The Right to Associate in the Defense

(2) The Insured shall furnish promptly all information reasonably requested by the Company with respect to any Occurrence, both with respect to any Claim against the Insured and pertaining to coverage under this Policy.

'

(4) Those expenses incurred by the Company on its own behalf in connection with claims representation pursuant to this Condition D shall be at its own expense and shall not be part of Ultimate Net Loss.

In the remainder of this article, we examine how courts recognize and enforce the right to associate, and what remedies are available where the insured fails to cooperate in the insurers' right to associate. Although this article focuses on New York law, there is little case law on this subject, and foreign courts are likely to be in accord with New York precedent.

Purpose of the Right to Associate

The purpose of the right to associate is to afford the excess insurer the opportunity to protect its interests by helping to contain the insured's loss. Insurers view this right as an important tool to mitigate their risk. Through association, insurers can also provide valuable assistance to insureds because insurers have extensive resources, experience, and expertise litigating high-stakes cases. For instance, insurers can provide their insureds with useful insight into mediators, plaintiffs' counsel, experts, and other key players in the underlying litigation whom they are likely to have previously encountered. Insurers, like their insureds, aim to resolve cases below their attachment point, leading to a smaller settlement, which will not reach other insurance layers or the insured. Containing the loss also has a positive impact on an insured's risk profile when procuring future liability insurance. In all of these respects, the insured and the insurer have complete unity of interest in the defense of the underlying lawsuit.

The Second Circuit, recognizing the mutual benefit within the right to associate clause, described the right to associate as follows:

The purpose of the “right to associate” clause is to provide the insurer with an “option to intervene” in the defense and settlement of a claim. ' To “associate” means to “come together as partners ' or allies.” ' This right thus allows the insured and the insurer to come together as partners in investigating, defending or settling a claim. That partnership can be useful to an insured, which may lack the expertise and experience of an insurer, where, as here, the insured bears the duty to defend.

' However, the right to associate is useful only if the insurer can use its experience throughout the process, not just at the end stages. The policies read as such. They provide, in the present tense, for an “opportunity to effectively associate with [the insured] in the investigation, defense and settlement” of a claim.

MBIA, Inc. v. Federal Ins. Co., 652 F.3d 152, 167'68 (2d Cir. 2011) (internal citations omitted). See also New York Marine & Gen. Ins. Co. v. Lafarge N. America, Inc , 599 F.3d 102, 127 (2d Cir. 2010).

In order to associate, the insurer must be permitted meaningful participation in strategic discussions, as outlined below.

NY Courts Recognize and Enforce the Right to Associate

An excess insurer's right to associate is clearly recognized and enforceable under New York law. For example, in MBIA, Inc. v. Federal Ins. Co., 652 F.3d 152 (2d Cir. 2011), the insured was the subject of informal investigations by the Securities and Exchange Commission (SEC) and the New York Attorney General, and it was the defendant in two derivative actions brought by its shareholders, all related to a particular financial transaction. The insured entered into a global settlement requiring the appointment of a law firm as an “Independent Consultant” to investigate the insured. The insured sought coverage from its primary and excess insurers for the settlement, including the Independent Consultant's legal fees. Both insurers denied coverage on the grounds that the insured had breached its policy right to “effectively associate with [the insured] in the ' settlement ' of any Claim” because, although they were informed about the settlement discussions, they were not informed that the settlement required appointment of Independent Consultant. Id. at 167. The insurers learned about the appointment after the settlement.

The Second Circuit held that the insured satisfied its obligation under the policy because it: 1) gave notice to the insurer of the claims involved in settlement discussions early on in the process; 2) provided adequate information about the claims; 3) met with the insurers in person to discuss possible settlements; and 4) gave the insurers an opportunity to join with it in resolving the regulators' investigations. Id. at 168. The Second Circuit found that the costs incurred for the Independent Consultant were covered because it “grew out of the natural course of settlement discussions about the same claim in which the insurers could have participated all along.” Id.

In Home Insurance Corp. v. Corcoran, 483 N.Y.S.2d 300, 107 A.D.2d 561 (1st Dep't 1985), rev'd, 65 N.Y.2d 1035, 484 N.E.2d 657, 494 N.Y.S.2d 294 (1985), New York's highest court found factual issues as to whether the excess insurer had been deprived of its right to associate. In that case, an excess insurer relied on the primary insurer to defend a wrongful death action that did not appear to reach the excess policy's attachment point. As the case progressed, the primary insurer went into liquidation and the counsel it had appointed was replaced by defense counsel appointed by a surety. The excess insurer attempted unsuccessfully on several occasions to contact the new counsel. The excess insurer later learned that the matter had gone to trial and resulted in a judgment well into the excess layer, and that the time to appeal had expired. The excess insurer also discovered that no serious defense effort had been made at trial.

