Liability insurance policies give the insurance company exclusive control over litigation in claims against its "insureds", who are the clients that own policies with the company. With the insurance company possessing this much control over a client’s case, conflicts of interest may develop between the insurance company and the insured. If conflicts do arise between the two, the insurance company may have to provide and pay for independent counsel for the insured separate from the counsel representing the company.
Some common situations where a conflict of interest arises which may require the insurance company to provide and pay for independent counsel include:
- The suit filed against the insured client contains allegations that are potentially both within and outside policy coverage. If that is the situation, the insurance company will likely attempt to defend the charge in the way that would make the claim not be covered by the policy. The insured, however, would probably prefer to defend on any grounds available to them without considering whether those grounds would place the case under the cover of the policy.
- The suit filed against the insured seeks damages in excess of the policy limits. In such a situation, the insured typically wants to settle at or within policy limits. The insurance company knows that the policy limit is its maximum payout, and, thus, is probably indifferent to any amount over the limits. However, the insurance company may have a duty to settle within policy limits.
- The insured alleges misconduct by the insurance company in handling the defense. Some courts have held that if general animosity between the insurance company and the insured rises to a level where it produces a conflict of interest, the insurance company will be obligated to pay for independent counsel for its client.
If you believe you have a conflict of interest with your insurance company, it may be time to contact a financial attorney on your own. An attorney can help you get independent counsel and have the insurance company pay for it.