Defense counsel’s “tripartite” relationship with the insurer and the insured usually comes into exist-ence when counsel agrees to handle a case at the insurer’s request. While the liability policy creates a relationship between the insured and the insurer, it does not directly govern or bind defense counsel.1 Once defense counsel accepts proffered employment, he enters into a retainer agreement with the insurer. These retainer agreements create and govern the relationship that defense counsel has with the insurer and the insured, and determines the nature and scope of these relationships.
The insurer and the defense counsel may determine what the scope of the defense counsel’s representation will be in a retainer agreement.2 For example, the insurer may decide that defense counsel will defend the liability action through trial but not the appeal. They may also decide that the lawyer will handle discovery but not trial. The retainer agreement also may include whether the defense counsel must inform the insured about major developments in the litigation and whether their consent is necessary for settlement.
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