Insurers frequently attempt to intervene into underlying disputes in which they are providing a defense, ostensibly to assert that there is no coverage for all or part of any damage award against its insured. What is often not acknowledged by the insurer is that once it makes it past the courthouse doors and into your case, the insurer’s presence is laden with the potential for conflicts of interest, prejudicial impacts on your case, and substantial delays in its resolution.
While insurers frequently attempt to justify their efforts under the auspices of “protecting their rights” in the event of a judgment against you, their true intentions may be more nefarious and, in certain cases, their stated justifications may be masking an effort to steer the litigation in a manner that minimizes the potential that you will be covered under the policy sold to you.
Policyholders must be on the lookout for insurers’ efforts to intervene into their lawsuits. Subject to a few exceptions, policyholders should oppose their insurers’ request to intervene into the suit and require them to file a separate lawsuit dealing with coverage issues.
How Intervention Works
If you are the defendant in a civil action and you submit a claim to your insurer requesting a defense to the claim and insurance coverage should you be found liable, the insurance company may agree to provide you with a defense - while at the same time “reserving” its right to later argue that the policy you purchased does not actually cover the claims being asserted against you.
Because your insurer will normally not be named as a party to the case when the lawsuit against you is filed, it must attempt to intervene into the case if it wishes to participate. Ohio law allows two types of intervention: (1) intervention as right; and (2) permissive intervention.
Both forms of intervention require the insurer to prove that it has a legally-protected interest that will be impaired if it is not permitted to participate in your case. The insurer will likely argue that the interest it is seeking to protect is the right to argue against coverage of your claim and the risk that it will be bound by any rulings or judgments in your case that may impact its right to assert that there is no coverage under its policy.
An insurer seeking to intervene must file a motion with the court within a reasonable time after the lawsuit has commenced explaining why its inclusion in the lawsuit is necessary. It must also submit to the court a proposed pleading setting forth the claim or defense it will assert in the case in the event the insurer is permitted to intervene.
Why Insurers Intervene and Why it Matters
There are a variety of reasons why an insurer may attempt to intervene in your case when it is already providing a defense to you through counsel appointed to you under the policy. The insurer may openly acknowledge some of these reasons in its motion to intervene, but it will frequently have undisclosed, secret motivations as well.
For example, the insurer may disclose in its motion that it would like to seek a stay of the lawsuit so that its coverage obligations may be determined first. Or, the insurer may disclose that it would like to litigate its coverage obligations in your case, or at a minimum, submit questions to the jury at trial that will help it determine if the reasons you were found liable for damages entitle you to coverage under your policy.
However, as part of developing the factual record on the issue of coverage, the insurer may be motivated to elicit facts or testimony that would result in liability against you that is not covered by its policy. Or, it may seek to develop facts that bring your case within an exclusion to coverage under your policy. For example, the insurer may be motivated to elicit facts showing that your conduct was intentional, rather than negligent, because intentional conduct is not a covered occurrence under many insurance policies.
While an insurer may have hidden motivations to intervene into your case, even its disclosed motivations may have adverse consequences to your defense efforts. Litigating coverage issues in your lawsuit will mean you are fighting a two-front war – one against the party suing you, and one against your insurance company – in the same proceeding. This will complicate matters in what may already be a complex and time consuming case.
If the coverage issues are being decided in the same trial as the underlying lawsuit, the jury will undoubtedly hear that you have insurance that potentially pays for any damages awarded against you. The presence of insurance to satisfy a judgment is almost always excluded from trial under ordinary circumstances because it can lead to a jury finding liability or awarding higher damages in circumstances when it otherwise might not do so.
Additionally, litigating coverage issues in your case will almost always mean that the case drags on longer than it otherwise would. The insurer will likely want to conduct its own discovery, new case deadlines, and will file its own motions that the court will need to take time deciding before the case is resolved. All these things take time, and mean that your case can last several months (or years in extreme circumstances) longer than it would if the insurance coverage issues took place in a separate forum.
Strategies for Opposing Intervention When Necessary
In some instances, your insurer may seek to intervene into your case solely for the purpose of submitting interrogatories to the jury that will help determine coverage issues. There is usually no reason to oppose such a request because the insurer’s limited participation will not significantly delay or complicate the case. Plus, the insurer’s participation in the case will mean it is bound by any decisions reached in the case by the judge or jury.
However, in virtually every other instance where your insurance carrier files a motion to intervene into your case, you will want to oppose it. Further, while the attorney already representing you in the lawsuit may not be directly conflicted from defending your rights to coverage, he or she will likely not represent you in a coverage dispute against your insurer. After all, while the attorney is obligated to act in your best interests, it is ultimately the insurance company that is paying the attorney’s bills.
Therefore, you will usually retain separate counsel to oppose the insurer’s motion to intervene. Policyholders have successfully opposed motions to intervene by arguing that the disclosure of insurance coverage will prejudice their case, and that this prejudice substantially outweighs any interest the insurer has to participate in the case.
Notably, your policy likely precludes you or a third-party from adding the insurer to your case on your own initiative for the simple reason that the insurer does not want the factfinder to know that there is potential insurance to pay for a judgment. The irony of the insurer actively seeking to inject insurance issues into your case through its intervention, which will undoubtedly reveal the existence of insurance to the jury, should not be lost on the court.
It is also important to impress upon the court the effect adding the insurer as a new party will have on case administration. The insurer will likely want new case deadlines, a new discovery schedule, and will want to file its own motions. As the policyholder, you may want to assert claims back against the insurer, meaning that a whole new case will spawn within the already-existing complex dispute.
Further, the insurer’s interests are already being protected in your case by the presence of defense counsel litigating on your behalf in an effort to defeat the underlying claims being asserted against you.
Given the substantial adverse effects that may occur once an insurer intervenes into your case, and the insurer’s ability to file its own separate coverage action, courts should be wary to grant insurers’ motions to intervene for any purpose other than submitting juror interrogatories.