Discussion in 'E&O - Errors and Omissions for Insurance Agents' started by SamIam, May 7, 2014.
New York has got some funky stuff - in all lines.
I'll just jump in with a quick bit of theory here. Regarding the appointment of lawyers, financial lines insurances fall into one of two categories; duty to defend or non-duty to defend.
If a policy is written in a duty to defend form, an insurer is required to defend the underlying claim against an insured. This means the insurer is responsible for appointing a lawyer who will defend an insured from the claim. This type of wording is often seen on smaller professional indemnity and management liability accounts, as the insured is typically considered less sophisticated in regards to risk management.
Larger accounts, on the other hand, may have a non-duty to defend provision. In this case, an insurer does not have a duty to defend the underlying claim, and instead it is left to the insured to defend their own claim. These policies will typically allow an insured to select their own legal counsel as long as they seek consent from the insurer first.
If there is any dispute, an insurer may insist on the use of their panel counsel. An insurer's panel simply consists of a selection of pre-approved firms that frequently perform work for or on behalf of the insurer. They have an ongoing relationship, so are trusted, and usually have slightly discounted rates due to the volume of work they do.
I also see that there has been some discussion surrounding the treatment of defence costs. A policy limit can be inclusive or exclusive of defence costs. A costs inclusive limit means that defence costs erode the limit of liability. A costs exclusive limit means that lawyer fees are not included in the policy's limit. Both forms commonly appear in the market, so you'll have to read your policy carefully to find out which applies to you.
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