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“Burning Limits?” Here’s the hot 4-1-1!

 Since at least the early 1980’s, most professional liability policies, director and officer (D&O) policies and employment practices liability (EPL) policies, among others, are “Defense Within Limits” (DWL) in nature. These are often called “burning limits” policies because the available limit is reduced or “burned” down by defense expenses such as attorneys’ fees, experts and other litigation costs.

We think Courts across the country will embrace exactly the following rule:

Where the amount of a claim against the policyholder (or other insured) under a DWL policy combined with the amount of reasonably foreseeable defense expenses might exceed the available limit, the insurer must relinquish control of the defense and pay for independent counsel selected by the insured, unless an informed, written consent has been obtained from both the insured and the insurer.

To read more, see Bill Ford’s paper, “Defense within limits: “Burning” Ethical Issues for Defense Counsel Selected by the Insurer.  ABA (TIPS) February 2011© presented in Phoenix. (Or, heck, just call.)

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