The trial court and a majority of the intermediate appellate court held that the excess insurer had failed to disclaim in a timely manner and, therefore, had to pay the judgment. One judge dissented, holding that there were factual issues as to the timeliness of the delay and that “the failure of [the primary insurer's] attorney to respond to any of plaintiff's inquiries and to make even a token effort at trial raises serious [factual] questions” as to whether the excess insurer had been deprived of its right to associate and whether the insured and its primary insurers had adequately cooperated with the excess insurer. 483 N.Y.S.2d at 303, 107 A.D.2d at 564. New York's highest court agreed and reversed, adopting the dissenting opinion, holding that the excess insurer was deprived of its right to associate. 65 N.Y.2d at 1038, 484 N.E.2d at 658, 494 N.Y.S.2d at 295.

Indeed, the right to associate is so significant that, even absent an express contractual right to associate, New York courts have held that an excess insurer has the right to participate in the defense of an underlying claim. See Preferred Const., Inc. v. Illinois Nat. Ins. Co., 494 F. App'x 162, 164 (2d Cir. 2012); American Home Assur. Co. v. Employers Mut. of Warsaw, 406 N.Y.S.2d 826, 827, 64 A.D.2d 563, 563 (1st Dep't 1978); Mandell Corp. v. Ins. Co. of N. America, 479 N.Y.S.2d 452, 454, 125 Misc. 2d 390, 392 (Sup. Ct. N.Y. Co. 1984). This indicates that the right to associate is of utmost importance, and will be enforced to protect an excess insurer.

The Insurer Has a Right, But Not an Obligation, to Associate

Insurers have a right to associate, but are not required to do so. If the insurer does not elect to exercise its right to associate, it will not be called upon or obligated to associate against its will. As S. Seaman and C. Kittredge explain in Excess Liability Insurance: Law and Litigation, 32 TORT & INS. L.J. 653, 663 (1997):

Although excess insurance contracts ordinarily do not contain a duty to defend, most excess insurance contracts provide that the excess insurer has the 'option' to participate or the right to 'associate' in the defense of lawsuits pending against the insured. These provisions are intended to allow the excess insurer, if it chooses, to become involved in actively defending lawsuits that could involve its layer of coverage. The option to defend, for example, may be exercised by insurers in situations in which there is significant exposure in excess of the underlying limits and the insured or the underlying insurer is not mounting a strong defense.

By exercising the right to associate, the insurer does not thereby assume the duty to defend the insured or to pay its insured's defense costs. See 4-24 New Appleman on Insurance Law sec. 24.04 (2014).

If the insurer elects to associate in the underlying defense, the insurer would bear the costs of that association, including the fees of any additional counsel it chooses to hire. This cost-bearing arrangement is often expressly stated in the right to associate clause and is clearly permitted under New York law. See 4-24 New Appleman on Insurance Law ' 24.04 (2014) (“[T]he excess insurer is responsible for paying the lawyers that it hires ' .”). The insurer's association is cost-free to the insured and has the potential to provide a valuable contribution to the insured's underlying case.

The Insured's Satisfaction of the Right to Associate

The right to associate, when elected, requires the insured to allow the insurer meaningful participation in strategic discussions with the insured and its defense counsel about the underlying claims, and the insured's plan in conducting its defense. In exercising the right to associate, the insurer typically assigns associating defense counsel. While the common interest between an insured and its liability insurer in the resolution of the underlying litigation enables the sharing of privileged information, some insureds prefer that the associating defense counsel represent both the insurer and the insured to fortify the protection of privileged communications and to create a fiduciary relationship between the associating defense counsel and the insured. Though it is not generally necessary for such associating defense counsel to make an appearance as counsel of record for the insured, it is essential that the insured allow privileged information to be provided to the insurer as part of its obligation to cooperate with the insurer's efforts to associate in the defense.

Policies conferring the right to associate require that, in the event that the insurer exercises its right to associate, the insurer and the insured shall “cooperate in all things in the defense of such claims.” Such a cooperation clause makes clear that the insurer has the absolute right to associate with the insured or underlying insurers in the defense and/or settlement of a claim or suit.

