Insurance Carrier Intervention in Underlying Tort Cases: Options for Preserving Coverage-Related Facts

Sometimes the facts that an insurance company believes will demonstrate that it has no duty to indemnify—that is, facts negating coverage for some or all the proffered claims—will be uncovered in discovery and determined in the underlying lawsuit over the policyholder's liability. Examples include where the underlying lawsuit will determine if the defendant is really an insured, whether the insured is vicariously liable for another's actions, whether the policyholder acted intentionally, or whether certain exclusions were triggered. If the insurance company waits to assert coverage defenses until that underlying lawsuit is resolved, whether through a verdict or settlement, the insurer may lose the ability to later assert facts critical to its coverage defenses. This is so even if it has issued a reservation of rights for filed a separate declaratory judgment action related to coverage.

One possible option is for the insurance company to seek to intervene in the underlying lawsuit pursuant to Federal Rule 24 and the various state counterparts. The number of jurisdictions that will not permit this is shrinking, but deciding whether to seek intervention and anticipating the indirect consequences of doing so remains complex. Insurance counsel have to be prepared to address all the reasons intervention is disfavored, understand the timing considerations, decide the goals of intervention and how to best achieve them, and consider the potential conflicts that are created and many other issues

Listen as our esteemed panel discusses when intervention is the preferred solution for preserving coverage defenses and offers practical approaches for avoiding unintended missteps.

I. Introduction: traditional approach

II. Permissive intervention

A. Reasons to intervene

B. When to seek permissive intervention

C. Potential pitfalls

D. Proposed course of action for an insurer seeking intervention

III. Possible outcomes

A. Intervention not allowed

B. Intervention allowed for insurance coverage purposes

C. Intervention allowed for tort liability purposes

The panel will review these and other key issues: 

• What are the traditional rationales for not allowing insurers to intervene?
• If intervention is denied, is the insurer still bound by factual determinations in the underlying case?
• Can an insurer intervene for some but not all purposes?
• Can intervention waive an insurer's right to control the defense?