DutytoDefend.com is a legal research tool that collects the law governing liability insurance companies and their lawyers and suggests how policyholders, plaintiffs, and their lawyers can effectively implement this law. Lawyers are welcome to download copyrighted materials to adapt in your practices. Non-lawyers are welcome to read, but should consult a known and trusted lawyer to help understand the complex, rapidly developing, and sometimes confusing law of a liability insurer’s duty to defend.

Sending Questionnaires helps to identify unethical lawyers and irresponsible liability insurance companies which reserve their rights to later disclaim coverage but improperly seize control of the policyholder’s defense. Ethical lawyers and responsible insurers will have nothing to fear from answering the Questionnaires truthfully. Others usually settle complex civil litigation promptly and generously.

When a liability insurer agrees to pay for the defense of its policyholder in a liability dispute but denies coverage to pay for an adverse judgment, some conflicts of interest always divide the policyholder from the insurer, each of whom wants the other pay. These conflicts of interest produce a second tussle – a coverage contest. Since the insurer is not licensed to practice law, it may only discharge its promise to defend its policyholder by hiring a lawyer who is not ethically compromised by this conflict of interest. If the insurer hires dependent counsel to defend the policyholder and to also represent its interests, a third tussle often develops – an ethical imbroglio. The lawyer cannot represent the interests of two clients whose interests conflict without analyzing potential conflicts, making written disclosure to both clients, and obtaining their informed written consent. As with all judicial jousts, resolution of each of these three tussles turns on two questions: “What happened?” and “So What?” – the queries that lawyers call questions of fact and conclusions of law. The factual record impacting the coverage contest and the ethical imbroglio is dynamic, because these tussles only arise after the liability dispute is joined. Thus, many facts impacting the coverage contest and all facts impacting the ethical imbroglio develop, if at all, as the liability dispute unfolds. The facts that will shape the outcome of the coverage contest and the ethical imbroglio may be developed favorably or unfavorably through zealous advocacy.

Reported cases demonstrate a clear pattern that policyholders tend to win the cases where substantial admissible evidence has been developed showing the breadth of the insurer’s coverage challenges and their impact on the lawyer’s ethical obligations, but insurers tend to win the cases where little or no such evidence is presented. The practical lessons to be learned are simple: 1) If you are or represent a policyholder, actively develop admissible evidence of the coverage contest and the ethical imbroglio by asking questions and insisting upon responses in writing: 2) If you are or represent an insurer, do the opposite. When policyholders ask, insurers and dependent counsel must answer because each has fiduciary duties to the policyholder to respond to inquiry. Ethical counsel and responsible insurers have nothing to fear from policyholders who ask. Others may have much to fear.

Simply put, policyholders can and perhaps should ask lawyers who have not yet complied with the Canons of Ethics whether they can be trusted. As Rita Rudner once said about trust: “A single woman may occasionally sip a vintage wine at a linen draped, candle lit dinner table across from a handsome man – wise, witty, wealthy – and wonder: ‘Could this possibly be the man that I want visiting our children on week-ends?’”
Across the nation, courts struggle with the broad public policy question of how to properly balance the interests of the policyholder with the interests of the insurer in controlling the conduct of the policyholder’s defense through lawyers who are loyal to both the insurer and the policyholder (dependent counsel) or in contrast, lawyers who are loyal only to the policyholder (independent counsel). “In sum, the ethical dilemma thus imposed upon the carrier-employed defense attorney would tax Socrates, and no decision or authority we have studied furnishes a completely satisfactory answer.” “It is a case-specific and fact-sensitive inquiry in which the Court must look at which issues will necessarily be evidenced or proved in the underlying litigation, and whether there is a significant risk that any issues will be resolved which will in turn affect the coverage determination.” This ethereal intellectual debate has produced three competing rules: 1) the “per se” rule; 2) the “disqualifying conflict” rule; and 3) the “enhanced duties” rule.
DutytoDefend.com collects and organizes the law in this field and it opines what parties and their lawyers can do with the law. This site seeks to jumpstart legal research and promote prompt and equitable settlements by effectively advocating and implementing that law.

