In addition to being a part of the news recently, the need for independent counsel is an important topic for liability insurance, too, as demonstrated by a recent decision by the U.S. Court of Appeals for the Fifth Circuit Court. No matter a company’s line of business, most in-house attorneys or risk managers have likely reported liability claims or lawsuits to an insurer. The ensuing script is familiar, in that the insurer will often agree to defend while raising coverage issues and insisting on appointing defense counsel of its choosing. The insurer may even force its own choice of counsel, despite the insured’s preference for another attorney or its reasonable request for independent counsel. A recent Fifth Circuit case highlights significant coverage implications for insureds that can arise under these circumstances.
In Grain Dealers Mutual Insurance Company v. Cooley, the Cooleys owned a gas station that was insured by Grain Dealers under a business owners’ policy. After Pine Belt Oil Co. purchased the station from the Cooleys, a neighboring property owner notified the Mississippi Department of Environmental Quality that gas was leaking into a pond on his property. The MDEQ sent a letter to Pine Belt requesting an assessment of the gas station’s fuel lines, which was then forwarded to the Cooleys. The Cooleys requested a defense and indemnification from Grain Dealers.
