Unfortunately, accidents and claims arising out of projects will occur and are a major cost of doing business in the construction industry. Construction companies spend enormous sums on layer after layer of liability policies in order to address claims. Often, the coverage is dictated by the Owner of the Project. When premiums are paid, there is an expectation that claims will be covered. However, a troubling trend has developed in the insurance industry whereby a large percentage of claims are effectively denied at the initial stages of litigation so that the insurance company can investigate the claim. In the meantime, the insurance company agrees to provide a defense through the issuance of a reservation of rights letter. This has always presented a dilemma for contractors. The same insurance company that is denying coverage is also selecting and paying for the attorney that will be representing the contractor. More importantly, while the contractor may not have to pay for attorney’s fees and costs presently, the contractor is exposed to an uninsured claim pending the insurance company’s final decision on coverage.

Fortunately, Louisiana courts have recognized this inherent conflict of interest and have uniformly held that so long as the contractor objects to the insurer’s selection of counsel at the outset, the contractor is entitled to select counsel of its own choosing and the insurer is responsible for all fees incurred. In Belanger v. Gabriel Chemicals, Inc., 2000-0747(La. App. 1Cir. 5/23/01); 787 So.2d 559, Lexington, the insurer of Gabriel, denied coverage for certain claims. Gabriel hired its own attorney to defend its interests and demanded that Lexington pay the defense costs incurred, which it refused to do. The Louisiana First Circuit Court of Appeal held that “If an insurer chooses to represent the insured but deny coverage, separate counsel must be employed. Failure to do so subjects the insurer to the attorney’s fees and costs the insured may incur for defending the suit.” The Court went on to conclude that when coverage is denied, an attorney selected by the insurance company has a conflict of interest under Rule 1.7 of the Rules of Professional Conduct as such representation would “be materially limited by the lawyer’s responsibilities to another client or to a third person”, in this case the insurance company. The Court also held that Gabriel properly assumed control of the defense and was entitled to reimbursement of all attorney’s fees incurred in the defense of the matter. See also Smith v. Reliance Insurance Co. of Illinois, 01-888(La. App. 5Cir. 1/15/02); 807 So.2d 1010.

In short, under Louisiana law, upon receipt of a reservation of rights letter by a liability insurer, your right to select counsel has been triggered. It is important to notify the insurer immediately of your intent to select counsel, the name of the counsel or firm and demand that all costs be paid by the insurer.

[1] In Trinity Universal Insurance, Co. v. Stevens Forestry Service, Inc., 335 F.3d 353(5th Cir. 2003), the Court denied a claim for reimbursement of attorneys fees incurred by an insured on the basis that the insured never objected to the insurance company’s selected counsel.

Unfortunately, accidents and claims arising out of projects will occur and are a major cost of doing business in the construction industry. Construction companies spend enormous sums on layer after layer of liability policies in order to address claims. Often, the coverage is dictated by the Owner of the Project. When premiums are paid, there is an expectation that claims will be covered. However, a troubling trend has developed in the insurance industry whereby a large percentage of claims are effectively denied at the initial stages of litigation so that the insurance company can investigate the claim. In the meantime, the insurance company agrees to provide a defense through the issuance of a reservation of rights letter. This has always presented a dilemma for contractors. The same insurance company that is denying coverage is also selecting and paying for the attorney that will be representing the contractor. More importantly, while the contractor may not have to pay for attorney’s fees and costs presently, the contractor is exposed to an uninsured claim pending the insurance company’s final decision on coverage.

Fortunately, Louisiana courts have recognized this inherent conflict of interest and have uniformly held that so long as the contractor objects to the insurer’s selection of counsel at the outset, the contractor is entitled to select counsel of its own choosing and the insurer is responsible for all fees incurred. In Belanger v. Gabriel Chemicals, Inc., 2000-0747(La. App. 1Cir. 5/23/01); 787 So.2d 559, Lexington, the insurer of Gabriel, denied coverage for certain claims. Gabriel hired its own attorney to defend its interests and demanded that Lexington pay the defense costs incurred, which it refused to do. The Louisiana First Circuit Court of Appeal held that “If an insurer chooses to represent the insured but deny coverage, separate counsel must be employed. Failure to do so subjects the insurer to the attorney’s fees and costs the insured may incur for defending the suit.” The Court went on to conclude that when coverage is denied, an attorney selected by the insurance company has a conflict of interest under Rule 1.7 of the Rules of Professional Conduct as such representation would “be materially limited by the lawyer’s responsibilities to another client or to a third person”, in this case the insurance company. The Court also held that Gabriel properly assumed control of the defense and was entitled to reimbursement of all attorney’s fees incurred in the defense of the matter. See also Smith v. Reliance Insurance Co. of Illinois, 01-888(La. App. 5Cir. 1/15/02); 807 So.2d 1010.

