control of the policyholder’s defense

Whether a policyholder or a liability insurer has the right to control the policyholder’s defense depends on whether a statute, contract, or common law prevail. “The [insurer] is bound, on request of the [policyholder], to defend actions or proceedings brought against [the policyholder] in respect to the matters embraced by the indemnity, but [the policyholder] has the right to conduct such defenses, if he chooses to do so.” (Civ. Code § 2778(4).) However, the insurer may have a right to conduct such defense if a “contrary intention appears” from the language of the policy. “But if an insurer reserves its rights to later deny coverage, where there are divergent interests of the insured and the insurer brought about by the insurer’s reservation of rights based on possible noncoverage under the insurance policy, the insurer must pay the reasonable cost for hiring independent counsel by the insured. The insurer may not compel the insured to surrender control of the litigation.” (San Diego Navy Fed. Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358, 375 (citations omitted).)

Please enter your email address in order to view this page.
Your email address will not be sold to or shared with third parties.