How To Deal With Insurers’ Litigation Management Guidelines
Insurers have broad obligations to defend claims against their policyholders. However, as policyholders quickly learn when facing a claim, insurers often seek to limit these obligations through a wide array of tactics. One common tactic is to insist that attorneys defending a policyholder must comply with guidelines issued by the insurer. These guidelines — often labeled litigation management guidelines, defense counsel guidelines or billing guidelines — seek to impose detailed limitations on defense counsel’s conduct. For instance, many guidelines prohibit or significantly restrict critical legal tasks such as: (1) engaging in intrafirm communications; (2) sending multiple professionals to participate in depositions, court appearances and meetings; (3) conducting legal research; (4) drafting and filing certain motions; (5) retaining expert witnesses; and (6) conducting nonparty depositions.
While insurers provide these guidelines to policyholders and their defense counsel as if they were a fundamental part of the insurance relationship, this is not the case. To the contrary, typically such guidelines are mentioned nowhere in the insurance contract and should not be read to restrict the broad defense coverage for which the policyholder bargained and paid premiums.
In fact, courts around the country have found insurer guidelines to be improper and unenforceable when they impair defense counsel’s ability to defend a claim against a policyholder — for instance, by requiring insurer consent to one or more tasks crucial to defending a claim, such as “scheduling depositions, undertaking research, employing experts or preparing motions.” At least one federal district court has also observed that guidelines restricting defense counsel’s conduct conflict with the Federal Rules of Civil Procedure. And one state high court has gone so far as to hold that insurer guidelines are improper no matter their terms, even where the insurer has the right and duty to defend a claim and the guidelines give defense counsel ultimate decision-making authority. While particular guidelines or guideline provisions have found court approval in certain circumstances, even courts in these cases sometimes note their concerns about the potential problems that guidelines can pose.
In addition to these issues concerning an insurer’s coverage obligations, guidelines also raise ethical concerns for defense counsel asked to abide by their limitations. Numerous state ethics boards have found that defense counsel are committing an ethical violation if they follow guidelines that curtail their ability to defend a claim against a policyholder, such as guidelines that “restrict or require prior approval before performing computerized or other legal research ... [or] dictate how work is to be allocated among defense team members ... [or] require approval before conducting discovery, taking a deposition, or consulting with an expert witness.” Other state ethics boards have found that defense counsel are ethically obligated to ignore insurer guidelines unless the insurer obtains the policyholder’s informed consent to the guidelines’ terms.
A policyholder receiving guidelines that may impair the broad defense to which it is entitled under its policy should be prepared to respond promptly to its insurer, state its objections and catalog all potentially improper limitations on the insurer’s coverage obligations and all potential ethical concerns. A prompt and detailed response is important not only for record-making purposes, but also because issues regarding insurer guidelines can often be resolved consensually, either through direct discussions between the policyholder and insurer or negotiations between their respective coverage counsel. Where a policyholder’s concerns result from particular guideline provisions, focusing on those provisions can at times facilitate such a resolution, as an insurer may agree to modify or waive the problematic provisions in an effort to resolve any disputes without putting at issue its guidelines as a whole. For instance, if regular team meetings are critical to defense counsel’s coordination of a complex matter or if nonparty depositions are pivotal to defense counsel’s strategy for bolstering a particular defense, agreements can sometimes be reached to address guideline terms that would otherwise restrict such work.
In discussing the propriety of any guidelines or guideline terms with an insurer, there are a few key legal and strategic considerations that a policyholder will generally wish to highlight. First, stress that the insurer drafted the insurance contract, chose to leave out any mention of these guidelines and their purported restrictions, and cannot now alter its obligations under the contract. Second, remind the insurer that limiting defense counsel’s ability to conduct the defense as he or she believes best will increase the risk of an adverse litigation result, which would be detrimental to both the policyholder and the insurer. Third, where an insurer contends that guidelines are necessary to protect its financial interest in controlling defense costs, explain that those interests are adequately protected by the requirement, found commonly in policies and at law, that defense counsel charge only “reasonable fees.” Fourth, where independent counsel has been appointed to defend a claim, note that in such instances it is well-established that “the insured is entitled to control the defense of the case.” Lastly, where an insurer maintains a difficult position, stress that the insurer may be vicariously liable for any legal malpractice resulting from defense counsel following the limitations dictated by the insurer.
Disputes over guidelines rarely proceed to litigation — in part because a loss in court against just one policyholder can have far broader repercussions for an insurer — but consensual resolution is not always achievable. Where litigation proves necessary, a policyholder’s efforts to persuade a court should generally focus on the same tactics discussed above: citing cases that prohibit or limit the use of guidelines, highlighting particularly troublesome guideline provisions and emphasizing key legal and strategic considerations that support the policyholder’s position.
