Fettering the Insurer's Privilege to Control the Defense It Is Duty-Bound to Provide

For more than 50 years, policyholders and their insurers have been struggling over the insurer's promise to defend and the insurer's control of the defense. Policyholders properly have been concerned that an insurance company that controls the defense of an action potentially covered by the carrier's duty to indemnify will use that control to avoid that very same indemnity obligation. In egregious cases where a lawyer hired by the carrier has abused his or her relationship with the insured ' the client ' so as to favor the lawyer's source of income ' the insurance company ' the courts have responded to protect the insured's interests. But most courts have ruled that such after-the-fact remedies are insufficient: They do not adequately compensate for the injury; meritorious claims are not pursued (in part because insureds may not discover the abuse); and the potential for this abuse alone undermines the dominant purpose of the insurance relationship ' to afford protection and peace of mind for the insured.

45 minute read April 28, 2006 at 02:32 PM

By

Marc S. Mayerson