In short, under Louisiana law, upon receipt of a reservation of rights letter by a liability insurer, your right to select counsel has been triggered. It is important to notify the insurer immediately of your intent to select counsel, the name of the counsel or firm and demand that all costs be paid by the insurer.

[1] In Trinity Universal Insurance, Co. v. Stevens Forestry Service, Inc., 335 F.3d 353(5th Cir. 2003), the Court denied a claim for reimbursement of attorneys fees incurred by an insured on the basis that the insured never objected to the insurance company’s selected counsel.

Unfortunately, accidents and claims arising out of projects will occur and are a major cost of doing business in the construction industry. Construction companies spend enormous sums on layer after layer of liability policies in order to address claims. Often, the coverage is dictated by the Owner of the Project. When premiums are paid, there is an expectation that claims will be covered. However, a troubling trend has developed in the insurance industry whereby a large percentage of claims are effectively denied at the initial stages of litigation so that the insurance company can investigate the claim. In the meantime, the insurance company agrees to provide a defense through the issuance of a reservation of rights letter. This has always presented a dilemma for contractors. The same insurance company that is denying coverage is also selecting and paying for the attorney that will be representing the contractor. More importantly, while the contractor may not have to pay for attorney’s fees and costs presently, the contractor is exposed to an uninsured claim pending the insurance company’s final decision on coverage.

Fortunately, Louisiana courts have recognized this inherent conflict of interest and have uniformly held that so long as the contractor objects to the insurer’s selection of counsel at the outset, the contractor is entitled to select counsel of its own choosing and the insurer is responsible for all fees incurred. In Belanger v. Gabriel Chemicals, Inc., 2000-0747(La. App. 1Cir. 5/23/01); 787 So.2d 559, Lexington, the insurer of Gabriel, denied coverage for certain claims. Gabriel hired its own attorney to defend its interests and demanded that Lexington pay the defense costs incurred, which it refused to do. The Louisiana First Circuit Court of Appeal held that “If an insurer chooses to represent the insured but deny coverage, separate counsel must be employed. Failure to do so subjects the insurer to the attorney’s fees and costs the insured may incur for defending the suit.” The Court went on to conclude that when coverage is denied, an attorney selected by the insurance company has a conflict of interest under Rule 1.7 of the Rules of Professional Conduct as such representation would “be materially limited by the lawyer’s responsibilities to another client or to a third person”, in this case the insurance company. The Court also held that Gabriel properly assumed control of the defense and was entitled to reimbursement of all attorney’s fees incurred in the defense of the matter. See also Smith v. Reliance Insurance Co. of Illinois, 01-888(La. App. 5Cir. 1/15/02); 807 So.2d 1010.

In short, under Louisiana law, upon receipt of a reservation of rights letter by a liability insurer, your right to select counsel has been triggered. It is important to notify the insurer immediately of your intent to select counsel, the name of the counsel or firm and demand that all costs be paid by the insurer.

[1] In Trinity Universal Insurance, Co. v. Stevens Forestry Service, Inc., 335 F.3d 353(5th Cir. 2003), the Court denied a claim for reimbursement of attorneys fees incurred by an insured on the basis that the insured never objected to the insurance company’s selected counsel.

Unfortunately, accidents and claims arising out of projects will occur and are a major cost of doing business in the construction industry. Construction companies spend enormous sums on layer after layer of liability policies in order to address claims. Often, the coverage is dictated by the Owner of the Project. When premiums are paid, there is an expectation that claims will be covered. However, a troubling trend has developed in the insurance industry whereby a large percentage of claims are effectively denied at the initial stages of litigation so that the insurance company can investigate the claim. In the meantime, the insurance company agrees to provide a defense through the issuance of a reservation of rights letter. This has always presented a dilemma for contractors. The same insurance company that is denying coverage is also selecting and paying for the attorney that will be representing the contractor. More importantly, while the contractor may not have to pay for attorney’s fees and costs presently, the contractor is exposed to an uninsured claim pending the insurance company’s final decision on coverage.

