As mentioned, one of the benefits of the general liability policy is the defense which the carrier provides for covered claims. Frequently, a company will be confronted with both covered and uncovered claims. In that case, the carrier is generally required to defend all of the claims, both covered and uncovered. This is a letter that states that the carrier believes that some or all of the claims may not be covered, but is providing the policyholder with a defense anyway. Space does not permit a detailed discussion of the policyholder s options at this juncture.
Carriers prefer to assign the defense of the claim to counsel whom they select.
The carrier usually has more experience with the approved counsel and has probably also negotiated a favorable fee arrangement . On the other hand, the policyholder may wish to select counsel. The attorney selected by the carrier may not have expertise in the policyholder s industry or product. However, if the carrier issues a reservation of rights, the policyholder may have the right to select counsel of its choice and require the carrier to pay reasonable fees for the counsel selected by the policyholder. In addition, many policyholders have negotiated the right to select counsel with their carriers.