United States: Five Things You Need To Know About General Liability Insurance: 4) Insurance Carriers Will Try To Improperly Limit Their Defense Obligation

Last Updated: July 20 2016
Article by Mark Miller

To see this video, please click here

Nothing in insurance is perhaps more frustrating to policyholders than being "nickeled and dimed" by an insurance carrier on defense of a covered claim.  Today we continue our Five Things You Need To Know About General Liability Insurance series with our fourth installment, where we address common strategies that insurance carriers employ to improperly limit what they will pay for the defense of covered claims.   When an insurance carrier agrees to defend a claim, policyholders rightly expect that the insurer will pay one hundred percent of that defense.  The reasons for this are well justified.  The duty to defend is like an on or off switch.  If the switch is on, the insurer has an obligation to defend, and they must pay for the entirety of the defense.  If, conversely, the switch is off, the insurance carrier has no obligations whatsoever.

Insurance carriers employ a number of tactics to try and avoid paying the full defense bill incurred by policyholders.

A common tactic that insurance carriers employ is to try and limit hourly rates paid to attorneys.  Insurers pay their general liability defense lawyers at pre-negotiated rates, which, depending on the specialty, tend to be far below market rates paid by policyholders.  Law firms that handle general liability defense work, in turn, set up their associate pay structures to profitably handle the large volumes of work delivered to them by the insurance carrier.  These practices can deliver excellent services for a slip and fall case, and their rates may be reasonable for that kind of work.  When the underlying claim is either complex, or high dollar, a defense cost issue may arise.

The way this comes about is the insurance carrier says, "$800 is an unreasonable hourly rate, as we only pay our defense lawyers $250 an hour."  For many specialties, $800 per hour is reasonable, and this tactic, if left unchecked, can result in a substantial undeserved discount for the insurer.

Another tactic is for the insurance carrier to say, "well, your policy covers two out of the ten counts against you, so we are going to pay one fifth of the total bill." Again, if permitted by the policyholder, this represents a huge savings to the insurance carrier.

In most instances, these tactics are improper and avoidable.  If the policyholder has the right to select counsel due to a conflict of interest, the "unreasonable fees" argument is invalid.  Similarly, the "we'll pay twenty percent" of the defense argument is illegal in most jurisdictions.

Insurance companies are great at controlling costs, but their desire to pay less oftentimes puts policyholders at risk.  This is why common law bad faith was created by the courts, and why virtually every jurisdiction has insurance claims practices statutes regulating insurance company conduct.

Please watch the video to see some of the strategies that we use to effectively counter these and other insurance company defense limiting tactics.

To read the transcript of today's video, see below:

Five Things You Need to Know About General Liability Insurance:

4) Insurance Carriers Will Try to Improperly Limit Their Defense Obligation

If you've got the insurance company defending, they're going to nickel and dime you on the defense. What do I mean by that? Well, they're going to find ways to try desperately to knock the number down. They don't want to pay four hundred dollars an hour for a general liability lawyer, a general liability defense lawyer. They certainly don't want to pay eight hundred, they want to pay much less.

What do they do? There's two common tricks for general liability. First is, they claim, "Well, that's not reasonable. Eight hundred and hour is not reasonable. We're not paying eight hundred an hour." Your response is, "Most of the lawyers we hire, that are at the highest level of their game, are charging eight hundred dollars an hour if they are in a big city." The insurance company says, "We don't care, we don't use them. You don't need them, so we're only going to pay a reasonable costs. That's two hundred dollars an hour, or three hundred." Whatever the number is, it's a negotiating thing. Quite frankly, the number usually doesn't go above three unless you're talking about some complex securities claim that's covered under D&O policy.

What you've got, is you've got a gap created and you need to narrow that gap. The way you narrow that gap is to understand your rights. If your right is to select your own council, great. You're fifty percent of the way there. After that, you got to look at all the arguments the insurance company is using to knock the rate down. If they're saying, "Well, it's unreasonable," that's one thing. If they're saying, "Hey, you know what? We looked at this pretty carefully, and maybe part of it's covered. Maybe we got two counts covered, maybe we got eight counts not covered. We're going to cover, what is it, two tenths now? We're going to cover one-fifth of your defense cost." That's another common thing that they use. If they pull that trick, the answer is it's illegal.

If you defend, it's a flip of the coin. You either got the obligation, or you don't. If it flips heads up, and you got the obligation, you pay. You don't say, "Oh, I'm only paying fifty percent." You pay the whole thing, because you have an obligation to defend. The rationale for that is, you can't look at a claim and say, "You, Mr. Lawyer, I want you to break out your time and how much you spend that's worthy of using on the covered part, and that should not be billed because it's on the uncovered part." The answer any lawyer is going to give the insurance company is, "I've got to do all of it no matter what the claims are. I can't do two-fifths, or one-fifth of it, or two-tenths, or three-tenths, or whatever you're telling me. If I'm in, I'm in. We got to produce the documents, we got to depose the witnesses, we got to depose the folks, and we got to build it for trial, and we have to win it."

The bottom line is, they should not be permitted to be nickel and diming under certain scenarios, but you have to recognize what those scenarios are. Once you do, you can use them to your advantage.

Miller Friel, PLLC is a specialized insurance coverage law firm whose sole purpose is to help corporate clients maximize their insurance coverage. Our Focus of exclusively representing policyholders, combined with our extensive Experience in the area of insurance law, leads to greater efficiency, lower costs and better Results. Further discussion and analysis of insurance coverage issues impacting policyholders can be found in our Miller Friel Insurance Coverage Blog and our 7 Tips for Maximizing Coverage series.

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.

In association with
Related Topics
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