While most articles available here are objective statements of law and useful model documents, such as deposition outlines, other articles are practice pointers that may challenge conventional thinking. – who rail against upsetting time honored practices to which policyholder regularly acquiesce. Those insurers and lawyers who find the opinions expressed here to be heretical, might remember that Pope Paul V condemned Copernicus and imprisoned Galileo for challenging a then universally accepted view that the Earth was at the center of the universe, while in fact it is not. So dear reader, please judge for yourself, including from the following sampling:
1. Questionnaires: Policyholders may easily ask for clarification with two Questionnaires: 1) a Coverage Questionnaire ; and 2) an Ethical Compliance Questionnaire . Appropriate responses may be guided by annotated versions of both Questionnaires.
2. Pitches and Fallacies : Many insurers and dependent counsel call or visit policyholders for a soothing oral chat, since no written record necessarily will result. The “Pitches and Fallacies” Guide helps prepare policyholders and their counsel to understand the 18 most common and dubious explanations why no conflicts of interest exist, with references to the applicable law.
3. GATBAL: This acronym stands for: Goals, Alliances, Timing, Burdens, Applicable law, and Leverage. Policyholders, insurers, plaintiffs, and their respective advocates rarely have the same GATBAL. For example, while policyholders and plaintiffs oppose each other in a liability dispute, they may share a desire for prompt and equitable settlements at the insurer’s expense. (Goal.) If they do, they may and perhaps should ally with each other to win the coverage contest and resolve the ethical imbroglio. (Alliances.) Principally, tort law controls many liability disputes, while contract law controls most coverage contests, and Canons of Ethics control ethical imbroglios. (Applicable law.) While liability disputes often take as much as five years to resolve and coverage contests may take an additional five years, ethical imbroglios should be resolved within 30 days – the time allotted to respond to a summons. (Timing.) The burdens imposed by fiduciary obligations and evidentiary burdens of proof are not shared equally among litigation participants. (Burdens.) Perhaps most importantly, dependent counsel has the burden to analyze potential conflicts of interest, make written disclosure, and perhaps obtain informed written consent from the policyholder/client, who may, and perhaps should expressly withhold both consent and authority to be represented by dependent counsel until conflicts of interest have been cleared (Leverage).
4. Settlement: There are only four possible responses to the Questionnaires: 1) truth; 2) lies; 3) silence; or 4) settlement. Results have been excellent that sending Questionnaires produces prompt and equitable settlements at no cost to the policyholder, except a modest deductible.
5. Powerful But Underutilized Law:
A. Dependent counsel’s appearance in court without the authority of the policyholder: “constitutes a cause for disbarment or suspension.” (Bus. & Prof. Code § 6104.) Policyholders who expressly withhold authority from dependent counsel to appear in court without first clearing conflicts reliably produce powerful leverage.
B. Dependent counsel “shall not accept compensation for representing a [policyholder] from one other than the client [such as an insurer] unless [the lawyer] obtains the client’s informed written consent.” (RPC, Rule 3-310(F)(3).) Policyholders who expressly withhold consent also reliably produce powerful leverage.
C. The policy promise to “cooperate” with the insurer only requires the policyholder to show up and testify truthfully in discovery and at trial.
D. Unless policy language says otherwise: 1) the policyholder “has the right to conduct such defenses, if he chooses to do so”; 2) “If the [insurer] neglects to defend, a recovery against the [policyholder] suffered by him in good faith, is conclusive in his favor against the [insurer]”; 3) the default standard for the attorney fee rate an insurer must pay to defend the policyholder is the costs of defense incurred by the policyholder “ in good faith, and in the exercise of a reasonable discretion.” (Civ. Code § 2778 (ellipses omitted).)
E. While a statute may limit the rate for attorney fee rate that performing insurer must be pay, this limitation must be earned. “[I]n the absence of a stipulation or unconditional agreement between the insurer and insured, unless and until there has been a judicial determination of an insurer’s duty to defend and the existence of a conflict of interest, the provisions of Civil Code section 2860 are inapplicable.” (Handy v. First Interstate Bank (1993) 13 Cal.App.4th 917, 926 (emphasis added).)
F. Asking for a defense constitutes a first party claim that requires the insurer to respond with a simple “Yes”, “No”, or “Maybe”. An insurer’s failure to promptly deny coverage may constitute a waiver of coverage defenses, including the assertion of a reservation of rights that is either inadequate, untimely, or unlawful. “[E]very insurer shall immediately accept [“Yes”] or deny the claim, in whole [“No”] or in part [“Maybe”]. Where an insurer denies a claim, it shall provide to the [policyholder a written] statement listing all the factual and legal bases for each reason given for such denial [and if] based on a specific policy provision, shall provide an explanation of the application of the provision to the claim.” (Code of Regs. § 2695.7(b) (ellipses omitted, parentheses added). “Section 790.03 define[s] various unfair methods of competition and unfair or deceptive acts or practices. [This statute] grants the Commissioner rulemaking power. The Regulation comes to the court with a presumption of validity.” (Assn. of Calif. Ins. Cos v. Jones (2017) 2 Cal.5th 376, 387-88 (ellipses omitted).)