In conclusion, while litigation management guidelines are only one of many ways in which insurers attempt to limit their defense obligations, policyholders should be aware of the issues discussed above and prepared to respond forcefully if they receive guidelines that would impair the defense to which they are entitled under their policy.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
 Numerous examples of insurer guidelines are publicly available online. See, e.g., AIG, General Litigation Management Guidelines (Apr. 2013) http://www.aig.com/content/dam/aig/america-canada/us/documents/brochure/2013-litigation-management-guidelines-as-of-083113-brochure.pdf; Endurance, Endurance Defense Counsel Guidelines (May 2013) http://www.sompo-intl.com/sites/default/files/Defense_Cousel_Guidelines_05.21.13.FINAL__0.pdf.
 Policyholders should be aware that insurers sometimes provide their guidelines only to defense counsel, even though these guidelines can directly impact policyholders. See, e.g., 212 Marin Blvd., LLC v. Chicago Title Ins. Co., No. HUD-L-5801-09, 2012 WL 6840270 (N.J. Super. Ct. Law Div. Dec. 21, 2012), rev’d in part on other grounds, No. A-3877-12T2, 2014 WL 8849641 (N.J. Super. Ct. App. Div. May 20, 2015).
 In re Rules of Prof’l Conduct & Insurer Imposed Billing Rules & Procedures, 299 Mont. 321, 326–27 (2000) (rejecting insurer’s “billing and practice rules” that required defense counsel to secure the insurer’s consent prior to undertaking various key legal tasks); see also Aldous v. Darwin Nat’l Assurance Co., 851 F.3d 473, 482 (5th Cir. 2017) (finding that insurer’s guidelines were “a document to which Aldous never agreed” that “cannot limit or define her rights under the Policy” and rejecting insurer’s attempt to exclude certain defense costs not covered by the guidelines); Philadelphia Indem. Ins. Co. v. Chicago Title Ins. Co., No. 09 C 7063, 2012 WL 2115487, at *5 (N.D. Ill. June 10, 2012) (holding that insurer guidelines cannot “govern the amount to which an insured is entitled when those guidelines were not a part of the original insurance contract”); 212 Marin Blvd., 2012 WL 6840270 (refusing to apply limitations on “block bill[ing]” imposed by insurer’s litigation guidelines); Givens v. Mullikin ex rel. Estate of McElwaney, 75 S.W.3d 383, 394 (Tenn. 2002) (holding that insurer “clearly possesses no right to control the methods or means chosen by an attorney to defend the insured”); Frederick v. Unum Life Ins. Co. of Am., 180 F.R.D. 384, 385 (D. Mont. 1998) (finding that guideline requiring insurer consent to legal services “hamstrings the lawyer charged with defending the claim”).
 Frederick, 180 F.R.D. at 385.
 In re Rules of Prof’l Conduct, 299 Mont. at 327.
 See Dynamic Concepts, Inc. v. Truck Ins. Exch., 61 Cal. App. 4th 999, 1009 n.9 (1998), as modified (Mar. 27, 1998) (“[W]e question the wisdom and propriety of so-called ‘outside counsel guidelines’ ... Under no circumstances can such guidelines be permitted to impede the attorney’s own professional judgment about how best to competently represent the insureds.”); AKH Co. v. Universal Underwriters Ins. Co., No. CIV.A. 13-2003-JAR, 2015 WL 1809157, at *9 (D. Kan. Apr. 21, 2015) (permitting insurer guidelines where they had not “restricted discovery activities, dictated the defense strategy” or “implicated any ... strategic decisions”).
 While these potential ethical issues are not the focus of this article, the ethics opinions cited below do provide useful guidance regarding potential ethical concerns for defense counsel.
