DutytoDefend.com is a free resource designed for defendants, and their personal lawyers, who are already involved in a serious civil lawsuit and who have liability insurance, but who also have trouble with the insurer and the insurer’s lawyers.
For example, Mike hit another car, killing the other driver, Beelzebub, whose estate sues Mike for running a red light. There are only two possible outcomes of the lawsuit, both of which are equally satisfactory to Mike: Mike is either innocent or negligent. Because Mike has a liability insurance policy with Mammon Insurance Co., both outcomes have precisely the same, modest, and acceptable financial consequence to Mike – he pays only his deductible. If Mike is later found to be innocent, Beelzebub will lose and Mammon will win. But if Mike is negligent, Beelzebub will win and Mammon will lose. What is more, Mammon will pay for its pre-approved, long standing, and loyal lawyer, Belphegor, to defend the interests of both Mammon and Mike. Everything is good for Mike. That’s why he bought insurance in the first place.
But now suppose that Beelzebub was Mike’s wife’s lover and Mike is also accused in the lawsuit of intentionally murdering Beelzebub in a jealous rage. Now, there are three possible outcomes of the lawsuit: Mike is either had the green light, had the red light, or is a felon. If Mike later is found to be a felon, then Mammon may not have to pay for anything! Things are no longer good for Mike. Can Mammon or its lawyers be trusted?
Given this sad turn of accusations, two questions arise. What bad things could happen to Mike? What may Mike quickly, efficiently and economically do protect himself? The law that may possibly answers to these two questions is the entire focus of this website.
The short answer to “What bad things could happen to Mike?” is:
1. Mike has many enemies – Beelzebub, Mammon, and Belphegor. Beelzebub wants to prove that Mike is a felon! So does Mammon, hoping it will then pay nothing. Belphegor wants his major revenue stream, Mammon, to be happy – knowing that Mike will never pay Belphegor a dime. Mike has no friends here.
2. Mammon’s insurance contract requires it to pay Peter, Mike’s personal lawyer who is loyal to Mike alone. Peter can ethically defend the lawsuit under Mike’s direction, but at Mammon’s expense, to a covered outcome.
3. Belphegor cannot ethically be Mike’s lawyer because Belphegor has conflicts of interest governed by the Rules of Professional Conduct – “No one can serve two masters.” (Matthew 6:24).
4. Sadly in real life, often Mammon will hire Belphegor to represent both Mike and Mammon, Belphegor will accept the employment despite the ethical conflicts of interest, and neither Mammon nor Belphegor will tell Mike anything about 1, 2, or 3 above.
5. This scenario plays out hundreds of thousands, if not millions, of times per year in a broad array of different kinds of civil lawsuits across America. Policyholders are sued for alleged wrongdoing, which if true is clearly covered by insurance, clearly not covered, or may or may not be covered. These policyholders’ liability insurers universally warn the policyholders of coverage problems in what is known as a reservation of rights letter. All policyholders who receive a reservation of rights letter should consider promptly taking proper steps to protect themselves from all enemies.
The short answer to “What may Mike quickly, efficiently and economically do protect himself?” is:
1. Mike can expressly withhold consent and authority for Belphegor to represent him. As a defendant in the lawsuit, Mike has the initial power to control his own defense. While Mammon has the contractual “right” to defend Mike, it cannot actually do the work of defending Mike because Mammon is not licenced to practice law. Thus, Mammon must hire a competent, ethical lawyer to do the legal work. If Belphegor cannot ethically represent the interests of both Mike and Mammon, then Belphegor must either: 1) get Mike’s informed written consent to represent Mike; or 2) quit. By Mike expressly withholding consent, Belphegor risks being disbarred if he goes ahead and represents Mike anyway. By expressly withholding authority, Belphegor cannot appear in court as Mike’s lawyer.
2. Mike can expressly request that Mammon pay for Peter to represent Mike instead of Belphegor.
3. If Belphegor and Mammon actually behave unlawfully in response, Mike may properly settle with Beelzebub at Mammon’s and perhaps Belphegor’s expense.
4. Here are damning accusations! Sadly, Mammon and Belphegor will almost always behave unlawfully. They usually coalesce to violate Mike’s rights. However, they may escape legal liability to Mike for these violations if Mike is not hurt. Mike can sue Mammon and Belphegor for damages only if Mammon and Belphegor owe duties to Mike (they do), Mammon and Belphegor breach those duties (they will), and the breach causes damage to Mike (they must not allow this to happen).
5. Often, by expressly withholding consent and authority for Belphegor to represent Mike, he can quickly, efficiently and economically place Mammon and Belphegor in a predicament of their own creation by which they cannot ask Mike to pay anything without inviting their own liability to Mike. Gottcha!
Sceptics, including reserving insurers and their panels of loyal lawyers, are prone to protest all of the foregoing prediction of bad behavior, labeling it: “Balderdash!” If asked in the abstract whether reserving insurers and their panel counsel will behave properly, the uniform, indignant response will be that of course they will – always. A quick and simple test should reveal whether a reserving insurer and its panel counsel can be trusted. In an email, ask panel counsel and the reserving: “Please provide me with your detailed analysis of how the insurer’s reservation of rights impacts panel counsel’s duties to me of undivided loyalty (Rule 1.7), disclosure (Rule 1.4), and confidentiality (Rule 1.6).” If the insurer and panel counsel faithfully provide the requested analysis, then they will probably pass the test and the policyholder may be satisfied that the accusations leveled here are poppycock. But if they respond: 1) panel counsel cannot get involved in coverage; 2) the tripartite relationship absolves panel counsel of conflicts of interest; or 3) the insurer is not a client of panel counsel, then perhaps the policyholder should beware. A simple follow up letter should set the stage: “I find you response to be unsatisfactory. Panel counsel does not have my consent nor authority to represent me.”
Of course, all of this can get quite complicated. The remainder of this website seeks to enunciate California law that governs this situation and delineates how policyholders can properly protect themselves. This website seeks to summarize the law addressing two broad questions: 1) What is the liability insurer’s duty to defend its policyholder? and 2) What are the shared duties of reserving liability insurers and their loyal lawyers to properly discharge the duty to defend?