Using Staff Counsel to Defend Insureds

The court's opinion demonstrates a pragmatic approach to a common situation and is interesting not so much for its direct result ' as the court notes, most states to have considered the issue have allowed insurers to use staff attorneys ' as it is for the implications of its rulings and the pragmatic grounds on which those rulings are based. Among other things, the opinion reinforces the ethical obligation of all defense counsel to their client, the insured. The opinion also suggests limits on the use of staff attorneys that could lead to a three-tier approach to defense counsel turning on the extent of congruence between the insured's and the insurer's interests. The court, however, provided little concrete guidance as to the situations in which the use of a staff attorney is not appropriate, placed on both insurers and their staff attorneys a burden of determining when such use is appropriate, and missed an opportunity to address the use of reservation-of-rights letters, which it admitted can often be “routine.” The court also warned of potential knowledge-imputation pitfalls that could accompany the use of insurer employees to defend insureds.