Is an insured required to use the defense counsel provided by their insurance company?
Under a standard general liability insurance policy, the insurance company is clearly obligated to indemnify the insured. If a judgment is made against the insured, the insurer must cover that amount. However, does this also mean that the insured is required to utilize the legal defense team of the insurance company? Can the insured hire their own legal counsel and simply submit those expenses to the insurance company for reimbursement?
I believe the answer to that last question would be no. Yet, this situation raises an intriguing issue: If an insured chooses not to employ the insurance company’s defense counsel and instead hires their own, and ultimately loses the case, is the insurance company still responsible for indemnifying them and covering the judgment?
You raise some important points about the obligations of an insured and an insurance company regarding legal defense. Generally speaking, in most standard general liability insurance policies, the insurance company does have the right to select and provide defense counsel for the insured. This is typically outlined in the policy terms, which often state that the insurer has the responsibility to defend any claims covered by the policy.
As for whether the insured is obligated to use the insurance company’s defense counsel, the answer is usually yes. The insurer’s obligation to defend is based on the principle of duty to defend, which means that they are responsible for appointing legal counsel to handle the defense in the event of a claim. If the insured chooses to hire their own attorney without the insurer’s consent, they may not be able to recover those costs, and there’s a risk of complicating the coverage arrangement.
Regarding your specific question about whether the insurance company is still obligated to indemnify the insured if they don’t use the insurer’s defense counsel and lose the case, this can be more complicated. If the insured fails to comply with the terms of the policy, the insurer may argue that their obligation to indemnify is affected, particularly if the alternative defense caused a negative outcome or compromised the insurer’s interests. However, whether the insurer can deny indemnification depends on the specific policy language and the circumstances of the case.
In summary, while the insured is typically required to use the insurer’s defense counsel, the nuances can vary based on the specific circumstances and policy terms. It’s always a good idea for insured parties to review their policies carefully and consult with a legal professional if they have any questions or concerns regarding their rights and obligations under their insurance coverage.