 The Supreme Court of Ohio Bd. of Comm’rs on Grievance & Discipline, Op. 2000-3 at 1 (June 1, 2000),
https://www.ohioadvop.org/wp-content/uploads/2017/04/Op-00-003.pdf (“It is improper ... for an insurance defense attorney to abide by an insurance company’s litigation management guidelines in the representation of an insured when the guidelines directly interfere with the professional judgment of the attorney.”); see also Tex. Comm. on Prof’l Ethics, Op. 533 (Sept. 2000), https://www.legalethicstexas.com/Ethics-Resources/Opinions/Opinion-533 (“[W]hen restrictions in litigation/billing guidelines direct and control legal services rendered by the lawyer to a client and how those services are to be delivered, imposing such restrictions upon the lawyer would result in a violation of the Rules by the lawyer.”); Ind. State Bar Ass’n Legal Ethics Comm., Op. 3 at 7–8 (1998), http://c.ymcdn.com/sites/www.inbar.org/resource/resmgr/Ethics_Opinions/1998.pdf (insurer guidelines that “curtail reasonable discussion between members of the defense team on a day-to-day basis” or “dictate the use of personnel within the lawyer’s own office” violated applicable ethics rules); Rhode Island Sup. Ct., Ethics Advisory Panel, Op. 99-18 at 4 (Oct. 27, 1999), https://www.courts.ri.gov/AttorneyResources/ethicsadvisorypanel/Opinions/99-18.pdf (insurer guidelines that require “the insurer’s pre-approval for specified legal services,” such as conducting legal research in excess of three hours, filing counterclaims, preparing dispositive motions, scheduling depositions, and retaining expert witnesses, are an “infringe[ment] upon the attorney-client relationship”); Iowa Sup. Ct. Bd. of Prof’l Ethics & Conduct, Op. 99-01 (Sept. 8, 1999), http://www.iowabar.org/default.asp?page=Ethics (insurer guidelines that determine “the legal services necessary to represent the client and who, within the lawyer’s office renders them” violate applicable ethics rules); W. Va. Lawyer Disciplinary Bd., L.E.I. No. 2005-01 (June 17, 2005), http://www.wvodc.org/pdf/lei/LEI%2005-01.pdf (insurer guidelines that restrict discovery, motion practice, trial preparation, or other substantive work violate applicable ethics rules); Dynamic Concepts, 61 Cal. App. 4th at 1009 (“Insurer-imposed restrictions on discovery or other litigation costs may well violate ... attorneys’ ethical responsibilities to exercise their independent professional judgment in rendering legal services.”); Ala. Office of Gen. Counsel, Ethics Op. RO-98-02 (Oct. 27, 1998), https://www.alabar.org/assets/uploads/2014/08/1998-02-1.pdf (“[A] lawyer should not permit an insurance company, which pays the lawyer to render legal services to its insured, to interfere with the lawyer’s independence of professional judgment in rendering such legal services, through the acceptance of litigation management guidelines which have that effect.”); Utah State Bar Ethics Advisory Op. Comm., Op. 02-03 ¶ 2 (Feb. 27, 2002), http://www.utahbar.org/wp-content/uploads/2017/11/2002-03.pdf (insurer guidelines are “not per se unethical” but are improper if they “impair materially the lawyer’s independent professional judgment”).
 See, e.g., Vt. Bar Ass’n, Advisory Ethics Opinion 1998-07 at 2–3 (1998),
Advisory%20Ethics%20Opinions/Confidences%20of%20the%20Client/98-07.pdf (“A lawyer may not comply with insurance ‘company guidelines’ without a full explanation of them to the client (insured) and only upon obtaining client’s full and informed consent.”); Va. Legal Ethics Op. 1723 (Nov. 23, 1998), https://www.vacle.org/opinions/1723.htm (“[I]t is ethically impermissible for an attorney to agree to an insurance carrier’s restrictions on the attorney’s representation of the insured absent full disclosure and consent of the client at the outset of the representation and absent a determination that the client’s rights will not be materially impaired by the restrictions.”); Wash. State Bar Ass’n, Op. 195 (1999), http://mcle.mywsba.org/IO/print.aspx?ID=1540 (attorney must “obtain the client’s informed consent to any limitations imposed” by insurer guidelines); Mo. Bar Ass’n Informal Ethics Opinion, 980124 (Aug. 1998), http://www.mobar.org/mobarforms/opinionResult.aspx?OpinionNumber=980124 (attorney can represent insured under insurer guidelines only “if the client consents”); N.C. State Bar, 98 Formal Ethics Op. 17 (Jan. 15, 1999), https://www.ncbar.gov/for-lawyers/ethics/adopted-opinions/98-formal-ethics-opinion-17/ (attorney cannot represent insured under insurer guidelines “unless the insured consents after disclosure”).
 See, e.g., Philadelphia Indem. Ins., 2012 WL 2115487, at *5 (“guidelines were not a part of the original insurance contract” and so cannot “govern the amount to which an insured is entitled”).
 See, e.g., In re Rules of Prof’l Conduct, 299 Mont. at 334.
 Assurance Co. of Am. v. Haven, 32 Cal. App. 4th 78, 87 (1995) (citing San Diego Navy Fed. Credit Union v. Cumis Ins. Soc’y, Inc., 162 Cal. App. 3d 358, 369, 375 (1984)).
 See Givens, 75 S.W.3d at 394–95; Barefield v. DPIC Cos., Inc., 215 W. Va. 544, 558 n.18 (2004).
Originally published on Law360, reprinted with permission.