Selecting and Working with Counsel

Zalma on Insurance Claims Part 108 – Second Edition

Adapted from Zalma on Insurance Claims Part 108 -Second Edition: A Comprehensive Review of the law and Practicalities of Property, Casualty and Liability Insurance Claims now available  here.

Retaining an Attorney

In instances where insurance claims may entail litigation, insurers must move quickly to engage counsel. When an attorney is retained to defend a person insured, the fact should be documented in writing by the attorney, the adjuster, and the insured who is to be defended.

Before an insurer retains an attorney to represent an insured to defend an insured who has been sued for a tort the claims person should be certain the lawyer is competent to defend the insured. This can be accomplished by attending a trial conducted by the lawyer where the claims person can evaluate the lawyer’s competence at trial. If that option is not available the claims person should seek recommendations from other insurance claims professionals who have retained the lawyer in the past or the insurance company’s list of approved defense lawyers who have been evaluated by the insurer’s management.

If the attorney is being retained for the first time by the insurer, the insurer should obtain an engagement letter from the attorney setting forth the terms and conditions of the retention and signed by the attorney, the claims person, and the insured. If the attorney or law firm has an ongoing relationship with the insurer, only the person being defended need sign an engagement letter.[1]

The engagement letter should, at least, list the following details:

  • The effective date of the agreement.
  • The fees to be charged, the units by which fees are calculated (usually in six minute increments or tenths of an hour) and a representation as to how often the attorney will submit fee bills (usually monthly or quarterly).
  • A description of reasons for discharge and withdrawal, or conclusion of services.
  • A disclaimer of guarantee.
  • It should also outline the scope of the engagement, i.e., it will specify that counsel will:
    • Review copies of contracts and insurance-related documents he or she has been provided with.
    • Review the files of the insurance broker and/or the underwriting files of the insurer.
    • Attend, take, review, and analyze the deposition(s) of the plaintiff and defendant, experts, and factual witnesses, as well as any other depositions agreed to be reasonably necessary.
    • Review any other files or documents that counsel, the claims person, and the insured defendant deem necessary. These might include those of plaintiffs and defendants, as well as others.
    • Review all pleadings and discovery that he or she, as well as the claims person and the defendant, deem necessary to present a competent defense.
    • Provide his or her opinion regularly as the case progresses and respond to inquiries from the claims person and the insured defendant.
    • Consult regularly with the insured defendant and the claims person on various issues related to the case.
    • Prepare regular reports to the insured defendant and claims person.
    • With the approval of the claims person, file necessary motions to the court, including a motion for summary judgment.
    • If appropriate, attend mediation or settlement conferences with the insured defendant and claims person after providing the insured and the claims person with opinions on the settlement value of the case.
    • If all attempts at settlement fail, present evidence at trial and defend the insured through trial and any necessary appeals.

At retention, the claims person should, in writing, instruct counsel on the following matters:

  • the basic facts of the case learned in the initial investigation;
  • a brief description of the documents collected by the adjuster;
  • a statement of the date and time the summons and complaint were served on the insured;
  • a summary of the coverage and limits available to the insured;
  • transcriptions of all recorded statements taken by the adjuster;
  • the insurer’s requirements regarding billing by counsel;
  • the insurer’s requirements regarding reporting from counsel concerning the litigation;
  • the insurer’s requirements concerning work to be done by counsel, partners, associates and paralegals; and
  • the insurer’s requirements concerning limitations discovery and motion practice based upon approval of the insurer.

The adjuster should provide the attorney with as many original documents as possible and keep copies for his or her own files.

The claims person must understand that all documents collected by the adjuster are important to the defense. This includes the service copy of the summons and complaint. The adjuster must advise the attorney of the exact date and time the complaint was served on the insured to ensure that a timely response is filed and to prevent the entry of a default.

In most states a defendant has 30 days from the date the complaint is served to file a formal response (20 days in federal courts). Failure to formally respond to the complaint or obtain an extension of time to respond allows the plaintiff to declare the defendant in default and seek judgment as if the defendant had admitted all of the allegations of the complaint.

