Navigating the Tripartite Relationship
The Lawyers Weekly, Vol. 32, No. 14, August 17, 2012
2 Pages Posted: 25 Aug 2012
Date Written: 2012
The insurer's duty to defend and indemnify the insured under liability insurance policies entitles the insurer to retain and instruct counsel in liability actions against the insured, resulting in a tripartite relationship between insurers, insureds and defence counsel.
This relationship has many advantages when there is a unity of interests. Insurers can protect their financial interests -- avoid judgment or minimize damages -- using experienced counsel, usually for reasonable fees. Insureds can avoid or limit financial risks where large deductibles and/or claims exceed policy limits, or when liability may prejudice their reputation.
However, the tripartite relationship has potential for conflict of interests where the parties' interests diverge. The paper addresses ways to avoid or at least minimize conflict of interests and the need for the insured to appoint independent counsel at the insurer's expense.
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