In many cases when you are sued for defamation and present a claim to your homeowner’s insurance company, the company may agreed to defend you under a “reservation of rights.” This means that there is a question as to whether the company is required to cover you under the policy, i.e. the agreement between you and the insurance company. The reason insurance companies do this is because the duty to defend claims is broader than the duty to indemnify claims. Insurance companies know that coverage disputes do not necessarily relieve the insurance company from having to defend you. If an insurance company properly and timely reserves their right to dispute coverage later, and if they are correct, they will not be bound by a judgment against you.
What this means in practical terms is that the insurance company will agree to pay for your legal defense and any costs associated with defending the lawsuit. However, they will not agree to indemnify you, which means that they will not necessarily pay any settlement or judgment in the case. If the insurance company agrees to defend you under a reservation, a conflict may exist between you and your insurance company. If such a conflict exists, you may have the right to hire a lawyer of your choosing. This is very important for a number of reasons.
First, most people simply do no know that they may have this right.
Second, often times insurance companies select an attorney from a “panel” of attorneys. Unfortunately, most of those attorneys do not have significant experience handling internet defamation or anti-SLAPP cases. This is an incredibly complex area of law and it is constantly evolving. Panel attorneys are typically generalists, which is problematic because these kinds of cases require an attorney with substantial experience and expertise. Insurance adjusters and defense attorneys often do not know the terms under which these kinds of cases are typically resolved; nor do they know the settlement value of these kinds of cases because they don’t see many of these cases. Who is in a better position to evaluate a defamation case? A person who has handled 20 cases? Or someone who has seen hundreds of such cases.
A more insidious issue, however, is that panel attorneys are paid by the insurance company and often have worked with the insurance company for years, which makes them financially dependent on them. This raises an obvious problem: will the insurance defense attorney have your best interests in mind, or will the attorney attempt to please the insurance company to secure future business? In my experience, most defense attorneys attempt to represent their clients in good faith and to the best of their ability; however, the potential for a conflict cannot be ignored and should be considered.
If you have been sued for defamation and your insurance company has agreed to defend you under a reservation rights, please contact an experienced defamation attorney for a consultation. We would be happy to assist you.
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