An Insured's Right to Independent Defense Counsel at the Liability Insurer's Expense

There is a fairly well-defined and well-developed body of case law in New York on the issue of under what circumstances an insured has the right to choose its own defense counsel at its liability insurer's expense.  Most insurance coverage professionals regard the seminal case on this issue in New York to be the New York Court of Appeals' 1981 decision in Public Service Mut. Ins. Co. v. Goldfarb, 53 N.Y.2d 392 (1981). That decision's sole footnote, marked with an asterisk not a superscript number, offers guidance to insurers for determining when an insured is entitled to separate or independent counsel:

* That is not to say that a conflict of interest requiring retention of separate counsel will arise in every case where multiple claims are made.  Independent counsel is only necessary in cases where the defense attorney's duty to the insured would require that he defeat liability on any ground and his duty to the insurer would require that he defeat liability only upon grounds which would render the insurer liable.  When such a conflict is apparent, the insured must be free to choose his own counsel whose reasonable fee is to be paid by the insurer.  On the other hand, where multiple claims present no conflict -- for example, where the insurance contract provides liability coverage only for personal injuries and the claim against the insured seeks recovery for property damage as well as for personal injuries -- no threat of divided loyalty is present and there is no need for the retention of separate counsel.   This is so because in such a situation the question of insurance coverage is not intertwined with the question of the insured's liability. 

Over at LinkedIn's New York Insurance group, Joseph Martan, counsel at the Property Research Loss Bureau, recently posed the question "When must [a] liability insurer yield choice of defense counsel?"  In only four days' time, Joseph's question itself yielded 18 comments, including several from me, that explored the important shades and nuances of what seems like a simple question.  But is it?

I commend that thread to any New York insurance professional or practitioner who deals from time to time with a liability insurer's duty to defend and making decisions regarding same.  To view that question and comment thread, however, you'll need to be a LinkedIn member.  You may also need to be a member of the New York Insurance group, I'm not sure.  If you're not already a member of LinkedIn, consider joining (it's free) and, if you do, adding me as a connection if you're so inclined.