Fortunately, Louisiana courts have recognized this inherent conflict of interest and have uniformly held that so long as the contractor objects to the insurer’s selection of counsel at the outset, the contractor is entitled to select counsel of its own choosing and the insurer is responsible for all fees incurred. In Belanger v. Gabriel Chemicals, Inc., 2000-0747(La. App. 1Cir. 5/23/01); 787 So.2d 559, Lexington, the insurer of Gabriel, denied coverage for certain claims. Gabriel hired its own attorney to defend its interests and demanded that Lexington pay the defense costs incurred, which it refused to do. The Louisiana First Circuit Court of Appeal held that “If an insurer chooses to represent the insured but deny coverage, separate counsel must be employed. Failure to do so subjects the insurer to the attorney’s fees and costs the insured may incur for defending the suit.” The Court went on to conclude that when coverage is denied, an attorney selected by the insurance company has a conflict of interest under Rule 1.7 of the Rules of Professional Conduct as such representation would “be materially limited by the lawyer’s responsibilities to another client or to a third person”, in this case the insurance company. The Court also held that Gabriel properly assumed control of the defense and was entitled to reimbursement of all attorney’s fees incurred in the defense of the matter. See also Smith v. Reliance Insurance Co. of Illinois, 01-888(La. App. 5Cir. 1/15/02); 807 So.2d 1010.

In short, under Louisiana law, upon receipt of a reservation of rights letter by a liability insurer, your right to select counsel has been triggered. It is important to notify the insurer immediately of your intent to select counsel, the name of the counsel or firm and demand that all costs be paid by the insurer.

[1] In Trinity Universal Insurance, Co. v. Stevens Forestry Service, Inc., 335 F.3d 353(5th Cir. 2003), the Court denied a claim for reimbursement of attorneys fees incurred by an insured on the basis that the insured never objected to the insurance company’s selected counsel.

Unfortunately, accidents and claims arising out of projects will occur and are a major cost of doing business in the construction industry. Construction companies spend enormous sums on layer after layer of liability policies in order to address claims. Often, the coverage is dictated by the Owner of the Project. When premiums are paid, there is an expectation that claims will be covered. However, a troubling trend has developed in the insurance industry whereby a large percentage of claims are effectively denied at the initial stages of litigation so that the insurance company can investigate the claim. In the meantime, the insurance company agrees to provide a defense through the issuance of a reservation of rights letter. This has always presented a dilemma for contractors. The same insurance company that is denying coverage is also selecting and paying for the attorney that will be representing the contractor. More importantly, while the contractor may not have to pay for attorney’s fees and costs presently, the contractor is exposed to an uninsured claim pending the insurance company’s final decision on coverage.

Fortunately, Louisiana courts have recognized this inherent conflict of interest and have uniformly held that so long as the contractor objects to the insurer’s selection of counsel at the outset, the contractor is entitled to select counsel of its own choosing and the insurer is responsible for all fees incurred. In Belanger v. Gabriel Chemicals, Inc., 2000-0747(La. App. 1Cir. 5/23/01); 787 So.2d 559, Lexington, the insurer of Gabriel, denied coverage for certain claims. Gabriel hired its own attorney to defend its interests and demanded that Lexington pay the defense costs incurred, which it refused to do. The Louisiana First Circuit Court of Appeal held that “If an insurer chooses to represent the insured but deny coverage, separate counsel must be employed. Failure to do so subjects the insurer to the attorney’s fees and costs the insured may incur for defending the suit.” The Court went on to conclude that when coverage is denied, an attorney selected by the insurance company has a conflict of interest under Rule 1.7 of the Rules of Professional Conduct as such representation would “be materially limited by the lawyer’s responsibilities to another client or to a third person”, in this case the insurance company. The Court also held that Gabriel properly assumed control of the defense and was entitled to reimbursement of all attorney’s fees incurred in the defense of the matter. See also Smith v. Reliance Insurance Co. of Illinois, 01-888(La. App. 5Cir. 1/15/02); 807 So.2d 1010.

In short, under Louisiana law, upon receipt of a reservation of rights letter by a liability insurer, your right to select counsel has been triggered. It is important to notify the insurer immediately of your intent to select counsel, the name of the counsel or firm and demand that all costs be paid by the insurer.

[1] In Trinity Universal Insurance, Co. v. Stevens Forestry Service, Inc., 335 F.3d 353(5th Cir. 2003), the Court denied a claim for reimbursement of attorneys fees incurred by an insured on the basis that the insured never objected to the insurance company’s selected counsel.