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| The Basics | Your lawyer -- or your insurance company's?
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If you need your insurance company to defend you because of a car accident, it pays to know how the company and the lawyers it hires operate.
By Insure.com
If youre sued after a car accident or other catastrophe, you may breathe easier once your insurance company assigns a lawyer to your case. Thats the peace of mind youve been paying for all these years. But its important to remember that your insurer calls the shots unless you know how and when to stand up for yourself.
The caseload
You may wonder how much time your lawyer is devoting to your case. Your lawyer might have as many as 100 cases on his hands if they are open-and-shut. The jurisdiction of the cases also affects a lawyer's workload. If the trial process is drawn out, as it is in states that have overfilled dockets, such as New York and California, a lawyer is able to take on more cases at once.
A typical large insurance company will employ several hundred in-house attorneys and use the services of potentially thousands of outside law firms for cases that it outsources. The majority of liability cases filed never go to trial and are settled out of court. If an insurer thinks the clients' actions have caused a mountain of liability exposure, they'll be looking to settle.
Policyholders have little say when it comes to controlling their defense. Though insurance companies encourage their customers to cooperate in the investigation and defense of the case, ultimately, what the insurance company says, goes. For example, an insurance company looking for a quick settlement resolution can override a policyholder who wishes to go to trial rather than settle his case out of court.
Insurance companies reserve the right to override policyholder wishes and settle a case in order to cover their own backsides. That's because a disgruntled policyholder who demands his day in court -- against the advice of his insurance company -- and loses could turn around and sue his insurer for not handling his case properly.
Unhappy campers
Most people who are sued aren't familiar with the litigation process and don't know how much they will depend on their lawyers for advice. Since policyholders don't know the litigation process, they won't know whether to complain about their defense or not. But if you're unhappy with your appointed counsel, you can always lodge a complaint with the insurance company. Then, generally, you, the lawyer and a representative from the company would then sit down to try to iron out the problems. You can even try to reject a lawyer from the in-house counsel team if you have a solid, legitimate reason, in which case your suit would be sent to an outside counsel.
If you start making noise about dissatisfaction with your in-house counsel, most insurance companies will quickly shift your case to an outside firm to avoid a bad-faith claim from you later on. Or, say your insurance company gives your lawyer bad advice or doesn't monitor his work properly. You might be able to sue your insurance company for malpractice. Further, if the company fails to provide what courts have deemed "reasonable defense," it may be liable.
The controversy over in-house lawyers
The use of in-house counsel by insurance companies can mislead the policyholder into believing that the lawyers work for you, when in reality they are working with you but taking their orders from the insurer.
The use of in-house counsel ultimately boils down to efficiency: If insurance companies have lawyers who deal with only cases of a particular kind, the lawyers become more proficient. This, in the long run, saves insurance companies money.
Opponents maintain that insurance companies practicing law on behalf of policyholders is not only illegal but also unethical.
The bottom line
When you sign your insurance policy, you agree to a three-way relationship when it comes to your defense: the insurance company, you and the lawyer hired by insurance company. The insurer pays for the lawyer regardless of where that lawyer is located. In addition, no matter which type of lawyer takes the case, the insurance company is responsible if that lawyer mucks up your defense.
Watch out, though, if you received a "reservation of rights" letter from your insurance company. The reservation of rights letter typically states that the insurance company can end its contractual obligation to defend you if it determines that your lawsuit is not covered by your policy. This could happen if your insurer finds evidence that you fraudulently sought the defense or that you misrepresented the facts of the case.
Copyright insure.com. All rights reserved.
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MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.
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