 1985) (the duty to defend arises when the allegations against the insured state a claim to which the policy potentially applies); and to pay any established loss that comes within the policy. Although not precluded from asserting a new ground for disclaimer, it should not be granted the opportunity to visit a costly relitigation upon a party that consistently claimed to be an insured unless it can show compelling justification. Hartford has not given any excuse or explanation for its erroneous disclaimer and has not demonstrated that its present position on coverage is meritorious.
Nevertheless, in this case, triable fact issues remain. At oral argument, Hartford disputed a number of material facts concerning the circumstances of the accident, the validity, scope, and enforceability of the Railroad Protective Liability Policy, and the date Hartford first became aware of Conrail's position that there was applicable coverage for the Lubbe lawsuit. Hartford's policy basis for defending Wehrli is unclear. The record, therefore, appears to lack the certainty required for entry of summary judgment. Because these fact questions remain, Conrail's motion for summary judgment cannot be granted.
Edmund V. Ludwig, J.
AND NOW, this 17th day of December, 1987, defendant Hartford Accident and Indemnity Company's motion for summary judgment is denied.