When the process server arrives at your insured’s door with a lawsuit, the last thing you want to hear is, “We never agreed to let you pick our attorney.” Yet this exact scene occurs in claims departments across the country every week, turning routine defense assignments into costly coverage disputes that could have been avoided with a simple conversation during the underwriting process.
The irony? Policy language probably (though not always) gives insurers the right to choose counsel, but good luck explaining that to an angry policyholder who has already hired a $700-per-hour corporate attorney and threatens bad faith litigation if you do not pay the bill.
Five minutes of uncomfortable conversation at the policy placement stage can save you from five months of depositions, discovery battles, and bad faith litigation down the road.
The foundation of effective claims management begins well before the first loss is reported. When policy language supports your position, proactively notify prospective insureds and their insurance brokers that the claims department usually selects defense counsel for liability cases. This early transparency helps avoid confusion and disagreements when litigation occurs.
While exceptions exist—such as clouded coverage situations, reservation of rights scenarios, or coverage disclaimers—most liability insurance policies grant the insurance company either implied or explicit authority to pick defense counsel. Rather than leaving this understanding to chance or policy hair-splitting, make it an explicit part of placement discussions.
THE STRATEGIC ADVANTAGE OF EARLY COMMUNICATION
A proactive approach is vital: Defuse potential friction points before binding coverage. If choosing counsel could be a dealbreaker for a prospective insured, it is much better to identify this during underwriting rather than amid the chaos of active litigation. When the process server delivers the lawsuit and all parties are “on the clock” to secure representation and file a responsive answer, the last thing needed is a heated debate about attorney selection.
Do you like the taste of Maalox? Fire drills create needless pressure, delay critical defense activities, and can expose both the insurer and insured to procedural defaults or missed deadlines. By addressing these expectations early, you can transform a potential crisis into a manageable business discussion.
UNDERSTANDING CLIENT PERSPECTIVES: THE WILLING MAJORITY
Fortunately, most clients readily accept insurer-selected counsel arrangements. Many policyholders prefer this approach, recognizing they lack the specialized knowledge to identify the most qualified attorneys for specific types of civil defense work. They understand that selecting and managing defense counsel is part of the claims department’s core competency—it is what you do every day.
Many clients appreciate that insurance professionals have developed relationships with attorneys who specialize in various practice areas, understand coverage issues, and have proven track records in similar cases. They are content to delegate this responsibility to the experts.
ADDRESSING COMMERCIAL ACCOUNT CONCERNS
However, commercial accounts often present different dynamics. In many risk management circles, the term “insurance panel counsel” carries negative connotations. Sophisticated buyers may harbor assumptions that insuranceappointed attorneys are inferior “hamand-egg” practitioners chosen primarily for their willingness to accept discounted hourly rates.
This (mis)perception creates several challenges:
Fee-Based Assumptions. Some corporate policyholders operate under the misguided belief that a $500-perhour attorney is inherently superior to a $250-per-hour lawyer. When facing litigation covered by insurance, they resist being represented by what they may view as “budget” counsel.
Relationship Preferences. Commercial clients may have established relationships with particular attorneys or law firms, often through transactional work or personal connections. Their $700-per-hour corporate counsel may advocate for expanded representation, suggesting that the insured needs independent advocacy to protect their interests fully.
Loyalty Concerns. Perhaps most notably, some commercial accounts are concerned that panel counsel’s primary allegiance is to the insurance company rather than the policyholder. They worry that attorneys relying on insurer referrals will favor the carrier’s interests over their own.
While these concerns are often unfounded, they are understandable from the client’s perspective. Law firms often rely on steady referral streams from insurance companies and naturally want to maintain those relationships. Meanwhile, their interaction with any particular policyholder may be limited to a single case rather than an ongoing partnership.
BUILDING A BRIDGE TO ACCEPTANCE
A key to overcoming these objections lies in education and relationship building. Claims professionals must be prepared to articulate the concrete benefits of using carefully selected panel counsel. This involves demonstrating how insurance companies’ systematic approach to attorney selection actually serves the insured’s interests better than ad hoc attorney selection.
Success in this area requires moving beyond defensive responses to client concerns and instead presenting a compelling case for why the insurance company’s counsel selection process delivers superior results.
MAKE THIS CONVERSATION COUNT
Do not wait for a claim to have this crucial conversation. Integrate counsel selection discussions into every commercial placement meeting. Create standard talking points that address common concerns proactively. Develop case studies and success stories that demonstrate the value your panel counsel delivers.
Train your underwriting team to present counsel selection as a valuable service benefit, not a policy restriction. Equip them with concrete examples of how your claims department’s attorney relationships have delivered favorable outcomes for similar insureds.
Document these conversations in your underwriting files. When claims arise, having a written record of the insured’s acknowledgment and acceptance of counsel selection procedures can prevent disputes and bad faith allegations.
Partner with panel counsel to develop materials that showcase their qualifications, specializations, and track records. Combat negative perceptions with positive proof of competence and results.
Discussing counsel selection rights is not just about avoiding conflicts— it is also about demonstrating the professional value your claims operation brings to the insurance relationship. Make it count, make it early, and make it part of your standard practice. Your future claims handling will be smoother, more efficient, and less vulnerable to bad faith allegations when expectations are clear from the start.
Some simple math: five minutes of proactive conversation during placement beats five months of litigation headaches later. Every day you delay implementing standardized counsel selection discussions is another day you are rolling the dice on a potential dispute. Panel counsel did not earn their roster spots by accident; they are there because they deliver results, cost-effectively. It is time to start selling that value proposition from day one, not defending it from the witness stand.
The question is not whether you can afford to have these conversations with every commercial account; the question is whether you can afford not to.