The Assistance and Cooperation clause often specifically requires the policyholder to “furnish promptly all information reasonably requested” by the insurer. The duty to provide information is not limited and extends to all reasonable requests. Under this standard, policyholders can be obligated to provide privileged documents and information ' so long as the requests are reasonable. The basis for such production is grounded under the common interest doctrine, which provides that “an insurer aligned in interest with its insured may generally have access to the insured”s privileged communications without breach of privilege.” See Bovis Lend Lease, LMB, Inc., v. Seasons Contracting Corp., No. 00 Civ. 9212, 2002 WL 31729693 (S.D.N.Y. Dec. 5, 2002).

Although the right to associate condition does not delineate what the insured must do to comply with its contractual duty to cooperate, the insurer and its associating defense counsel would be entitled, on a real-time basis, to:

• Receive status reports about the underlying litigation and other developments.
• Receive reports from the insured evaluating its liability and damages.
• Receive reports evaluating settlement options, value and strategies.
• Consult with the insured and its defense counsel regarding settlement value, opportunities and demands.
• Participate in settlement negotiations between the insured and the plaintiff.
• Provide input on the selection and retention of experts and consultants.
• Review draft expert reports.
• Participate in discussions with experts and fact witnesses.
• Review and comment on draft pleadings, motion papers, and briefs.

Potential Remedy for Insured's Breach of Assistance and Cooperation Clause

Where the insured fails to adequately cooperate with the insurer's efforts to associate, a court will find a breach of the right to associate. See, e.g., Home Ins. Corp. v. Corcoran, 65 N.Y.2d 1035, 484 N.E.2d 657, 494 N.Y.S.2d 294 (1985) (adopting the dissenting opinion written by Judge Joseph P. Sullivan of the Appellate Division and holding that the repeated failures of the primary insurer's defense counsel to keep the excess insurer informed of the progress of the case and its failure to offer anything beyond a “token defense” at trial presented a triable claim that the insured and primary insurer had breached the excess insurer's contractual right to associate and their duty to cooperate in the defense of the claim). The Assistance and Cooperation clause does not specify the remedy for a breach of the condition and there is not much case law in the context of an indemnity policy (which does not require the insurer to defend the underlying claims). The majority of case law on this issue is in the context where the insurer has a duty to defend the policyholder in the underlying suit. In the duty to defend context, New York courts hold that “willful obstruction” of an insurer's ability to defend the underlying litigation may result in a disclaimer of coverage where the insurer can demonstrate the policyholder's breach, materiality and resulting prejudice.

There is no case law on point specifying a remedy where the insurer does not have a duty to defend the policyholder, and the policyholder breaches the Assistance and Cooperation clause. An action for damages is not practical because it would do nothing to cure the breach of the Assistance and Cooperation clause. For that reason, the remedy in the context of an indemnity policy should follow the case law in the duty to defend context: An insurer may disclaim coverage if it can demonstrate the policyholder's breach, materiality and resulting prejudice.

If an insured refuses to cooperate with its insurer's right to associate, such non-cooperation could have ramifications beyond the immediate matter at hand. Non-cooperation is likely to have an adverse impact on the risk profile of the insured and will likely influence an underwriter's decision on whether to continue insuring the risk, as well as terms, conditions and pricing on any future policies.

Conclusion

Typical insurance policies contain a condition that permits, but does not obligate, the insurer to associate with the insured or its underlying insurers in the defense of the underlying lawsuit. It is important to understand the mutual benefits and partnership that can be created by permitting the insurer and insured to work together to protect both parties' interests. Collaboration between the insured and the insurer in the defense of the underlying litigation will lead to an optimal outcome for all interested parties.

Paul R. Koepff is a Senior Equity Partner at Clyde & Co., resident in the New Jersey office. He has handled insurance coverage and reinsurance disputes for over 35 years. Koepff is a contributing author to the multi-volume treatise, New Appleman on New York Insurance Law, and the recently published book titled Inside the Minds: The Insurance Business, among several others. Erica J. Kerstein is a Senior Counsel at the firm.

Many excess insurance policies provide insurers with the right, but not the obligation, to associate with the insured and/or its underlying insurers in the defense and control of the underlying lawsuit. This “right to associate” permits the insurer to work with the insured to investigate, defend, or settle a claim. Such partnerships protect the insurer and can prove beneficial to the insured's underlying case and ultimate exposure.

