Top Ten: Surprising Liability Insurance Laws

1.      An insurer reserves its rights to protect its rights against the policyholder and the plaintiff, creating conflicts of interest that permit the policyholder and the plaintiff to cooperate to protect shared interests against the insurer.

2.      An insurer must accept a reasonable settlement offer within the policy limit to avoid the risk of paying an adverse judgment in any amount.[1]

3.      An insurer that reserves its rights to later deny coverage[2] usually must pay full rates[3] to independent counsel, selected and directed by the policyholder.[4]

4.      A reserving insurer may have to pay independent counsel as often as every 30 days.[5]

5.      Independent counsel may earn 10% on delinquent invoices.[6]

6.      An insurer that wrongfully fails to defend loses control of settlement.[7] The abandoned policyholder may cooperate[8] with and assign rights[9] to the plaintiff with favorable conclusive evidentiary presumptions[10] and save years of litigation time.

7.      An insurer that reserves its rights can sue its policyholder to get back all of its costs of defense[11] and costs of settlement[12].

8.      Dependent counsel usually must analyze conflicts of interest, make written disclosure, and get informed written consent before starting work.[13]

9.      An insurer that says Yes may change its mind at any time to say Maybe or No.[14]

10.    An insurer must immediately conduct a thorough investigation before saying No or Maybe.[15]


[1] See, Article: Policy Limit Settlement Offer Properly" href="">How to Make a Policy Limit Settlement Offer Properly.

[2] See, Article: Reservation Of Rights" href="">Reservation of Rights.

[6] See, Article: Prejudgment Interest.

[7] See, Article: Control of Settlement" href="">Control of Settlement.

[15] See, Article: Duty to Investigate" href="">Duty to Investigate.

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