The Right to Select Counsel, Part 1

The Right to Select Counsel, Part 1

One of the reasons we buy insurance, whether it’s homeowners insurance  or workers comp insurance,  is to aid us in court should we be held liable and sued. However, what happens when this liability coverage (sometimes referred to as “litigation insurance”) is compromised by interests that work contrary to our own by the insurer in regards to defending you in court?

In this article, we’ll take a look at some instances when you (as the insured consumer) can reserve the right to protect yourself by selecting legal counsel of your choosing to protect your best interests.

Reservation of Rights

 It may be an unfortunate circumstance, but liability policies typically grant insurers the right to control the defense in litigation and often don’t grant a policyholder the right to select counsel, found in a selection-of-counsel provision in the policy.

 However, if there is no such provision, the policyholder’s right to select counsel depends on the claim’s circumstances and the insurer’s position regarding coverage.

When an insurer agrees to provide a legal defense for a policyholder, they will often defend the policyholder under a reservation of rights, which preserves the insurer’s ability to deny all or part of a liability claim against the policyholder if facts and allegations develop that change during litigation.

As an example, suppose that it is discovered that the defendant is sued and found liable for an auto accident. However, after facts develop, it is discovered on security camera that the driver was acting willfully reckless, contradicting the defendant’s initial statements of innocence. Would it be fair to the insurer to provide expensive legal counsel when the defendant has been exposed?

Differing Interests

What makes a reservation of rights dangerous for the policyholder and the insurer are the differing interests regarding covered and uncovered claims.

As an example, imagine that two causes of action are alleged against the policyholder: one is covered by the policy, the other is not. The insurer has an interest in having the covered claim dismissed, while the policyholder wishes to have all claims dismissed. This can create a conflict of interest  between insurer-selected counsel and the policyholder. This would thus require independent counsel for the policyholder at the insurer’s expense.

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This article is continued in part 2. 

If you’ve found yourself worrying what would happen if you or one of your family members were held liable, wouldn’t it be a relief to have an insurance expert in your corner to help you navigate the confusing labyrinth of legalities? That’s where the insurance advisors at RiskBlock can help give you peace of mind. Contact an advisor today to have someone  on your side with your interests at heart!