DutytoDefend.com collects and organizes the law governing a liability insurance company’s obligation to defend its policyholder in civil lawsuits and to settle those lawsuits, lawyers’ ethical obligations to policyholders, and simple steps that policyholders and plaintiffs can take to get claims settled promptly and generously.

This body of law develops in three separate but related tussles: 1) a liability dispute by an injured plaintiff against a defendant/policyholder that is usually governed by tort law; 2) a coverage contest between a liability insurer and its policyholder that is usually governed by contract law; and 3) an ethical imbroglio for the insurer’s lawyer that is governed by Canons of Ethics. For clarity, lawyers who are selected and directed by the liability insurance company are identified here as dependent counsel while their counterparts who are selected and directed by the policyholder are called independent counsel.  While the liability dispute and the coverage contest can each occupy as much as five years to resolve, dependent counsel’s ethical imbroglio must be resolved in 30 days, the time allotted for a policyholder to respond to a plaintiff’s complaint.

While the plaintiff and the policyholder oppose each other in the liability dispute, they often share the same goals in the coverage contest and the ethical imbroglio, which they may properly pursue by cooperating with each other, provided that do not collude. The plaintiff may properly plead into coverage. Both the plaintiff and the policyholder may also properly testify into coverage, and develop admissible evidence relevant to the coverage contest and the ethical imbroglio.

When an injured plaintiff sues a defendant who has liability insurance, both the plaintiff and the policyholder make separate but related claims to the defendant’s insurer. Usually, both the plaintiff and the policyholder want the same thing: prompt and equitable resolution of the injured plaintiff’s liability dispute so that they can both get on with their lives without the stress of litigation. The plaintiff makes a third-party claim to the insurer for payment of damages caused ty the policyholder’s alleged tort. The policyholder makes a first-party claim against the insurer for payment of the costs of defending and indemnifying the plaintiff’s liability dispute based on the language of the policy contract.

When a policyholder notifies an insurer of a plaintiff’s claim, the insurer is required by regulations to immediately respond in writing to both of these claimants with a simple “Yes”, “No”, or “Maybe”, giving full particulars. “No” is easy to recognize as the insurer emphatically denies the entire claim and encourages the claimant to complain to the Department of Insurance. “Maybe” can be confusing as it accepts part(s) of the claim, denies other part(s), and defers making any firm decision, leaving that exact status of coverage in limbo. The most common form of “Maybe” occurs when an insurer agrees to defend its policyholder but reserves its rights to later deny coverage to its policyholder and to the plaintiff. “Yes” accepts the entire claim, but is usually fraught with uncertainty because insurers almost never comes right out and expressly says “Yes”. Instead, “Yes” is often merely implied by the insurer failing to say “No” or “Maybe”.

Unless the plaintiff’s claim is promptly resolved at no cost to the policyholder (except a modest deductible), conflicts of interest always develop among the insurer, the plaintiff, and policyholder. As a result, complex potential conflicts of interest may develop among a policyholder, a liability insurer, and dependent counsels regardless of whether the insurer responds with a “Yes”, a “Maybe”, or a “No”.

The existence of disqualifying conflicts of interest may shift control of the policyholder’s defense and/or settlement from the insurer to the policyholder. If dependent counsel cannot ethically represent the policyholder, the insurer must fulfill its promise to defend by paying for independent counsel. Much of this website is devoted to the battles that often ensue among the policyholder, the plaintiff, an insurer, and dependent counsel for control of the defense and settlement. Since dependent counsel must resolve the ethical imbroglio within 30 days, these lawyers are extremely vulnerable to ethical lapses, discipline, disbarment, civil liability, and expungement of attorneys fees.

These potential conflicts of interest may be easily resolved by fleshing out factual and legal details. Both liability insurers and their dependent counsel are required by regulations to analyze potential conflicts of interest and make written disclosure of the analysis to the policyholder. Dependent counsel may also be required to obtain the policyholder’s informed written consent to represent the policyholder. When liability insurers or their dependent counsels fail to take the initiative to make these required disclosures, the policyholder may expressly withhold consent and authority for dependent counsels to represent the policyholder until the lawyer complies with the Canons of Ethics.

Simple tools available here to flesh out factual and legal details of potential conflicts of interest are Questionnaires. Practical experience teaches that sending Questionnaires either produces detailed conflict of interest information or alternatively produces prompt and generous settlements. While responsible insurers and ethical lawyers have nothing to fear from such Questionnaires, others may be reluctant to respond. Receiving a Questionnaire requires a liability insurer and dependent counsel to choose to: 1) tell the truth; 2) lie; 3) not respond; or 4) settle the liability dispute promptly and generously at no cost to the policyholder so as to defuse all potential conflicts of interest and obviate the need to respond to the Questionnaires.

DutytoDefend.com is a self-help resource with over 120 objective memoranda of law, over 90 definitions of terms, about 35 model legal documents, about 40 highly opinionated practice pointers, and a few Action Guides for do-it-yourselfers. All of these resources are downloadable in Word or WordPerfect, and a few in pdf – at no cost to the user.

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