An insurance company's conduct of a court action on your behalf

Contributed by Greg Pynt and current to 1 September 2005

It is common for an insurance company to offer to take over the defence of a claim against you before liability is established by a court judgment, an arbitration award or a settlement. The insurance company generally is entitled to do so as long as it agrees beforehand to indemnify you against any costs, compensation or damages awarded against you if liability is subsequently established against you. Further, by taking over the conduct of the defence, the insurance company gets to exercise damage control by choosing its own lawyer to conduct the defence and controlling the way the claim is defended.

If an insurance company is conducting a recovery action in your name against a third party (by exercising a right of subrogation after indemnifying you against your claim on the insurance contract) or defending a court action against you, then in the course of conducting the action, the lawyer appointed and paid for by the insurance company will be acting on behalf of the insurance company and on your behalf. In other words, there will be a lawyer-client relationship between the insurance company and the lawyer, and a separate lawyer-client relationship between you and the lawyer.

This requires the insurance company’s lawyer to keep you informed of the progress of the action and to seek your approval at each critical stage of the action, in particular, in relation to Court pleadings, discovery, settlement negotiations and any decision made to proceed to trial.