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
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions