Legal Defense as Part of Liability Insurance

What Does Your Insurance Company Owe You for a Legal Defense?

Your insurance company owes you two basic duties. One is the duty to indemnify you in case of a covered loss. The other is your duty to defend yourself from liability claims. These duties do not always go together. That is, the insurance company has the duty to defend you in a case that they don’t necessarily have to compensate you for.

Consider an example where a pedestrian fakes an auto accident and sues you for damages. Your auto insurer doesn’t have to compensate you for such fraudulent claims. However, the carrier has the duty to defend you until they prove that the claim is fraudulent.

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How Does the Defense Work With the Insurance Company?

The insurance company will control every aspect of your legal defense. For example:

• The insurance company determines which lawyer to use for your defense. The company may use an in-house legal defense team or hire another lawyer of their choosing.
• The company determines which legal theory, evidence, and witnesses to use for your defense.
• The company determines whether to settle your case or to proceed to trial.

The carrier’s right to control your defense means, for example, that you might not get to work with your favorite legal team. That could mean a variety of things ranging from how acquainted you are with the current legal counsel, to the way they go ahead with their work (that is, online via software like the ones from RemoteLegal.com or they go down the traditional way of filing cases in the brick and mortar court of law). This right also means you don’t get to choose how much of your insurance coverage to use for the defense.

Who Pays for the Defense Costs?

Legal costs can be expensive, depending on the circumstances of the claim. Getting insurance to pay for legal fees for cases like that of wrongful death (for example, see mike morse million dollar settlement case to learn more) may not be very complicated when the claim is clearly in favour of you. However, when the claim is against you, the insurance cover depends on two things. The first is your coverage limit, and the second is whether your defense costs fall under your overall insurance limit.

The costs associated with the right to defend an insurance client typically take two forms. First, some policies include the defense cost under the overall limit. The inclusion limits the amount available for claim settlement.

Say you have liability coverage worth a million dollars, including the defense costs. If your legal costs run up to $250,000, the carrier only has $750,000 to settle the claim if the plaintiff prevails. Anything above that comes from your pocket. Other policies exclude the defense costs from the overall limits. Understand your policy before you have to file any claim.

What Does the Duty to Defend Include?

The duty to defend doesn’t mean that your insurance company only pays your legal fees, which might also include traditional or remote notary services for document verification. Instead, the company will cover every cost associated with your defense, such as:

• Court filing fees
• Document production fees, such as photocopying fees
• Out-of-court expenses, such as travel expenses and phone bills
• Expert witness fees

You might only have to pay for the proceedings if your defense exceeds the applicable limits.

How Do Both Parties Benefit?