Litigation Guidelines Shouldn’t Undercut Policyholder

Insurers often insist that counsel representing the policyholder follow the insurer’s litigation management guidelines. But some guidelines have the potential to impair a lawyer’s independent professional judgment and implicate violations of ethical rules. Other guidelines have the potential to impermissibly interfere with a lawyer’s duties of loyalty.

Problematic guidelines may include restrictions on the use of experts and other third-party vendors; refusal to compensate for work on motions unless the claim handler believes the motion has a 50 percent or greater chance of success; and the requirement for prior approval by the claim handler for appeals, jury demands and the decision to mediate.

The ABA Standing Committee on Ethics and Professional Responsibility and many state bar associations have issued opinions regarding these or similar litigation management guidelines. Unfortunately the remedy suggested by most bar associations is for the lawyer to withdraw, but that’s not satisfactory. It can’t be unethical for one lawyer but ethical for another to follow a particular guideline. The policyholder is effectively left without counsel.

There are some practical steps to help insure defense counsel will effectively and zealously represent the policyholder. One is simply to ask the insurer to strike problematic guidelines. The insurance company may be willing to substitute the policyholder’s guidelines for a matter; if the claim handler refuses, speak to a supervisor. Another strategy would be to address the issue of guidelines at the time of policy inception or renewal.