Attorneys Hired By The Insurance Company

An attorney in Weatherford, Mineral Wells, Aledo, Willow Park, Hudson Oaks, Azle, Peaster, Millsap, Brock, Poolville, Springtown, or anywhere else in Texas may be a good attorney to help someone with their case. When an insured gets sued he may want one of these attorneys to help him with his case and would expect their insurance company to pay the costs because that is one of the benefits of having insurance. Most of the time the insurance company pays for defense costs. Right?
The answer is no. The insurance company will pay for defense costs but they get to chose who the lawyers are going to be.
The Texas Supreme Court decided a case in 2004 styled, Northern County Mutual Insurance Co. v. Timoteo Davalos. Here is some background.
The automobile liability policy in this case obligated the insurer to provide a defense for covered claims and grant the insurer the right to conduct that defense. The insured, however, refused the insurer’s tendered defense because of a disagreement about where the case should be defended. The issue for the court was “whether a disagreement over venue is a sufficient reason for the insurer to lose its right to conduct the defense, while still remaining obligated to pay for it.” This Supreme Court said, NO.
Davalos, a resident of Matagorda County, was injured in an automobile accident in Dallas County. Davalos sued the driver of the other car in Matagorda County. The other driver and his wife then sued Davalos and a third driver involved in the accident, but in a separate action in Dallas County. Although Davalos was insured by Northern, he turned the Dallas litigation over to the attorneys representing him as a plaintiff in Matagorda County. These attorneys answered the Dallas suit and moved to transfer venue to Matagorda County. The attorneys then notified Northern of the Dallas litigation.
Northern responded in writing to Davalos, stating that it did not wish to hire the attorneys he had selected to defend the Dallas case, that it opposed his pending motion to transfer venue to Matagorda County, and that it had chosen another attorney to defend Davalos in Dallas County. The letter suggested that liability protection under the policy might be threatened if Davalos’ personal attorneys did not abandon their venue motion and withdraw.
The underlying lawsuit eventually settled but this case regarding whether Northern had to pay for the attorneys that Davalos had chosen and whether Davalos had voided the policy by not allowing the insurer to hire the attorney of its choosing continued.
Northern argued that it complied fully with its duty to defend. Northern said that a coverage dispute is the only type of disagreement that is sufficient to defeat an insurer’s contractual right to conduct the defense. Because it never disputed that the collision was covered and because it offered to defend Davalos without a reservation of rights or non-waiver agreement, Northern concluded that Davalos had no right to refuse its defense.
Davalos responded that Northern attached improper conditions to the defense and inappropriately threatened his coverage, thereby forfeiting its right to conduct the defense. Moreover, Davalos submitted that his disagreement with Northern about venue was itself a sufficient conflict of interest to defeat Northern’s contractual right to conduct his defense. Davalos concluded that Northern remained obligated to pay for his defense because it failed to meet its duty to defend by offering an unconditional defense.
This court stated, “Whether an insurer has the right to conduct its insured’s defense is a matter of contract. The Texas Personal Auto Policy here granted Northern that right, providing that the insurer would ‘settle or defend, as we consider appropriate, any claim or suit asking for damages.’ The right to conduct the defense includes the authority to select the attorney who will defend the claim and to make other decisions that would normally be vested in the insured as the named party in the case.”
The court went on to say, “Every disagreement about how the defense should be conducted cannot amount to a conflict of interest …. If it did, the insured, not the insurer, could control the defense by merely disagreeing with the insured’s proposed actions.”
The court then listed situations where a conflict would probably allow for an insured to select their on attorney. Those mentioned include;
1) when an insurer issues a reservation of rights letter, which creates a potential conflict of interest,
2) when the facts to be adjudicated in the lawsuit are the same facts upon which coverage depends,
3) when the defense tendered “is not a complete defense under the circumstances in which it should have been,”
4) when “the attorney hired by the carrier acts unethically and, at the insurer’s direction, advances the insurer’s interests at the expense of the insured’s,”
5) when “the defense would not, under the governing law, satisfy the insurer’s duty to defend,”
6) when, though the defense is otherwise proper, “the insurer attempts to obtain some type of concession from the insured before it will defend.”
It is usually rare for there to be a dispute about the attorney hired by the insurance company to defend an insured in a lawsuit, but if there is a reason that an insured believes that the attorney is not acting in the insured’s best interests, then an experienced Insurance Law Attorney should be sought.