Insurer Liability for Retained Counsel's Malpractice: Causes of Action, Standards of Care, and Insurer Remedies

This CLE course will examine how and when an insurer is liable for the malpractice of defense counsel that an insurer selected to represent its policyholder. The panel will also address when retained counsel's malpractice may lead to claims for extra-contractual bad faith damages. The program will also review when the insurer itself may have direct claims against retained counsel for negligence.

When an outside lawyer retained by an insurer to represent its policyholder commits malpractice, courts differ about whether the insurer may be vicariously liable for the retained attorney's malpractice, or whether retained counsel is a true independent contractor for which the insurer is normally not responsible. Independent contractor status can disappear, however, if an insurer turns counsel into an extension of itself.

Even if an insurer is not vicariously liable for retained counsel's malpractice, the insurer may be directly liable to the policyholder for breaching its own duty to defend, for example by retaining unqualified counsel, failing to supervise or monitor the case, refusing to fund proper investigations and experts, or providing inadequate resources to rebut the plaintiff's claims. The standard of care to which an insurer is held remains under debate.

How these issues are resolved affects who can sue and recover from the retained counsel.

Listen as our experienced panel guides counsel for insurers and counsel for policyholders through this complex area of liability.