They are on seperate layers. I made a temporary fix for it, by just make the coat a bit bigger where it was sticking to the shirt, though it's supposed to be kinda tight around the character and not so loose. Making the thickness higher caused the coat to blow up, so i'll try playing with repulsion.
here's the results with just making the coat wider. Im going for a more form fitting look though on the area around the armpit and upper back, and then it will hang loosely near the bottom.
http://www.mechag.com/chardesign/wip001.jpg
http://www.mechag.com/chardesign/wip002.jpg
I also have some seams which i modelled in. (you can see one on the back view on the bottom part of the coat) that kind of loose their form when I play the cloth animation. Is there a way I can make them keep form?