• Published On: September 30, 2022

When an insurance company owes a defense to a policyholder against a third-party claim, who gets to appoint defense counsel: the insurance company, or the policyholder?

In instances where a defense attorney is appointed by an insurance company to represent a policyholder, the insurance company often hires “panel” defense counsel which is retained scores or hundreds of times by the insurance company. The policyholder may find that their interests diverge from the insurance company’s under various circumstances in which the insurance company reserves its rights or otherwise imposes conditions on the possibility or extent of coverage. In such cases, defense strategy may affect whether the insurance company limits the extent of coverage or acknowledges any coverage at all. That potential conflict leaves open the question of whether the insurance company panel counsel can provide proper representation when such a divergence arises.

The insurance company owes a duty to defend the policyholder, but when a conflict of interest exists between the parties, policyholders have a right to select independent defense counsel. The right to independent counsel protects the policyholder’s interests against such conflicted representation.

What Is Independent Counsel?

Most defense counsel are appointed in insured matters with no input from the policyholder. That ordinary course changes in the case of a potential conflict. The right to independent counsel is based on attorneys’ obligations, codified in both statutory and common law principles. Attorneys must abide by rules of professional conduct. New York’s Rules of Professional Conduct are modeled after the ABA Model Code of Professional Responsibility. Under Rule 5.4 of the Rules of Professional Conduct, a lawyer is required to maintain professional independence and protect confidential information:


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