Is an insured required to utilize the defense counsel provided by their insurance company?
In a typical general liability insurance policy, the insurance company is clearly obligated to indemnify the insured. If a judgment is rendered against the insured, the insurer must pay that amount. However, does this obligation also extend to requiring the insured to use the insurance company’s legal defense? Can an insured hire their own legal counsel and later seek reimbursement from the insurance company for those expenses?
I would assume the answer is no. But this raises an intriguing question: If the insured decides not to use the insurance company’s defense counsel and instead opts for their own, and subsequently loses the case, is the insurance company still obligated to indemnify the insured and cover the judgment?
You’re correct in assuming that the insured does not have the right to simply choose their own defense counsel and expect the insurance company to cover the costs. Most standard general liability insurance policies include a provision requiring the insured to accept the defense provided by the insurance company. When the insurer agrees to defend a claim, they will typically appoint counsel of their choice, and defense costs will be covered under the policy.
If the insured chooses to hire their own attorney without the insurer’s consent, they may be assuming a risk. Generally, if the insured does not follow the terms of the policy regarding defense, the insurer may not be obligated to indemnify them for costs incurred by the insured’s independent counsel. Courts may determine that if the insured acted outside the policy’s stipulations, the insurer’s obligation to indemnify for a judgment could be compromised.
It’s always advisable for the insured to review the specific terms of their policy and consult legal counsel to ensure they fully understand their rights and obligations. In complex situations, it may also be beneficial to communicate with the insurance company to clarify any uncertainties regarding defense arrangements.