In a civil lawsuit when a defendant’s liability insurance “coverage is disputed, the interests of the insured and the insurer are always divergent. The attorney [hired by the insurer to protect both the insurer and the policyholder] should not be placed in the position of divided loyalties. Such an arrangement would be adverse to the best interests of the insured, the insurer, the attorney, and the profession. . . . Canons of Ethics impose upon lawyers hired by the insurer an obligation to explain to the insured . . . 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.”
And yet, in hundreds of thousands of cases per year, some lawyers fail to comply with the mandate of the leading case quoted above. Like a limping gazelle on the Serengeti, these lawyers who violate the Canons of Ethics are vulnerable. So too are the insurers that hire them.
Any policyholder who has been sued, whose insurer reserves its rights to later deny coverage and hires its own lawyer who fails to analyze and explain potential conflicts of interest has strong leverage. These policyholders should expressly withhold consent and authority to be represented, ask the insurer to explain its coverage position in writing, and ask the insurer’s lawyer to comply with the Canons of Ethics, also in writing. When asked, only four responses are possible: 1) truth; 2) lies; 3) silence; and 4) settlement.
Ethical lawyers and responsible insurers have nothing to fear in truthfully answering appropriate questions. Those who lie in writing or fall silent will risk forfeiting legal fees, incurring civil liability, and being disbarred. By extension, insurers which hire such lawyers risk breaching the duty to defend, losing control of settlement, and incurring bad faith liability. Those lawyers who eschew truth, lies, and silence may opt to resolve the plaintiff’s liability dispute, the insurer’s coverage contest, and the lawyer’s ethical imbroglio by urging the insurer to settle with the plaintiff at no cost to the policyholder, except a modest deductible – and this is precisely what usually happens to those who ask.
There is no harm in asking. Plaintiffs and defendants may properly cooperate with each other to achieve their shared goals of settlement, even as they fight the merits of the civil suit. If asking fiduciaries to fulfill their duties seems scary, remember that Copernicus was right even though his views were initially challenged by entrenched interests.
Figuring out what to ask is easy. Questionnaires to the insurer and counsel are available at DutytoDefend.com for free which pose broad, proper questions that, like penicillin, cure whatever ails you. Parties who want the peace of mind secured by closure may simply send the Questionnaires, insist on written responses, and anticipate a prompt and equitable settlement of all controversies.