An Insurance Company’s Duty to Defend (Part 1)

An Insurance Company’s Duty to Defend (Part 1) by Evan Schwartz


{5 minutes to read} There are a few things that you, as the insured, should know when the insurance company hires a lawyer on your behalf. 

For liability claims that are covered by insurance, businesses and individuals have two types of protection:

1. The insurance company will hire and pay a lawyer to defend the insured when a claim is covered or potentially covered by the policy. 

2. The insurance company will pay, or indemnify, the insured up to the limits of the policy’s indemnity limit that was purchased (the coverage limit). 

For example, you have a million dollars in coverage. A lawsuit is filed against your business that has exposure of up to a million dollars. If the insurance company believes the claim may be covered, they will provide you with a lawyer to defend you. The insurance company will then pay to settle—or go to trial and pay up to one million dollars if a verdict is awarded against you. 

In almost all policies, the insurance company has total control over the defense and settlement under the policy. So you, as the insured, have a lawyer who is hired to represent you, but the insurance company will ultimately make the determination of the defense strategy and amount of money the lawyer can spend/bill to defend your case properly. The insurance company will also decide whether the case should be settled and for how much. 

The insurance company has a lot of control in that situation. That doesn’t change the fact that the lawyer is hired to represent you or your business. The lawyer is not hired to represent the insurance company. The lawyer has an absolute, ethical duty of loyalty to protect you. 

The ethical obligations of the lawyer-to-client relationship don’t change simply because an insurance company is footing the bill. 

In part 2, we will look at the ways in which the lawyer must abide by—in respect to the lawyer-client relationship. Feel free to contact us to discuss any aspect of these potential problems.


Evan S. Schwartz
Founder of Schwartz, Conroy & Hack