Selecting Defense Counsel and Controlling the Defense: Who Makes the Call When Rights are Reserved?

Where an insurer accepts a tender of defense unconditionally, the insurer generally has the right to select counsel to defend the policyholder. There, the policyholder and the insurer share identical interests in seeing the matter resolved in their favor. Logic suggests that that even if a reservation of rights letter were issued to a policyholder, the insurer would still be able to select counsel to defend the policyholder. This is so because the attorney enrolling as counsel for the policyholder, although paid by the insurer, would be ethically obligated to represent the interests of the policyholder &mdash; his client &mdash; to the best of his abilities and to place the interests of the policyholder first. However, many courts have found that when an insurer offers a defense under a reservation of rights, a conflict of interest exists between the insurer and the insured relating to the defense of a suit against the insured. Therefore, the insured may, if he so elects, select independent counsel whose reasonable fees are to be paid by the insurance company. <i>See</i> Todd R. Smyth, <i>Duty of Insurer to Pay for Independent Counsel When Conflict of Interest Exists Between Insured and Insurer,</i> 50 A.L.R. 4th 932.

27 minute read April 01, 2004 at 09:38 AM

By

Ralph S. Hubbard III And Seth A. Schmeeckle