Several clients have asked us if they have the right to choose a particular firm for their defense. The answer to this question depends on your legal malpractice policy.
Facing a malpractice claim can be an emotional and unsettling experience for any firm. Sometimes, the stress of a claim leads a firm to act before coordinating with their malpractice insurer. In this case, some firms make the mistake of retaining their own legal malpractice attorney instead of using one of the insurer’s pre-approved defense lawyers. If this has happened to your firm, then you know that this can result in your practice being responsible for those legal costs or causing other issues with the claim.
Here are some examples of how the policy’s language may read:
- “The Company shall have the right to appoint counsel with the consent of the Named Insured, which consent shall not be unreasonably withheld, and to make such investigation and defense of a claim as it deems appropriate.”
- “While we welcome your input in selecting defense counsel, we retain the exclusive right to make that selection. Our determination as to the reasonableness of claim expenses is conclusive.”
Choice of Counsel Endorsement
If there is a specific legal malpractice defense attorney that you would want to defend your firm in the event of a malpractice claim, first check to see if that group is already on your malpractice insurer’s approved list. If not, you might want to ask for a choice of counsel endorsement.
In some cases, insurers will let you add a choice of counsel endorsement to your policy, which allows your firm to select your defense counsel. You must get the insurer’s approval, and your selected firm must meet certain qualifications, including having specific expertise, complying with the insurer’s guidelines, and agreeing to the insurance company’s rates.
Indemnification Policy
An indemnification (as opposed to the more common duty to defend) policy may be another option for your firm for flexibility in choosing your own legal malpractice attorney. Under an indemnity policy, your firm is responsible for finding your defense counsel. The insurer will typically issue guidelines that limit the reimbursable hourly rate and outline reporting and other requirements. The main drawback of an indemnification policy is that your firm must pay the defense firm up front and then wait to be reimbursed.
If you have any questions about this topic or other matters related to your firm’s legal malpractice insurance, please contact Steven Sherman, JD at ssherman@psafinancial.com / 443-722-7467.
