You’ve been sued and have insurance coverage. Do you have to use the insurance company’s lawyer? Check your policy.

If you have been sued, and you make a claim with your insurance company, make sure to read your policy.  Your insurer may not tell you, but you could have the right to choose your own defense attorney — paid by the insurer — if the policy creates a potential conflict of interest.

Has your insurer disclaimed responsibility for punitive damages?

One such conflict of interest may exist if the lawsuit claims a substantial amount of punitive damages as compared to compensatory damages.  Punitive damages are likely not covered by insurance, which means the insurer has no interest in avoiding or minimizing any potential punitive damages award.  A lawyer retained by the insurance company to defend your interests in the case may have incentive to focus on the claims covered by the policy, at the expense of non-covered claims such as punitive damages.

Consider whether you have the right to choose your own attorney at the insurer’s expense

I recently obtained a judgment against an insurance company, affirmed on appeal, where the insurance company tried to insist on using its own attorney even though the case involved a substantial claim for non-covered punitive damages.  The lawsuit is captioned Xtreme Protection Services, LLC v. Steadfast Insurance Company and can be viewed here.  In its opinion, the appellate court provides an updated analysis of decades-old case law addressing potential conflicts of interest arising from punitive damages claims, and an insured’s right to be defended by its own attorney at the insurer’s expense.

Another example of a potential conflict of interest that could allow you to choose your own lawyer is where the lawsuit alleges both negligent and intentional conduct, and your policy only covers negligent conduct. Due to the insurer’s potential incentive to shift liability from the negligence claim to the claim involving intentional conduct, the insurer can be required to let you decide on your own representation, with the insurer to reimburse your attorney’s fees.  See Maryland v. Peppers, 64 Ill. 2d 187, 197-99 (1976).

Your case is important, and much is at stake.  Make sure to check your policy before simply agreeing to be represented by a lawyer that someone else has chosen for you.