For nearly two decades, Keith Lapuyade has served as personal counsel for physicians, attorneys, accountants, engineers, and other professionals who have become involved in litigation. A lawsuit or even the thought of being sued can cause immense stress, and the threat of losing hard-earned assets because of an adverse judgment can be both emotionally and financially devastating. Personal counsel is retained by a professional to protect the professional from the potential adverse consequences of litigation.
When a person or company is sued, the insurance company (if there is insurance) will generally retain and pay to provide representation in the lawsuit. This relationship between the insurance company and the insured can lead to a potential, or perception of a, division of loyalties between the company and it’s insured. The personal counsel’s role is to monitor the litigation and, when necessary, address and confront issues that may impact insurance coverage. Examples of such situations include:
- Cases where the legal claims could result in a judgment that exceeds insurance policy limits;
- Cases that involve potentially uncovered claims (such as intentional or criminal acts and/or punitive damages) or a combination of covered and uncovered claims;
- Cases where the insurance company disputes either the fact or amount of available insurance coverage; and
- Cases where other factors (such as stress, publicity, or business decisions) may affect the decision to settle a case.
In these types of cases, defense counsel should advise the insured to seek personal counsel. Personal counsel is hired by the professional who has been sued, is paid by such professional, and is accountable only to such professional (and not any insurance company).
Since this is a highly nuanced area of practice, it is not recommended that the professional’s business lawyer serve as personal counsel unless he or she has the requisite experience in handling these types of cases.
The Colorado Court of Appeals has recognized the importance of personal counsel in the context of professional malpractice. In Bankr. Estate of Morris v. COPIC Ins. Co., 192 P.3d 519, 524 (Colo. App. 2008), the Colorado Court of Appeals held that it was not enough for defense counsel to offer the client the option of retaining personal counsel; defense counsel must affirmatively recommend that the client retain personal counsel:
Concerning materiality of this disputed issue the difference between “recommending” personal counsel to an insured and “advising” the insured about “an option” to retain personal counsel is material because it may bear upon the reasonableness of COPIC’s conduct. See Christian Builders, Inc.v. Cincinnati Ins. Co., 501 F. Supp. 2d 1224 (D. Minn. 2007) (in affirming summary judgment for insurer on bad faith action involving an excess judgment, court noted that insurance carrier told insured of the potential for a verdict in excess of policy limits, of the insured’s responsibility for any excess, and of insured’s right to retain personal counsel; after unsuccessful mediation of underlying cases, defense counsel hired by insurer recommended that insured retain personal counsel); see also Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice §30.21, at 338 (2008) (“Although defense counsel can and should evaluate and advise regarding the reasonableness of the settlement demand, counsel should not choose sides or advocate either client’s [insurance company or insured] interest as between them. Avoiding that conflict [of interest] means that the insured should consider the assistance of another lawyer. That lawyer can counsel the insured concerning whether to risk the excess exposure and should function as an advocate against the insurer.” (emphasis supplied); Hartford Accident & Indem Co. v. Foster, 528 So. 2d 255, 273 (Miss. 1988) (when a settlement offer within limits is made, if there is any objective reason for the insured to have additional legal counseling, defense counsel should promptly advise him or her to seek it; any doubt on this question should be resolved in favor of recommending independent advice).
Personal counsel for the professional will monitor the case, carefully observe and document any actions or omissions by the insurance company that may lead to a judgment outside of coverage or in excess of policy limits. An important role of personal counsel is to document and preserve the professional’s right to seek recourse against the insurance company if there is a judgment that exceeds insurance policy limits or is not covered by insurance.
This is where the roles of retained counsel and personal counsel differ. Counsel retained by the insurance company cannot address insurance coverage disputes or take steps to hold the insurance carrier responsible for any choices that it makes that result in an adverse outcome for the insured. In cases where insurance coverage is disputed, limited or in an insufficient amount to cover the claimed damages, personal counsel is critical to protect assets, reputation, and potentially the practice of the insured professional.
If you have been sued or face the threat of a lawsuit and you are concerned about protecting your hard-earned assets, you should contact an attorney, such as Mr. Lapuyade, who regularly represents clients in this area of law.