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Who Does Insurance Defense Counsel Really Represent?

WHAT IS “INSURANCE DEFENSE COUNSEL”?

Insurance defense counsel is the term for a lawyer hired by an insurance company to defend a lawsuit (or other legal claim) against an insured person or entity (the “Insured”).

Generally, the insurance company has the right to choose (and the obligation to pay the fees of) the lawyer who serves as insurance defense counsel. That lawyer has two clients: the insurance company and the Insured, and while some people may think this seems like a conflict of interest, in principle both clients have the same (or at least overlapping) interests: the rapid, successful resolution of the litigation or claim.

Because insurance defense counsel undertakes dual representation of the insurance company and the Insured, the attorney owes a duty of care to both clients.

IF A CONFLICT OF INTEREST ARISES, WHAT DUTY DOES INSURANCE DEFENSE COUNSEL OWE TO THE INSURED PARTY? 

In California, generally speaking, insurance defense counsel has a primary duty of loyalty to the Insured, even in situations where a conflict of interest or adverse situation arises with regard to the insurance company. (See: California State Bar Ethics Opinion No. 1995-139) Insurance defense counsel cannot reveal certain kinds of privileged information to the insurer, and while counsel may be required to withdraw from representation of the insured if certain types of conflicts of interest arise, the attorney cannot violate the primary duty of loyalty to the Insured.

That said, the lawyer does owe the insurance company duties of cooperation, consultation, and disclosure–which is part of the reason why the attorney may have to withdraw from representation of the Insured if significant conflicts of interest arise between the interest of the Insured and those of the insurance company. If the lawyer’s duty to the Insured would prevent insurance counsel from communicating properly with the insurance company (at least to the degree required to fulfill the duties above) then the lawyer cannot legally or ethically continue to represent both parties.

CAN INSURANCE DEFENSE COUNSEL BE SUED FOR MALPRACTICE?

A malpractice claim can be brought against any attorney who commits provable professional negligence in the course of representing a client. This includes insurance defense counsel.

In fact, if the insurance company chooses the attorney who serves as insurance defense counsel, either the Insured or the insurance company can bring a professional negligence claim against an attorney who commits malpractice in the course of defending the Insured against a claim or action arising under an insurance policy. (See: Gulf Ins. Co. v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2000) 79 CA4th 114, 128, 93 CR2d 534, 544.) However, where the Insured chooses to proceed with independent counsel, the attorney does not owe any duty of care to the insurance company, and the insurance company cannot bring a claim against the lawyer for malpractice (although the Insured client can do so, assuming a prima facie case for professional negligence can be made). 

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Disclaimer: THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY, AND DOES NOT CONSTITUTE LEGAL ADVICE OR CREATE AN ATTORNEY-CLIENT RELATIONSHIP BETWEEN THE AUTHOR OR ROSS LAW AND ANY PERSON. Your legal rights and experiences may vary. Never use an online article (including this one) to evaluate your legal rights or claims. Consult an experienced attorney promptly to obtain a personalized evaluation of your claims, potential damages, and the various legal rights and options available to you.

You may lose or compromise your rights if you delay in consulting legal counsel. Most legal claims (and defenses), as well as legal and court procedures, are complicated and fact-dependent. If you believe you have a claim against someone who injured you, a lawyer who represented you in a previous lawsuit, or any other legal claim, consult an experienced lawyer immediately for an evaluation of your individual rights and claims.

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