When you purchase commercial liability insurance—whether for general liability or specialized risks like director’s & officer’s (D&O) or errors & omissions (E&O)—your primary concern typically is getting your claim covered. But if that claim results in a lawsuit, you’ll need legal counsel to represent you. What many business owners don’t realize is that the insurance policy fulfills that need too, at no added cost.
If you have or plan to purchase commercial liability coverage, it’s important to understand the role of the insurance company’s panel counsel if a claim triggers a lawsuit.
What is Panel Counsel?
When you buy commercial liability coverage, you are paying for two key benefits: getting your covered claim paid and obtaining legal defense of a claim-related lawsuit. Both benefits are included in your coverage and paid for through your premiums.
Once a lawsuit is initiated, the insurance company appoints counsel to represent the insured and pays for attorneys’ fees and litigation costs. The insurance carrier often selects counsel from a list of vetted attorneys who have previously agreed to the carrier’s rates and guidelines. The appointed attorney is often referred to as “panel counsel” and most insurance carriers maintain an approved panel counsel list.
Since panel counsel is appointed by the insurance company, there is often a misconception that the attorney represents the carrier. But that’s not the case. Think of panel counsel as your attorney, paid for through your insurance policy. Their responsibility is to vigorously represent you in defense of the lawsuit, from its commencement through resolution or trial.
Are You Required to Use Panel Counsel?
Under the general terms of most commercial liability policies, the carrier has the right to select counsel on your behalf, and many insureds are satisfied with the assignment. However, insureds often ask whether they can use a different attorney of their choice. For example, if you’ve worked with an attorney to develop your HR policies, and a former employee files an unlawful termination lawsuit, you might assume you should use the same attorney to defend the claim.
However, there are two factors to consider when deciding whether to use an attorney other than panel counsel:
Will the insurance company allow it? The carrier only approves attorneys who agree to a pre-determined hourly rate (often half the rate for a private attorney) and their litigation guidelines (including reporting requirements the attorney may not be accustomed to). Approved attorneys also must have experience in the type of law involved, as well as relevant trial experience. If you’re facing a slip-and-fall injury claim, the insurer won’t agree to have your tax lawyer represent you. If the insurer does approve an attorney not on their panel counsel list, but that attorney does not agree to the carrier’s rates, they may still be appointed, but you must pay the difference.
Is it in your best interests? Even if the insurer approves your preferred attorney, it might not be the best option. Panel counsel has extensive experience defending lawsuits in the area of law related to the allegations made against the insured. Often, they also know the plaintiff attorneys, judges, mediators, and juror composition in the jurisdiction. Simply put, they are very capable of handling this type of legal work.
If you want the right to use an attorney not on the panel counsel list, it’s best to request this option before the policy is written or renewed. While the carrier might agree to using your preferred attorney midway through the policy period, there is no guarantee. If non-panel counsel is agreed to before the policy commences, there is no vetting process and no delays in your representation.
How Can You Work with Panel Counsel Effectively?
Assuming you use the insurance company’s panel counsel, there are several considerations to ensure a smooth process and a favorable outcome.
First, if an incident happens that could result in a claim or lawsuit, alert your insurance broker. One of their most important roles is to determine whether a claim is potentially covered and how to proceed with placing the insurance company on notice of a claim.
Second, it’s important not to immediately engage a private attorney on a liability claim before considering the financial ramifications. For instance, if a company receives an employment discrimination charge from the US Equal Employment Opportunity Commission (EEOC), they’re likely to hand it off to the outside attorney who developed their employee handbook or HR policies. After the action becomes more complex and counsel has run up significant legal fees, the attorney asks if the business has employment practices liability insurance and suggests that the carrier takes over the case.
Meanwhile, if the claim was timely reported and panel counsel was initially assigned, they would have defended the claim from the start, at no additional fee. It is very likely that panel counsel would have also had much greater familiarity with the nuances of this type of lawsuit and responded differently to the initial pleadings. Unfortunately, the legal fees already incurred may not be reimbursed by the carrier since the business didn’t give notice of the claim and allow for selection of panel counsel first.
While emotions often run high when a lawsuit or demand letter is served, it’s best to pause and carefully consider the best course of action, which is typically to contact your insurance broker to get the right remediation steps in motion.
Finally, keep in mind that liability policies include a cooperation clause requiring you to assist in the claim’s defense or risk having the coverage denied. You and your employees must be available for interviews, court appearances, or depositions, and must assist with providing documents requested. The more prepared and informed panel counsel is, the better they can represent you. It’s also important to develop a good rapport with panel counsel, to ensure the process goes smoothly. It is recommended that you remain a part of the process with counsel by asking to be copied on all correspondence, so you’re informed at every step.
If you’re not pleased with how panel counsel is handling the lawsuit, be sure to let the carrier know. Conversely, if you’re happy with their representation, consider asking the carrier to assign the same attorney on future claims (within their area of practice) or to write them into your policy at renewal time.
How B. F. Saul Insurance Can Help
B. F. Saul Insurance provides more than just access to the best commercial liability policy for your needs. Our commercial team includes an in-house attorney highly experienced in commercial liability lawsuits who assists with making sure you receive the most benefits out of your liability coverage. Moreover, we are familiar with the complexities of commercial liability underwriting and we use sophisticated claim analytics to obtain the best coverage at the best premium.
In the event of a claim, B. F. Saul also serves as your first-line advocate—advising you on the best next steps and ensuring you know what to expect when working with panel counsel.
To find out how the right approach to commercial liability claims can help protect you at a lower total cost, contact the experts at B. F. Saul Insurance.
In order to bring the best content to our readers, we feature various writers from within B.F. Saul who have advanced expertise in key, niche areas of insurance. This is an article by featured writer, Brandon Newlands, B.F. Saul Insurance's Vice President, Senior Director of Coverage and Claims.
Brandon is responsible for leading our Claims Advocacy practice and supporting clients in the event of a claim or complex coverage issue, and opining on current litigation and regulatory trends impacting our clients.