the insurance policy is the contract that exists between the insurer and the insured.
the insurance policy is the contract that exists between the insurer and the insured.
the contract that exists between the insurer and the insured?
the insurance policy
we conclude the canons of ethics impose upon lawyers hired by the insurer an obligation to explain to the insured and the insurer the full implications of joint representation in situations where the insurer has reserved its rights to deny coverage. if the insured does not give an informed consent to continued representation, counsel must cease to represent both. moreover, in the absence of such consent, where there are divergent interests of the insured and the insurer brought about by the insurer's reservation of rights based on possible noncoverage under the insurance policy, the insurer must pay the reasonable cost for hiring independent counsel by the insured. the insurer may not compel the insured to surrender control of the litigation ... disregarding the common interests of both insured and insurer in finding total nonliability in the third party action, the remaining interests of the two diverge to such an extent as to create an actual, ethical conflict of interest warranting payment for the insureds' independent counsel.
cumis counsel
the duty to settle is of greatest import in the scenario where the insured may have some liability exposure (i.e., there is some evidence apparently linking the insured to the plaintiff's alleged injuries), the plaintiff has evidence of substantial damages which may exceed policy limits, and the plaintiff makes a settlement demand (either to the insured or directly to a defending insurer) which equals or exceeds policy limits. in that situation, the insurer's interests conflict with the insured's interests, because the insurer has an incentive to "not" immediately settle. that is, if the insurer refuses to settle and the case then goes to trial, there are only two possible outcomes: (1) the insured loses and the insurer must pay the ensuing judgment against the insured up to the policy limits, or (2) the insured wins, meaning both the insured and the insurer bear no liability. if the first outcome occurs, then it is essentially "nothing gained nothing lost" from the insurer's point of view, because either way it will pay out its policy limits. (for simplicity, this analysis disregards sunk costs in the form of defense costs incurred to that point, as well as additional costs sustained by the insurer in defending the insured to a verdict at trial, and opportunity costs sustained by the insured while participating in trial.)
liability insurance