A common complaint we hear from our regular clients is their frustration with their insurance company’s choice of counsel to defend them in a litigation that is covered by insurance. Although the frustration is sometimes due to the quality of legal work provided, it is usually more about the insurance attorney’s lack of familiarity with the client’s business, reputation, personality, and ultimate goals.
The insurance attorney’s lack of intimacy with the client can affect their effectiveness or ability to defend the client, and often results in a legal strategy that is not reflective of the client’s business goals or litigation desires. This problem stems from two issues. The first, and obvious, issue is that it can be difficult to defend an act or omission, product, or claim if the insurance attorney does not know the client’s business intimately. The attorney generally learns only the issues seemingly relevant to the litigation, and thus gains a superficial understanding of the client’s business. A lack of knowledge about the client’s business can result in key evidence or arguments being omitted in the litigation. This results from the client not knowing that something was relevant and, therefore, not disclosing it to the attorney, and the attorney not knowing the business well enough to ask the right questions. Another problem with the attorney’s lack of familiarity with the client’s business is that the client has to keep re-educating the attorney about issues relating to the client’s business. While we appreciate a client who is committed to their case, we understand that the client’s primary focus is on its day-to-day business, and not on educating its attorneys.
The second issue relates to the insurance attorney’s inherent conflict between his/her loyalty to the insurance company that pays the bills and the duty owed to the client. This is known as the “tripartite relationship,” where both the insurance company and the insured client are “clients” of the attorney. Under most insurance policies, the insurance company has the right to control the litigation and to settle any claim without needing the approval of its policyholder. Thus, insurance companies often pay tens of thousands of dollars to settle meritless claims because it is cheaper to settle than to defend and win. The policyholder has no say in the matter. The undesired result for the policyholder is that the policyholder becomes a target for litigation in the eyes of the public. Clients do not want the reputation of being an easy target for litigation. Although our clients voice this to their insurance attorney, the attorney has to balance between serving the insured client and keeping the insurance company—the repeat client—happy.
Also, the insurance company’s litigation strategies are not always in the best interest of the policyholder. Taking a position in a lawsuit today for the sole purpose of moving that case toward a cheaper settlement could have a long-term undesired impact on the policyholder.
As a policyholder, you might have the right to choose the attorney that is retained by the insurance company. Sometimes a policy has a high Self Insured Retention (“SIR”) or deductible. If the SIR or deductible is high, such as $100,000 or more, your policy might include a “Choice of Counsel” endorsement allowing you to choose your attorney—one that you already know and, more importantly, already knows your business. If your policy does not have a Choice of Counsel endorsement, you can request that the endorsement be added the next time you renew your policy. This can also be a bargaining chip when shopping around for insurance—the insurer might add the endorsement to get your business. Even if your policy does not have a Choice of Counsel endorsement, you can still request your insurance company to hire “your attorney.” Insurers are more receptive to this request when the lawsuit involves complicated issues that are unique to your company or product, and the attorney’s familiarity with your business will be helpful in the litigation.
Remember, you purchase insurance to protect you, not just to pay claims. Insurance defense attorneys are typically “jacks of all trades” and handle all kinds of cases, from slip-and-falls to death claims. But they generally do not have personal relationships with clients, and have no special expertise in the client’s business. When a lawsuit against your business involves serious allegations, it is important for you to have an attorney representing you who knows your business intimately and is more interested in protecting you than the insurance company. The next time you are brought into a lawsuit, remember to ask the insurer to hire your attorney.
If you have questions about your insurance policy or whether it contains a Choice of Counsel provision, contact Titus Brueckner & Levine PLC at 480-483-9600, or contact Brad Shelts directly at bshelts@tbl-law.com.