CASE BRIEFS

In Trinity Universal Insurance Co. v. Stevens Forestry Service Inc., No. 02-30442 (5th Cir. 6/18/03), the U.S. Court of Appeals for the 5th Circuit, affirming the district court, recently held that an insurer is not obligated to reimburse its insured for attorneys' fees the insured incurred to hire separate counsel to represent it in a lawsuit where the insurer provided the insured with counsel but reserved the right to deny coverage and withdraw from the defense.

Stevens Forestry Service Inc. ('Stevens') hired a lawyer to assist it in handling a dispute with a customer. When Stevens received a formal demand for $1.1 million from the customer, Stevens tendered the claim to its liability insurer, Trinity Universal Insurance Co. ('Trinity'). Trinity advised Stevens that it agreed to provide Stevens with counsel and begin investigation of the matter, but that Trinity reserved the right to later deny coverage and withdraw from the defense. Trinity also expressly advised Stevens that because of the coverage dispute and the possibility that Trinity might withdraw from the defense, Stevens might wish to continue to retain an attorney at Stevens' expense to protect its interest in the litigation.