Choosing Your Own Defense Counsel, And Why You Should Consider Adding A Choice Of Counsel Endorsement To Your CGL Policy
by Brian Rickert
Wednesday, June 8, 2016
Litigation is costly and time consuming. Preparing for this risk, you purchase an insurance policy thinking that you can work together with your insurer to help protect your business from any claims. However, when insurance steps in to defend a claim filed against you, your insurer dictates many of the steps taken in that lawsuit and you may feel like you have no control. Compounding the problem, your interests and those of your insurer can differ, as the insurance company generally wants to get rid of your case as quickly and cheaply as possible, while you are looking out for the long-term interests of your company. As you consider renewing your insurance policies, one of the best ways for you to better manage your litigation and its impact on your business is to request an endorsement on your insurance policy that allows you – instead of the insurer – to choose your defense counsel.
Under a typical Comprehensive General Liability (“CGL”) or Employment Practices Liability Insurance (“EPLI”) policy, the insurer has the right to choose defense counsel for you if you get sued. When your insured selects your counsel, it typically hires insurance defense counsel that handles routine cases such as slip-and-falls and automobile accidents. That lawyer is chosen because the insurer has previously negotiated a deal with a local law firm (sometimes called “panel counsel”) whereby the local panel counsel will get a volume of insurance defense work from the insurer in exchange for charging low hourly rates. Many times, this insurance defense counsel does not know anything about your business or the claims at issue in your lawsuit; yet, that lawyer will be defending you and handling your case regardless of the consequences to you or your business.
When a case or series of cases involve serious allegations that threaten your company’s reputation or existence, you need the ability to retain counsel who is familiar with your business and has specialized expertise in the appropriate area of law. Good examples of such cases include: construction defect claims; OSHA or other regulatory claims; employment practices liability asserting claims for discrimination (based on sex, race, age or disability), wrongful termination, harassment or retaliation; directors and officers claims; errors and omission claims (i.e., malpractice); fiduciary liability claims; and the like. Imagine your surprise when you get sued by an owner claiming you defectively designed or constructed a building that collapsed and the defense counsel appointed for you by your insurer only handles auto accident cases, and does not even know what 2x4’s are (he/she thinks a 2x4 has to do with the drive systems on a car). This choice and failure to provide competent counsel can literally make or break your business.
If you are facing with multiple lawsuits either in the same or in multiple jurisdictions, your need to choose your own counsel is even more important. When these circumstances arise, it is critical that the defense of all cases be coordinated and handled with consistency, and with an eye toward the overall strategy of obtaining the best result for your company long-term. This is difficult to accomplish when different lawyers in different states are assigned to your case by different insurers. Using a lawyer who understands your industry and your business will ensure that the law firm representing you understands your business goals and will be better equipped to act in your best interest than an insurer-assigned lawyer with whom you have no relationship.
In short, when renewing your policy, you should ask about adding a Choice of Counsel Endorsement to your policy. This Endorsement generally gives you the ability to choose your counsel if you get sued, rather than letting your insurance company choose your counsel. You need to negotiate this at the time of negotiating your policy, as failure to include such an endorsement will result in the insurance company picking your counsel.
Your insurance broker should be familiar with choice of counsel provisions and should be able to talk you through the process. An experienced attorney can also help discuss the benefits of this process and the appropriate language to use in your CGL policy, as well as other potential options. In the end, your business is too valuable to rely on an insurance company to dictate who will defend your case, especially if it is a make-or-break case. You need a lawyer defending you who understands your business to better protect it.
Please contact Brian Rickert at 515-242-2457 if you have any questions.