Once a default has been entered, a judgment against the insured will follow unless good cause can be shown why the default should be set aside. Adjusters should make every effort to avoid putting an insured into such a difficult position by retaining counsel promptly. The insured must also report service of a lawsuit immediately with advice as to the time and place the summons was served, the person who received the summons, and the reason for any delay in delivery to the insurer.

The defense attorney should also have available:

  • a specimen copy of the policy;
  • a complete copy of the claim file; and
  • a copy of the insurer’s policy, if any, with regard to billing and case handling.

If the insurer’s billing and case handling policies are not available in written form, the initial retention letter should describe them or it should be attached as an exhibit.

The claims person must understand that an engagement letter is an effective contract between the lawyer and the insurer. As a matter of law, there could not have been an implied contract between Plaintiffs and Gulley, personally. Because the Court has decided the implied contract issue as a matter of law based on undisputed facts, the issue of whether there is a factual dispute regarding the existence of an implied contract is moot. Like an insurance policy a lawyer’s engagement letter will be read as written if there is no ambiguity.

When the language of an Engagement Letter is clear and unambiguous that defendant agreed to pay plaintiff 5% of the gross income received by defendant less any amounts “clearly defined as reimbursements of your expenses” and defendant came forward with no evidence that any portion of the four installments totaling $1,055,000 that she received represented reimbursements for her expenses, the Contract provided that the fee paid defendant was inclusive of any and all personal and/or business expenses incurred by defendant. [Krausz v. Kaufman, 2013 NY Slip Op 30803 (N.Y. Sup. Ct., 2013)]

In a situation where is no dispute that the parties entered into an enforceable fee agreement, the terms of which were set forth in the engagement letter a court will enforce the agreement. When the defendant responded to requests for admission in which she acknowledged signing the engagement letter, receiving itemized invoices for services rendered under the engagement letter and paying some of the fees and expenses charged by the lawyers the fees must be paid. [Jochum v. Listati, 2019 Ohio 166 (Ohio App., 2019)]

The adjuster and the attorney should meet in person to reach an agreement that they will work as a team in handling the case through trial and that they are both in agreement with the terms and conditions of the lawyer’s engagement letter.

Relationship between the Insurer and the Defense Attorney

Whenever an insured is sued and requires a defense or the insurer is sued, the insurance adjuster and the defense attorney must understand their respective roles in preparing the case for trial. They must develop a rapport with each other and with the insured person or entity that is being defended, to make communication easier to maintain. Bad faith lawsuits and poorly tried bodily injury cases seem to arise when the adjuster and the defense attorney fail to communicate regularly with each other and the policy holder.

At the first meeting, the attorney and the adjuster should agree on the division of labor with regard to the preparation of the case, according to their respective training and experience. Counsel and the claims person should reach an agreement regarding the handling of the case.

Claims adjusters often mistakenly leave all investigation tasks to the attorney. Most adjusters are also investigators and are trained to fulfill the duties of an investigator within their narrow field of expertise. Therefore, the adjuster should do as many informal interviews of witnesses and parties as possible and provide the results to the attorney. The attorney should limit his or her investigation work to the preparation of witnesses before the trial or deposition.

Work that is usually done by the attorney or by a legal assistant includes:

  • meeting with the insured to obtain facts for answering interrogatories;
  • interviewing the insured and key witnesses, including getting recorded statements from each;
  • collecting and preparing documentary evidence, such as medical records, police reports, and employment records;
  • preparing responsive pleadings to lawsuits;
  • preparing for and taking depositions of parties (including plaintiff or defendant and independent witnesses);
  • preparing written discovery such as interrogatories, requests for admission, and requests for production of documents;
  • preparing, filing, and arguing motions with the court;
  • preparing mediation briefs;
  • attending and negotiating potential settlement at mediation or court ordered settlement conferences;
  • preparing motions in limine before trial;
  • preparing trial briefs for presentation to the court before trial begins;
  • preparing evidence and witnesses for trial; and
  • presenting evidence and arguing legal issues at trial.

