In part three of our series "Five Things You Need To Know About General Liability Insurance" we address whether a policyholder, or the insurance carrier, has the right to select defense counsel. With high dollar claims, this can be a critical issue for policyholders.
The initial question policyholders should ask, is whether the underlying litigation is important enough to justify hiring defense counsel of a policyholder's own choosing. Although litigation may be annoying, it is not always significant. Insurers typically do a great job at defending low-dollar slip and fall cases,. With these kinds of bodily injury claims, there is generally no reason to quibble with an insurer's selection of defense counsel. Insurers have large numbers of lawyers on call to defend these cases, and, using an insurance company appointed lawyer to defend these kinds of claims may be the best option.
Cases we become involved in as insurance coverage counsel fall into a different category, namely, high-dollar complex litigations that have the ability to significantly impact the company. If a case alleges considerable damages, or centers on complicated legal specialties, a general purpose insurance defense litigator appointed by the insurance carrier may not be the best choice. For these kinds of claims, policyholders should carefully analyze whether they have the right to select counsel.
Here, there is a major divide between insurance industry custom and practice, and what the law provides. Insurers seldom offer a policyholder the right to select counsel. Yet, the law oftentimes mandates that the insurer accept a policyholder's selection of counsel. Most jurisdictions permit the policyholder to select counsel when there is a conflict between the policyholder and the insurer. Unless the insurer unqualifiedly defends the policyholder, which is exceedingly rare, there is likely a conflict. The most common example of this is the typical reservation of rights letter, the kind that insurers send on most every claim they encounter. As a general rule, these letters state that the insurer will defend, up and until defense counsel finds evidence indicating that coverage need not be provided. There in lies the conflict. The insurer is paying defense counsel, and defense counsel is beholden to the insurance carrier for future business. Defense counsel knows that, if they find evidence supporting an insurance carrier's position for denial of coverage, that the insurance carrier would want them to divulge that information to them. This is a classic conflict of interest that the law has long since recognized, and this conflict is the very reason that policyholders should be permitted to select defense counsel for the vast majority of claims.
We have included the transcript of the video below:
Five Things You Need to Know About General Liability Insurance: 3) The Right to Select Your Own Counsel
Point number three under General Liability policies, consider your right to select your own counsel. When businesses get sued and they're thinking of insurance, when we get involved, it's usually important, meaning it's a big enough claim, it could have an impact on the company, they're concerned about it. The small claims get handled in due course without legal input. They probably don't need legal input. If they're denied, it's not significant. If they're paid, it's 10 cents, 20 cents on the dollar. It doesn't necessarily fully impact the company. But if you have a massive claim where you're spending $5 million a year and the total burn might be $30 million, then it's significant. Or if you have a claim alleging $1 billion in damages that can put the company under, then it's significant. You have to start thinking about that.
When you start thinking about those kind of claims, you care about who your lawyer is and who your counsel is. You don't want the guy necessarily down the street that the insurance company's buddies with because he did the last slip and fall case and he got a good result. "Hey, this person wanted $50,000, and he got them down to $2,000."
It's a different body of law. It's a different kind of practice. You don't want that lawyer that the insurance company necessarily proposes. What you want is you want the best of the best lawyer. You want the lawyer that knows how to deal with these kind of cases. If it's intellectual property, don't hire a general liability-type lawyer that the insurance company's looking at. If it's a business tort and it's significant, you want a high-end firm dealing with that.
My point there is if you take the lawyer the insurance company gives you, you're probably at peril. Not always. Some of the lawyers are very good, and I don't want to disparage anyone, but I would say make your own choice on a lawyer and find out if you have the right to select your own lawyer. Why would you have that right? If the insurance company sent you a letter and they reserved under reservation of rights, they've created a conflict situation. Many courts, many states, when there's a conflict situation like that permit you to select your own lawyer. Use that proactively. Find out if you have that right. If you have that right, pick the right lawyer because it can get you out of a lot of trouble in the future.
Miller Friel, PLLC is a specialized insurance coverage law firm whose sole purpose is to help corporate clients maximize their insurance coverage. Our Focus of exclusively representing policyholders, combined with our extensive Experience in the area of insurance law, leads to greater efficiency, lower costs and better Results. Further discussion and analysis of insurance coverage issues impacting policyholders can be found in our Miller Friel Insurance Coverage Blog and our 7 Tips for Maximizing Coverage series.
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