United States: Managing Litigation By Fiat: Can An Insurer Impose Litigation Guidelines On Defense Counsel Hired To Defend A Potentially Insured Claim?

Last Updated: March 27 2013
Article by Peter D. Laun

Insurance policies that include a duty to defend generally provide—explicitly or, in the insurer's view, by implication—that the insurer gets to select counsel to defend a potentially covered claim.  Insurance policies that provide for the policyholder to defend, with the insurer paying the cost of defense, often give the insurance company the right to provide input into the selection of counsel.  And even policies which provide that the policyholder has the right to select counsel and defend commonly state that the insurer is liable only for "reasonable defense costs."

Where an insurer bears some or all of the cost to defend a lawsuit, the insurer often takes the position that it will pay defense costs only if defense counsel scrupulously follows "defense guidelines" drafted by the insurer, and the insurer refuses to pay defense costs it claims are not consistent with the guidelines, leaving the client and defense counsel at odds.  Although insurers treat compliance with these guidelines as a strict condition to paying defenses costs, as a purely legal matter, they are not:  Most insurance policies do not include or incorporate by reference such defense guidelines (though of course they could), quite plainly making them extra-contractual. 

In some cases, an insurer's defense guidelines are very specific and stringent, for example stating that the insurer will not pay for conferences between two lawyers or certain types of activities such as legal research or travel time.  In other cases, they are more general, stating (for example) that the insurer will not pay for "administrative" work or certain types of expenses (e.g., expenses it considers to be "overhead").  Whatever form such guidelines may take, two things are clear:  (1) defense cost guidelines represent an attempt by insurers to impose restrictions on the duty to defend (or to pay defense costs) that are not part of the written contract between the insured and the insurer, and therefore they are of questionable enforceability; and (2) they can be especially harmful to a policyholder if they attempt to restrict, or have the effect of restricting, defense counsel's zealous representation of its client and are unlikely to be enforced by a court when that is the case.

Somewhat surprisingly, these types of guidelines appear not to have been the subject of many challenges, at least judging from the paucity of reported decisions on this subject.  Perhaps that is because the policyholder's interests and those of the insurer are often aligned, at least to some degree, in trying to keep defense costs down, and accordingly any disputes that do arise are resolved through discussion and negotiation.  Or perhaps it is because a policyholder for whom the defense is critical does not want to upset the apple cart at peril of having the insurer take a hard line on defense costs.  Whatever the cause, policyholders need to examine carefully whether such guidelines improperly impinge upon counsel's ability to provide—and the policyholder's contractual right to receive—a complete and zealous defense consistent with the applicable ethical rules. 

Applying a common-sense view, some courts have recognized that insurers cannot impose restrictions on defense counsel that hamper or restrict counsel's ability to provide a full and complete defense.  See, e.g., Dynamic Concepts, Inc. v. Truck Ins. Exch., 61 Cal. App. 4th 999, 1009 (Cal. Ct. App. 1998) (stating that "[i]nsurer-imposed restrictions on discovery or other litigation costs may well violate the insurer's duty to defend as well as the attorney's ethical responsibilities to exercise their independent professional judgment in rendering legal services."); In re Urgin, 2 P.3d 806, 814-15 (Mont. 2000) (examining the requirement for the insurer's prior approval for defense work and holding "the requirement of prior approval fundamentally interferes with defense counsel's exercise of their independent judgment, required by Rule 1.8(f), M.R. Prof. Conduct.").

 Several state ethics boards and similar attorney ethics organizations have expressed similar views.  For example, in an advisory opinion, the Ohio Ethics Board addressed in detail whether it is proper for an insurance defense attorney to abide by an insurer's litigation guidelines in the representation of the insured.1  The Board stated that, "the majority view is that certain carrier imposed limitations give rise to ethical problems."  Among other things, the Board held that it was "improper under DR 5-107(B) for an insurance defense attorney to abide by an insurance company's litigation management guidelines in the representation of an insured when the guidelines directly interfere with the professional judgment of the attorney."  The Board then described litigation guidelines that would interfere with the professional judgment of an attorney.  These guidelines include:  (a) guidelines that restrict or require prior approval before performing computerized or other legal research; (b) guidelines that dictate how work is to be allocated among defense team members by designating what tasks are to be performed by a paralegal, associate, or senior attorney; (c) guidelines that require approval before conducting discovery, taking a deposition, or consulting with an expert witness; and (d) guidelines that require an insurer's approval before filing a motion or other pleading.  The Board further noted that, "[o]ther guidelines may or may not interfere with an attorney's professional judgment." 

