Your insurance company has agreed to defend you in a lawsuit, but who is going to represent you. As the insured paying the insurance premiums to a grateful insurance carrier you have two choices, and the choice is clear. You have every right and entitlement, and leverage, to instruct the insurance carrier that you want to retain the legal services of a lawyer that comes into to the lawsuit already familiar with your business operations and industry regulations. If you fail to exercise your right to counsel of your choice then the carrier will randomly hire a lawyer who, more likely than not, knows little, if anything, about the fireworks business and regulations.
During litigation, your priorities and that of your insurance carrier can diverge. For example, while a personal injury or trademark lawsuit may be a covered peril under your insurance policy, a lawsuit also threatens to impact your reputation among customers, competitors and investors. It should not be a surprise to learn that insurance defense lawyers generally are guided by a single objective of having the lawsuit resolved for the least amount of money. This single-minded mission may not serve your company’s best business interests. Consequently, it is highly recommended that you manage the litigation not solely on the basis of costs, but also with an eye on your long-term strategy and business goals.
Commercial general liability policies routinely provide the insurance carrier with the express right to control the defense, and this includes the selection of counsel. To the extent that it is the carrier’s money at risk this makes some sense. However, to the extent that the insured is on the hook for the deductible and, oftentimes, excess legal fees as well as exposure to damages in excess of your coverage (not to mention the damages to the reputation of your business), you also have the largest stake in the outcome of the lawsuit.
Accordingly, when your broker places or renews your insurance coverage, request the inclusion of a ‘choice-of-counsel’ endorsement to the policy (a/k/a selection-of –counsel clause). Essentially, this endorsement provides you with the right to select your own counsel, subject to the insurance company’s approval which shall not be unreasonably withheld. If your current policy does not have a choice-of-counsel endorsement, you may still be able to have the insurance company approve your selection of counsel.
In closing, the sooner you notify your insurance carrier of your intention to have your lawyer represent your business, the greater the odds that the insurance carrier will consent to your choice of counsel. Suffice to say, if you wait until the carrier randomly selects a lawyer, and if that lawyer has already spent time and money on your case, approval by the insurance carrier is less likely. As in many things, here, vigilance counts.