The “right to associate” clause, typically found in the cooperation section of the insurance policy, usually provides in form or substance:

(1) The Company shall not be called upon to assume charge of the settlement or defense of any Claim made or suit brought or proceeding instituted against an Insured, but the Company shall have the right and shall be given the opportunity to associate with the Insured or the Insured's underlying insurers or both in the defense and control of any Claim, suit or proceeding relative to any Occurrence where the Claim or suit involves, or appears reasonably likely to involve, the Company, in which event the Insured and the Company shall cooperate in all things in the defense of such claim.

(2) The Insured shall furnish promptly all information reasonably requested by the Company with respect to any Occurrence, both with respect to any Claim against the Insured and pertaining to coverage under this Policy.

'

(4) Those expenses incurred by the Company on its own behalf in connection with claims representation pursuant to this Condition D shall be at its own expense and shall not be part of Ultimate Net Loss.

In the remainder of this article, we examine how courts recognize and enforce the right to associate, and what remedies are available where the insured fails to cooperate in the insurers' right to associate. Although this article focuses on New York law, there is little case law on this subject, and foreign courts are likely to be in accord with New York precedent.

Purpose of the Right to Associate

The purpose of the right to associate is to afford the excess insurer the opportunity to protect its interests by helping to contain the insured's loss. Insurers view this right as an important tool to mitigate their risk. Through association, insurers can also provide valuable assistance to insureds because insurers have extensive resources, experience, and expertise litigating high-stakes cases. For instance, insurers can provide their insureds with useful insight into mediators, plaintiffs' counsel, experts, and other key players in the underlying litigation whom they are likely to have previously encountered. Insurers, like their insureds, aim to resolve cases below their attachment point, leading to a smaller settlement, which will not reach other insurance layers or the insured. Containing the loss also has a positive impact on an insured's risk profile when procuring future liability insurance. In all of these respects, the insured and the insurer have complete unity of interest in the defense of the underlying lawsuit.

The Second Circuit, recognizing the mutual benefit within the right to associate clause, described the right to associate as follows:

The purpose of the “right to associate” clause is to provide the insurer with an “option to intervene” in the defense and settlement of a claim. ' To “associate” means to “come together as partners ' or allies.” ' This right thus allows the insured and the insurer to come together as partners in investigating, defending or settling a claim. That partnership can be useful to an insured, which may lack the expertise and experience of an insurer, where, as here, the insured bears the duty to defend.

' However, the right to associate is useful only if the insurer can use its experience throughout the process, not just at the end stages. The policies read as such. They provide, in the present tense, for an “opportunity to effectively associate with [the insured] in the investigation, defense and settlement” of a claim.

MBIA, Inc. v. Federal Ins. Co. , 652 F.3d 152, 167'68 (2d Cir. 2011) (internal citations omitted). See also New York Marine & Gen. Ins. Co. v. Lafarge N. America, Inc , 599 F.3d 102, 127 (2d Cir. 2010).

In order to associate, the insurer must be permitted meaningful participation in strategic discussions, as outlined below.

NY Courts Recognize and Enforce the Right to Associate

An excess insurer's right to associate is clearly recognized and enforceable under New York law. For example, in MBIA, Inc. v. Federal Ins. Co. , 652 F.3d 152 (2d Cir. 2011), the insured was the subject of informal investigations by the Securities and Exchange Commission (SEC) and the New York Attorney General, and it was the defendant in two derivative actions brought by its shareholders, all related to a particular financial transaction. The insured entered into a global settlement requiring the appointment of a law firm as an “Independent Consultant” to investigate the insured. The insured sought coverage from its primary and excess insurers for the settlement, including the Independent Consultant's legal fees. Both insurers denied coverage on the grounds that the insured had breached its policy right to “effectively associate with [the insured] in the ' settlement ' of any Claim” because, although they were informed about the settlement discussions, they were not informed that the settlement required appointment of Independent Consultant. Id. at 167. The insurers learned about the appointment after the settlement.

The Second Circuit held that the insured satisfied its obligation under the policy because it: 1) gave notice to the insurer of the claims involved in settlement discussions early on in the process; 2) provided adequate information about the claims; 3) met with the insurers in person to discuss possible settlements; and 4) gave the insurers an opportunity to join with it in resolving the regulators' investigations. Id. at 168. The Second Circuit found that the costs incurred for the Independent Consultant were covered because it “grew out of the natural course of settlement discussions about the same claim in which the insurers could have participated all along.” Id.

