How to Control the Dynamic Duty to Defend - Simply

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Course Description

This program was recorded on January 18th, 2018

Liability insurance fuels the defense and settlement of millions of litigated cases every year. Securing valuable coverage starts with triggering the duty to defend by showing the mere possibility that a lawsuit could conceivably result in a covered judgment. Once triggered, insurers strongly favor controlling the defense through appointed dependent counsel despite the risk of potential ethical conflicts, but most American jurisdictions have adopted one of three rules, all of which focus on the ethical obligations of insurer appointed dependent counsel. Some insurers and their lawyers wrongfully seize control of the defense, thereby becoming vulnerable to early challenges for breach of fiduciary duties without costly coverage litigation. By simply sending Questionnaires [available with these course materials], policyholders may catch violators who, like a kid caught with his hand in the cookie jar, then tend to promptly settle cases to the satisfaction of plaintiffs and at no cost to the policyholder.

  • Stephen ThomasStephen Thomas
    Principal fields of study include: duty to defend, conflicts of interest, reservations of rights, Cumis counsel, lawyers’ ethical obligations, reasonableness of attorney fees, insurer reimbursement claims, good faith reliance on counsel, insurer good or bad faith, insurance coverage in construction defect, professional liability, personal injury, many business and personal torts, products liability, malicious prosecution, false imprisonment, libel, slander, wrongful eviction, invasion of privacy, discrimination, sexual harassment, and pollution claims. Represented insurance companies or policyholders in coverage disputes. Defended policyholders for insurers in a wide variety of liability suits.

    Contact Stephen Thomas

      • 2 General Credits
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    1. Basic liability insurance concepts:
      1. McCarren Ferguson Act delegates insurance law to the states.

      2. Policy contract language is standardized and universal,

      3. Model codes have been enacted in many states, including the Field Code (Cal. Civ. Code § 2778) and the Unfair Claim Handling Practices Act (Cal. Ins. Code § 790.03(h).)

      4. California is an incubator of duty to defend law: Gray v. Zurich and Cumis.

      5. “Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.” (Cal. Ins. Code § 22.)

      6. Liability insurance contract construction - The Lord giveth and the Lord taketh away.

      7. Two primary promises.

    2. Three categories of issues often arise regarding the duty to defend:

      1. Defense trigger;
      2. Control of the defense; and

      3. Encouraging prompt and equitable settlements.
    3. How to Trigger the Duty to Defend – or not

      1. Upon notice of a claim, the insurer must respond with a “Yes”, “No”, or “Maybe” to coverage:

      2. Summary of familiar principles MV Transport

      3. Duty to investigate. An insurer cannot reasonably and in good faith deny payments to its insured without thoroughly investigating the foundation for its denial.

      4. Plead into or out of coverage.

    4. How to gain control of the defense – or not.
      1. Three tussles arise whenever any conflict of interest emerges, Liability dispute, Coverage contest, Ethical Imbroglio.

      2. Questions of fact and conclusions of law.

      3. The facts of any coverage contest and any ethical imbroglio are dynamic, unlike the static facts of the liability dispute. Facts are usually poorly developed.

      4. The applicable law: 50 State Survey.

      5. Cooperation clause and collusion are commonly asserted defenses that are usually groundless.

    5. How to encourage prompt and equitable settlements.

      1. Immediately identify and challenge all fiduciary breaches

      2. Breach of the duty to defend may free the policyholder to control settlement.
      3. Three things scare liability insurers, Fear of the unknown; Fear of making bad law; Fear of bad faith liability.
      4. GATBAL

        1. Goals may differ.

        2. Alliances may differ.

        3. Timing always differs.

        4. Burdens always differ.

        5. Applicable law usually differs.

        6. Leverage is held by the powerful policyholder.

    6. Magic Bullets:

      1. Coverage Questionnaire.

      2. Ethical Compliance Questionnaire.

      3. Annotated versions.

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