When claims are made against parties that have liability insurance coverage, insurance companies frequently have a duty to defend under their policies. The insurer selects the lawyers to defend the claim, pays their bills, and (at times) provides, or attempts to provide, input into the defense. Often, insurance companies hire defense counsel with whom they have a long or close relationship, who therefore are beholden to the insurance company for future business. This can lead to an awkward situation when the insurer’s interests and those of the policyholder are not completely aligned, such as (1) when the insurer has asserted coverage defenses that turn on facts being litigated in the underlying action or (2) where a litigation tactic is good for the policyholder but not necessarily the insurer (e.g., admitting or contesting a fact that bears on liability or coverage).
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