In Home Insurance Corp. v. Corcoran , 483 N.Y.S.2d 300, 107 A.D.2d 561 (1st Dep't 1985), rev'd, 65 N.Y.2d 1035, 484 N.E.2d 657, 494 N.Y.S.2d 294 (1985), New York's highest court found factual issues as to whether the excess insurer had been deprived of its right to associate. In that case, an excess insurer relied on the primary insurer to defend a wrongful death action that did not appear to reach the excess policy's attachment point. As the case progressed, the primary insurer went into liquidation and the counsel it had appointed was replaced by defense counsel appointed by a surety. The excess insurer attempted unsuccessfully on several occasions to contact the new counsel. The excess insurer later learned that the matter had gone to trial and resulted in a judgment well into the excess layer, and that the time to appeal had expired. The excess insurer also discovered that no serious defense effort had been made at trial.

The trial court and a majority of the intermediate appellate court held that the excess insurer had failed to disclaim in a timely manner and, therefore, had to pay the judgment. One judge dissented, holding that there were factual issues as to the timeliness of the delay and that “the failure of [the primary insurer's] attorney to respond to any of plaintiff's inquiries and to make even a token effort at trial raises serious [factual] questions” as to whether the excess insurer had been deprived of its right to associate and whether the insured and its primary insurers had adequately cooperated with the excess insurer. 483 N.Y.S.2d at 303, 107 A.D.2d at 564. New York's highest court agreed and reversed, adopting the dissenting opinion, holding that the excess insurer was deprived of its right to associate. 65 N.Y.2d at 1038, 484 N.E.2d at 658, 494 N.Y.S.2d at 295.

Indeed, the right to associate is so significant that, even absent an express contractual right to associate, New York courts have held that an excess insurer has the right to participate in the defense of an underlying claim. See Preferred Const., Inc. v. Illinois Nat. Ins. Co. , 494 F. App'x 162, 164 (2d Cir. 2012); American Home Assur. Co. v. Employers Mut. of Warsaw , 406 N.Y.S.2d 826, 827, 64 A.D.2d 563, 563 (1st Dep't 1978); Mandell Corp. v. Ins. Co. of N. America , 479 N.Y.S.2d 452, 454, 125 Misc. 2d 390, 392 (Sup. Ct. N.Y. Co. 1984). This indicates that the right to associate is of utmost importance, and will be enforced to protect an excess insurer.

The Insurer Has a Right, But Not an Obligation, to Associate

Insurers have a right to associate, but are not required to do so. If the insurer does not elect to exercise its right to associate, it will not be called upon or obligated to associate against its will. As S. Seaman and C. Kittredge explain in Excess Liability Insurance: Law and Litigation, 32 TORT & INS. L.J. 653, 663 (1997):

Although excess insurance contracts ordinarily do not contain a duty to defend, most excess insurance contracts provide that the excess insurer has the 'option' to participate or the right to 'associate' in the defense of lawsuits pending against the insured. These provisions are intended to allow the excess insurer, if it chooses, to become involved in actively defending lawsuits that could involve its layer of coverage. The option to defend, for example, may be exercised by insurers in situations in which there is significant exposure in excess of the underlying limits and the insured or the underlying insurer is not mounting a strong defense.

By exercising the right to associate, the insurer does not thereby assume the duty to defend the insured or to pay its insured's defense costs. See 4-24 New Appleman on Insurance Law sec. 24.04 (2014).

If the insurer elects to associate in the underlying defense, the insurer would bear the costs of that association, including the fees of any additional counsel it chooses to hire. This cost-bearing arrangement is often expressly stated in the right to associate clause and is clearly permitted under New York law. See 4-24 New Appleman on Insurance Law ' 24.04 (2014) (“[T]he excess insurer is responsible for paying the lawyers that it hires ' .”). The insurer's association is cost-free to the insured and has the potential to provide a valuable contribution to the insured's underlying case.

The Insured's Satisfaction of the Right to Associate

The right to associate, when elected, requires the insured to allow the insurer meaningful participation in strategic discussions with the insured and its defense counsel about the underlying claims, and the insured's plan in conducting its defense. In exercising the right to associate, the insurer typically assigns associating defense counsel. While the common interest between an insured and its liability insurer in the resolution of the underlying litigation enables the sharing of privileged information, some insureds prefer that the associating defense counsel represent both the insurer and the insured to fortify the protection of privileged communications and to create a fiduciary relationship between the associating defense counsel and the insured. Though it is not generally necessary for such associating defense counsel to make an appearance as counsel of record for the insured, it is essential that the insured allow privileged information to be provided to the insurer as part of its obligation to cooperate with the insurer's efforts to associate in the defense.

