Tuesday, December 27, 2005

Does the insurer's reservation of rights letter give the insured the right to hire its own counsel at the carrier's expense?

In Twin City Fire Ins. Co. v. Ben-Arnold Sunbelt Beverage Co., the Fourth Circuit in an opinion by District Judge Devers, joined by Judge Luttig and Senior Judge Hamilton, took the interesting question of whether, upon an insurer's issuance of a reservation of rights letter, the counsel retained by the insurer for the insured has a conflict of interest, such that the insured has the right to choose its own counsel and have the insurer pay for it.

The answer, under the facts of the case and South Carolina law, is no.

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