Medical Malpractice Insurance and Your Right to Legal Counsel of Your Own Choosing:
What You Should Know, But Nobody Told You

We’ve all heard about Miranda warnings, and about how indigent persons accused of crimes have the right to counsel. But have you heard about the right of physicians in medical malpractice cases to choose their own counsel, and have their medical malpractice insurance company pay for it? Probably not.

Mention law or lawyers to most physicians and the reaction is predictably negative. Mentioning medical malpractice insurance generally produces an even stronger reaction, and the mention of medical malpractice litigation has the potential to send the sphygmomanometer off the charts. Even the thought of having any involvement with lawyers or medical malpractice claims produces anxiety, fear, anger, or worse.

Ah, but if you get sued for medical malpractice, at least you have the right to have a good, competent lawyer assigned by your malpractice insurer to defend you. Right? A lawyer with only your own best interests at heart, and not the insurance company’s, right? Not so fast.

Yes, you have a right to such a lawyer. No, you don’t always get it. Here’s why.

The typical professional liability insurance policy contains two essential obligations which fall to the insurer: to pay legitimate claims made up to the limits of the policy, and to retain and pay for legal counsel to defend the insured against said claims. That’s what your premiums buy.

When insurer and insured share the same interest:

Often, the interests of the malpractice insurer and the insured physician are identical. When that’s the case, there is no problem. The insurer retains counsel to represent you, as they are required to do under the terms of the insurance policy. The assigned attorney owes a legal and ethical duty to the physician, not to the insurer, but since their interests are the same, there is no problem.

However, the courts have recognized the reality that sometimes an attorney will actually owe her primary allegiance to the insurer that pays her bills, i.e. the insurer who retained her, and not to the physician she is ethically duty-bound to represent.

When insured and insurer do not share the same interest:

Again, there is no problem if the interests of insured and insurer are the same. What happens when those two interests are not identical? Suppose you’ve been sued, and let’s say there is an issue over what is and what is not covered under the policy. Do you think that the attorney retained (and paid for) by the insurance company might just litigate the case against you in a manner so as to let the insurance company get off scot-free without paying the claim, but leave you with exposed to an uninsured personal judgment against you? Well, New York’s highest court has acknowledged that this is a very real possibility.

In 1981, the Court of Appeals decided Goldfarb v. Public Service Mutual Ins. Co., holding that where insurer-retained counsel may have a conflict of interest as between the rights of the insurer and the insured, insureds have the right to retain their own counsel. Moreover, the insurance company must pay the legal fees of this attorney.1 These potential conflicts of interest can arise in many ways – in Goldfarb, certain claims were made against a dentist-insured based upon alleged improper contact with a patient. Some claims were covered under the policy, and some were not. The Court recognized that insurer-assigned defense counsel might actually navigate the defense of these various claims in a manner calculated to be beneficial to the insurer, but not to the insured, i.e., fighting off the covered claims, but leaving the insured exposed to the uncovered claims.

Strikingly, the court recognized that in the real world, the attorney hired and paid by the insurer to represent the dentist may defend the case so as to make sure the insurer doesn’t have to pay any claims, even if the dentist personally does. Of course, there really shouldn’t be such a conflict, since the attorney theoretically owes an important fiduciary duty to the client, and no one else. However, that’s not how it actually works. The Court held that the remedy was to allow the insured to pick out a lawyer without allegiance to or prior business dealings with the insurer, and the insurance company’s expense.

Does this signify the Court’s low opinion of an attorney’s ethical duty towards the dentist? Perhaps, though the court has also suggested that the insurer’s influence upon counsel can even be subliminal or subtle.2

Of course, this holding doesn’t only apply to dentists accused of this type of professional misconduct – it applies to all insureds, including physicians, in all cases where there is an issue of insurance coverage.

The problem is that most insured people, including most physicians, are understandably not learned enough in the nuances of the laws involving insurance coverage and conflicts of interest to be able to know when this right to counsel comes into play. This has lead to unfortunate results, with real harm caused to physicians, especially in a medical malpractice context.

So even though this right to counsel of a physician’s own choosing exists, what good is it if physicians are unaware of it? This was precisely the question that an intermediate level appeals court addressed in 2005 in Elacqua v. Physicians Reciprocal Insurance. It held that a medical malpractice insurer must tell their insured physicians of their right to choose their own non-conflicted counsel. 3 However, when it became clear that the medical malpractice insurer in Elacqua was still not following the Court’s directives to so advise their insured, the Elacqua court revisited the matter in 2008, and has now held that this failure to advise could be deemed a deceptive business practice which can subject the insurer to compensatory and punitive damages pursuant to our consumer protection laws.4

However, the holding of the court in Elacqua is not binding on all insurers in New York, as the Courts differ on the obligation of the insurance company to advise the insured of their rights. In fact, another New York appellate court says that while the insurer’s Goldfarb duty to provide separate counsel does indeed exist, the insurer doesn’t have to tell the insured about it!5 So, while the appellate courts in this state are presently divided about whether the insurance company has to tell their insured. The courts are quite clear that this Goldfarb right exists, and now at least you know about it.

Solution:

Obviously, knowledge is power. When faced with a letter from your insurer saying they are not responsible for your loss, either in whole or in part, know your rights. If you are not sure what to do upon receiving such a letter6, consider making a small investment of time and money in asking competent non-conflicted7 counsel what your rights are. If you have already been assigned counsel by your insurer, you needn’t bother asking them. Despite their clear duty to you, you nevertheless may not get advice which is in your best interest. As the Court of Appeals has recognized, your insurance company-retained counsel may have in mind the best interest of the folks who pay their bills, i.e. your insurer, and not you.

The end result of getting good, non-conflicted advice is that you may have the right to have counsel hired for you, at the insurer’s expense. After all, that’s what you pay substantial premiums for – not just to pay claims against you, but to defend claims against you.

That bit of advice you receive might well be that you have the right to have your insurer pay for a lawyer selected by you, not by them. The alternative, having the case defended by insurer-assigned counsel and being left with a big judgment against you which your bought and paid for insurance will not pay, is a disaster. This is not a problem in theory – I have had many physicians and other insureds come to me after this scenario has happened to them, and our case law contains many other examples of this.

Conclusion:

In sum, the law is clear that you have the right to non-conflicted counsel to represent your interests, and not the interests of your insurer. The law is less clear as to whether your insurer need tell you of this right. The moral of the story is clear: know your rights! If you don’t know your rights, ask! Just be careful who you ask.

Richard B. Ancowitz is a noted litigator and lecturer on insurance law and civil litigation, and is co-author and editor-in-chief of Weitz on Automobile Insurance: The No-Fault Handbook. Mr. Ancowitz limits his practice to complex civil litigation and insurance-related matters, and can be reached at 518.489.1098