Policies conferring the right to associate require that, in the event that the insurer exercises its right to associate, the insurer and the insured shall “cooperate in all things in the defense of such claims.” Such a cooperation clause makes clear that the insurer has the absolute right to associate with the insured or underlying insurers in the defense and/or settlement of a claim or suit.

The Assistance and Cooperation clause often specifically requires the policyholder to “furnish promptly all information reasonably requested” by the insurer. The duty to provide information is not limited and extends to all reasonable requests. Under this standard, policyholders can be obligated to provide privileged documents and information ' so long as the requests are reasonable. The basis for such production is grounded under the common interest doctrine, which provides that “an insurer aligned in interest with its insured may generally have access to the insured”s privileged communications without breach of privilege.” See Bovis Lend Lease, LMB, Inc., v. Seasons Contracting Corp., No. 00 Civ. 9212, 2002 WL 31729693 (S.D.N.Y. Dec. 5, 2002).

Although the right to associate condition does not delineate what the insured must do to comply with its contractual duty to cooperate, the insurer and its associating defense counsel would be entitled, on a real-time basis, to:

• Receive status reports about the underlying litigation and other developments.
• Receive reports from the insured evaluating its liability and damages.
• Receive reports evaluating settlement options, value and strategies.
• Consult with the insured and its defense counsel regarding settlement value, opportunities and demands.
• Participate in settlement negotiations between the insured and the plaintiff.
• Provide input on the selection and retention of experts and consultants.
• Review draft expert reports.
• Participate in discussions with experts and fact witnesses.
• Review and comment on draft pleadings, motion papers, and briefs.

Potential Remedy for Insured's Breach of Assistance and Cooperation Clause

Where the insured fails to adequately cooperate with the insurer's efforts to associate, a court will find a breach of the right to associate. See, e.g., Home Ins. Corp. v. Corcoran , 65 N.Y.2d 1035, 484 N.E.2d 657, 494 N.Y.S.2d 294 (1985) (adopting the dissenting opinion written by Judge Joseph P. Sullivan of the Appellate Division and holding that the repeated failures of the primary insurer's defense counsel to keep the excess insurer informed of the progress of the case and its failure to offer anything beyond a “token defense” at trial presented a triable claim that the insured and primary insurer had breached the excess insurer's contractual right to associate and their duty to cooperate in the defense of the claim). The Assistance and Cooperation clause does not specify the remedy for a breach of the condition and there is not much case law in the context of an indemnity policy (which does not require the insurer to defend the underlying claims). The majority of case law on this issue is in the context where the insurer has a duty to defend the policyholder in the underlying suit. In the duty to defend context, New York courts hold that “willful obstruction” of an insurer's ability to defend the underlying litigation may result in a disclaimer of coverage where the insurer can demonstrate the policyholder's breach, materiality and resulting prejudice.

There is no case law on point specifying a remedy where the insurer does not have a duty to defend the policyholder, and the policyholder breaches the Assistance and Cooperation clause. An action for damages is not practical because it would do nothing to cure the breach of the Assistance and Cooperation clause. For that reason, the remedy in the context of an indemnity policy should follow the case law in the duty to defend context: An insurer may disclaim coverage if it can demonstrate the policyholder's breach, materiality and resulting prejudice.

If an insured refuses to cooperate with its insurer's right to associate, such non-cooperation could have ramifications beyond the immediate matter at hand. Non-cooperation is likely to have an adverse impact on the risk profile of the insured and will likely influence an underwriter's decision on whether to continue insuring the risk, as well as terms, conditions and pricing on any future policies.

Conclusion

Typical insurance policies contain a condition that permits, but does not obligate, the insurer to associate with the insured or its underlying insurers in the defense of the underlying lawsuit. It is important to understand the mutual benefits and partnership that can be created by permitting the insurer and insured to work together to protect both parties' interests. Collaboration between the insured and the insurer in the defense of the underlying litigation will lead to an optimal outcome for all interested parties.

Paul R. Koepff is a Senior Equity Partner at Clyde & Co., resident in the New Jersey office. He has handled insurance coverage and reinsurance disputes for over 35 years. Koepff is a contributing author to the multi-volume treatise, New Appleman on New York Insurance Law, and the recently published book titled Inside the Minds: The Insurance Business, among several others. Erica J. Kerstein is a Senior Counsel at the firm.