When an insurance company appoints an attorney to defend a policyholder against a lawsuit, the announcement often is provided in a way that makes it seem like there is no room for disagreement. This “take it or leave it” tone is not by accident. Insurance companies have a vested interest in you being represented by an attorney who owes his first allegiance to the insurance carrier. It is an unethical practice for attorneys to act as coverage counsel for the same insurance companies that appoint them to defend policyholders where coverage is significantly in dispute. Unfortunately, this practice is also quite common.
Insurance companies have a strong preference for appointing attorneys to defend their policyholders that receive much or all of their work from the insurer. There are many attorneys who receive virtually all of their case files from a single insurance company. These attorneys are far too aware of who butters their bread, so they are not going to take a position that jeopardizes their relationship with their “real” client. These attorneys also are favored by the insurance company because the attorney’s work at substantially reduced rates as consideration for the volume of work they receive from the insurance company. In other words, the insurance company gets an attorney who will protect its interest on coverage issues and that will work at a substantially reduced rate. The insured gets something too – the shaft.
As an insured, you have priorities that have nothing to do with the hourly rate paid by the insurance carrier or the lawyer’s loyalty to the insurance company. The primary considerations of an insured is an attorney who is genuinely independent because the attorney will not have mixed loyalty that leads him to nose around coverage issues. Further, you want the best attorney you can get to defend you, rather than a cut rate junior associate who is billed out at a discounted rate. If you are a business owner defending against a liability claim, you also probably want someone who is familiar with your business.
Most states allow policyholders the right to demand independent defense counsel when an insurer defends under reservation of rights. Florida Statute 627.426 mandates that an insurance company retain “independent counsel which is mutually agreeable to the parties.” The statute also provides that if the parties disagree about the fee to pay the mutually selected attorney, the issue can be submitted to a court for a determination of the appropriate fee.
The rights of the policyholder to impact the litigation will largely be dictated by the terms of the policy. If the policy is a comprehensive general liability policy with a duty to defend, the insurance company will generally have the right to control litigation of the defense claim. If the policy does not have a duty to defend, the insured may be authorized to retain defense counsel and pay the attorney. Under these policies, the insurance company generally does not have a right to control the litigation but must reimburse the insured for cost of defense.
If you are facing a liability claim against you as an individual or against your business, we can answer your questions about your rights to an independent attorney. My law firm represents policyholders in claims disputes in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.