Q. Where Should Your Best Attorney Be? [(a) Asserting the insurer’s position of no coverage through a declaratory judgment action, or (b) Defending the underlying claim, or (c) Where the best chance of defense is?]
A. Where the best chance of defense is.
Q. Should Different Claims Persons Handle Coverage and Defense?
A. It is not legally necessary, but it helps to have the person making the initial decisions on proper settlement amounts for the claim against the insured not be the same person who makes initial determination of whether the insurer will decline coverage or what will be paid for settlement of the coverage dispute. Such a division of initial responsibility helps defend against a claim that the final decision by the insurer was unreasonable. (This assumes the person making the initial decision made the same determination the company ultimately made.)
Q. Should (Must) you Pay the Insured’s Personal Attorney?
(1) To defend the underlying claim?
A. Generally, no, if you furnish counsel to defend the claim. However, if you are defending under a reservation of rights, there are some situations where the insured can decline the counsel you appoint and choose another, which you must pay.
(2) To defend a declaratory action?
A. No, not initially. However, if you lose the declaratory judgment action you will usually be required to pay the insured’s legal fees to secure the determination of coverage.