Insurance Companies Can Limit Insured’s Right to Independent Counsel

Feb 26, 2018

A recent Illinois decision ruled in favor of the insurer.

Policyholders occasionally request that insurers allow them to choose their own counsel rather than the “panel defense counsel” the insurer normally appoints to defend cases.

Insurance companies typically are loath to agree to this request.

An article in NOSSAMAN’S INSURANCE RECOVERY REPORT by Joan Cotkin examines recent decisions that limit the right of policyholders in California to retain independent counsel.

“A cornerstone of California law is that the duty to defend arises whenever the lawsuit against the insured seeks damages on any theory that, if proved, would be covered by the policy.”

This leads to the recurring question—is independent counsel required to protect the interests of the policyholder? When the insured can demonstrate there is a conflict of interest between them and their insurance company the appointment of independent counsel is appropriate.

“In two recently reported cases, the insurer prevailed where the policyholders did not submit evidence supporting a potential conflict, and the insurers avoided any obligation to pay for independent counsel.”

One was Centex Homes v. St. Paul Fire and Marine Ins. Co. 2018 Cal. App. LEXUS 45, January 22, 2018. In this case, Centex did not provide credible evidence that the insurer’s appointed attorney had a conflict representing the insured.

In Bean Products, Inc. v. Scottsdale Ins. Co., 16 CH 7504, January 22, 2018, “the insured failed to show any actual conflict existed… that would somehow impair the defense Scottsdale was providing.”

Ms. Cotkin closes her discussion with the following admonition—“Policy holders must pick their fights carefully. Bad facts make bad law and these most recent cases are great examples of coverage suits that should not have been litigated.”


Can The Insurance Industry Limit the Right to Independent Counsel? Joan Cotkin, NOSSAMAN’S INSURANCE RECOVERY REPORT, Jan. 25, 2018.