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[1] “Dependent counsel” describes lawyers selected and directed by and loyal to the insurer who are the counterparts to Independent counsel, who represent only the policyholder, although at the insurer’s expense.

[2] “A lawyer . . . must also act with zeal in advocacy upon the client’s behalf.” ( ABA Model Rule 3.1, Comment 1)

[3] Hyperlink to Cumis Line of Cases at DutytoDefend.com. “Canons of Ethics impose upon lawyers hired by the insurer an obligation to explain to the insured and the insurer the full implications of joint representation in situations where the insurer has reserved its rights to deny coverage. If the insured does not give an informed consent, counsel must cease to represent both.” (San Diego Navy Fed. Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358, 375

[4] Hyperlink to Dynamic Concepts Line of Cases at DutytoDefend.com. The policyholder “is alleging conclusions without substance, not facts. As Gertrude Stein famously said about Oakland, there is no there there.” (Centex Homes v. St. Paul Fire & Marine Ins. Co. (2015) 237 Cal.App.4th 23, 32.)

[5] Hyperlink to Duty to Respond to Inquiry at DutytoDefend.com.

[6] Hartford Acc. & Indem. Co. v. Foster 528 So.2d 255, 269, 274 (Miss. 1988)

[7] Auto-Owners Ins. Co. v. Lake Erie Land Co. 2:12-CV-184 JD (N.D. Ind. 2013) (emphasis added).

[8] Hyperlink to 50 State Survey: Do Conflicts of Interest Arising from a Liability Insurer’s Reservation of Rights Require Payment of Independent Counsel? at DutytoDefend.com. “The mandatory rule of [lawyer] disqualification in cases of dual representations – analogous to the biblical injunction against ‘serving two masters’ (Matthew 6:24) – is self-evident.” (Flatt v. Superior Court, 9 Cal.4th 275, 286 (1994) (ellipses omitted).)

[9] Hyperlink to Coverage Questionnaire at DutytoDefend.com.

[10] Hyperlink to Ethical Compliance Questionnaire at DutytoDefend.com.

[11] Hyperlink to Annotated Coverage Questionnaire and Annotated Ethical Compliance Questionnaire at DutytoDefend.com.

[12] Hyperlink to Pitches and Fallacies at DutytoDefend.com.

[13] Hyperlink to Policyholder’s Duty to Cooperate at DutytoDefend.com.

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