Reporting Requirements

The defense attorney should be required to report to the claims person and the insured defendant on a regular basis, and the adjuster should establish reporting requirements clearly with the attorney.

Reporting requirements should include, at a minimum:

  • that the attorney report the progress of the case no less than every 60 days to the claims person and the insured even if the report states nothing new has occurred;
  • that copies of all pleadings filed by both the attorney and his or her opponent be delivered to the adjuster and the insured;
  • that the attorney need send only one copy of each pleading to the adjuster and the insured, regardless of the number he or she may receive; and
  • that with regard to answers to form or pattern interrogatories, requests for admission, requests for production of documents or other written discovery, and minor pleadings, such as demands for jury trial or notices of continuance, the attorney use his or her discretion as to whether to advise of their existence, summarize or to send copies to the adjuster and the insured.

If the case is complicated, or has multiple parties, the adjuster may wish to keep only a skeleton file of pleadings and discovery and obtain summaries of relevant pleadings and discovery from the attorney. Now that technology permits it, the attorney should be asked to avoid excessive use of paper documents and instead send copies of the documents, pleadings, discovery, and correspondence in electronic form.

Involvement of the Adjuster

At the moment the suit is assigned for defense the adjuster and the defense attorney must have a clear understanding of the adjuster’s involvement in the preparation of the case for trial. The adjuster must make it absolutely clear that the attorney is required to abide by any guidelines provided by the insurer. If the attorney believes that the guidelines impinge on his or her ethical obligations, he or she will advise the adjuster, and they should work together to modify the guidelines appropriately.

The insurer’s guidelines for case control and billing may change from time to time. The adjuster must keep abreast of such changes made by the insurer’s management and promptly inform the attorney of the changes.

Control of the litigation process rests with the insurer who pays the fees as long as they do not deter the lawyer from representing the insured – his or her client – as required by his professional responsibility. The insurer retains, and pays, the attorney to represent the insured defendant. The attorney is obligated to serve his or her clients, the insurer and the insured defendant(s), as they desire — as long as their instructions do not cause him or her to breach his or her professional ethics.

The insurer must accept the fact that it retained defense counsel to do everything necessary to properly defend the person or persons insured. If instructions from the insurer ask the attorney to breach his or her obligation to the insured counsel must so advise the adjuster and if the insurer insists, a competent, ethical and honorable lawyer will resign rather that breach the ethical requirements of the profession.

Despite the adjuster’s prerogative to direct the attorney’s handling of the case, the prudent adjuster will not prevent the defense attorney from doing work the attorney advises is necessary to properly defend the insured.

The adjuster and the attorney must meet regularly to review the file and discuss the need for:

  • further investigation;
  • discovery needed; and
  • any changes in the evaluation of the exposure the insured faces that have resulted from the work done by the attorney since the last meeting.

The case review meetings should take place no less than once every six months, and more frequently as the case comes closer to trial. The insured should be invited to attend and participate if the insured is able. In addition to allowing the adjuster to become totally familiar with the case, the periodic case review sessions allow the adjuster, the attorney and the insured to get to know each other on a personal basis. This will allow the two or three to foster a mutual relationship of trust and respect that cannot be achieved with contact only by telephone, letter, e-mail, or fax.

After each case review the adjuster and counsel should agree on the terms and conditions of a report to the insured and insurer concerning the status of the case as discussed at the case review meeting and whether the insurer needs to modify its reserves.

In the last three months before trial these meetings should take place as often as needed including weekly conferences. In the last days before trial it may be necessary for the adjuster and the attorney to meet as often as daily to properly prepare for trial.

[1].       For example, the State Bar of California rules require that attorneys provide a contract to each client. A sample agreement that complies with Section 6148 of the California Business and Professions Code may be found at (accessed August 23, 2013).

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Adapted from Zalma on Insurance Claims Part 108 -Second Edition: A Comprehensive Review of the law and Practicalities of Property, Casualty and Liability Insurance Claims now available  here.