A similar approach was set forth in ethics opinions, bar association comments, and advisory opinions in, among other states, Pennsylvania, Texas, Utah, Washington, and Indiana2  These analyses focus, in large part, on the potential conflict between defense counsel's duty to zealously represent its client (and the client's obvious interest is a fulsome defense) and the fact that another party (often, though not always, an insurer) that is paying for the defense may have a legitimate interest in managing the cost of litigation.

By way of example, the Pennsylvania Bar Association on Legal Ethics and Professional Responsibility3,while noting that insurer-imposed guidelines do not violate ethics rules per se, stated as follows: 

[U]nder the Pennsylvania Rules of Professional Conduct], "an agreement may not be made whose terms might induce the lawyer improperly to curtail services for the client or perform them in a manner contrary to the client's interests. . . .  Any duties that the lawyer may owe to the Third Party Provider by contract or otherwise cannot prevail over the lawyer's duties owed to the client under the guise of enabling the Third Party Provider to provide a "cost-effective" defense and indemnity to the client.

Discussing litigation guidelines that require approval of litigation strategy by third party providers (such as insurers), the Committee further stated that, "[l]itigation management guidelines, no matter how well intended, cannot operate to remove the attorney's independent professional judgment and replace it with that of a Third Party Provider."  Id. at *5.  In other words, guidelines that have the effect of micromanaging the defense by controlling the activities of defense counsel are likely to be viewed as problematic.

 In summary, while insurer-imposed defense cost guidelines may not be found to be improper or unenforceable per se, they are unlikely to be enforced by a court if they infringe in a material way on defense counsel's duty to zealously represent its client, the policyholder.  Furthermore, a policyholder likely will have a reasonable basis to instruct counsel to ignore guidelines that arguably are inconsistent with ethical rules and attempt to restrict counsel's legitimate discretion in running a case (e.g., a rule that two attorneys cannot attend court hearings or a rule that the insurer will not pay for conferences between two attorneys).

So what actions should a policyholder take? 

  • First, if an insurer attempts to impose on defense counsel stringent defense guidelines that the policyholder or defense counsel believes restrict defense counsel's ability to defend a case with the appropriate level of independence and effort, the policyholder and defense counsel should raise the issue with the insurer in writing at the beginning of the representation, specifically objecting to the problematic portion(s) of the guidelines and citing (if necessary and appropriate) relevant ethics opinions.
  • Second, if an insurer acts overly aggressively in enforcing litigation guidelines (for example, by refusing to reimburse significant amounts of defense costs), the policyholder or its defense counsel should write to the insurer to the effect that the insurer's guidelines or conduct are improperly restricting counsel's ability to litigate the case.  At the very least, such communications should cause the insurer to think twice about attempting to enforce litigation guidelines in an overly aggressive manner. 

As noted above, while most courts and ethics organizations have not categorically rejected such guidelines per se, they are likely to come out in favor of the policyholder if they conclude that the guidelines, as written or applied, in effect substitute the judgment of the insurer for the judgment of the lawyer in staffing and litigating a case.

1  The Supreme Court of Ohio Bd. of Comm'rs on Grievance and Discipline, Op. 2000-3 (2000). 

See, e.g., Tex. Comm. on Prof'l Ethics, Op. 533 (2000); Utah State Bar Ethics Advisory Op. Comm., Op. 02-03 (2002) (2002 WL 340262); Wash. State Bar Assoc., Formal Op. 195 (1999); Ind. State Bar Assoc. Legal Ethics Comm., Op. 3 (1998).  

3  Pa. Bar Ass'n Comm. on Legal Ethics and Prof'l Responsibility, Formal Op. 2001-200 (2001) (2001 WL 1744775).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Peter D. Laun
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.