OTHERWISE YOU MAY PAY FOR IT.
Two trial judges and an appellate court in Massachusetts summarized a risk of extracontractual, "bad faith" exposure embedded in many cases across the United States whenever a liability carrier reserves its rights to deny all coverage, let alone when the liability carrier denies all coverage:
Quoting from another decision of the Superior Court, the judge sensibly observed that “an insurer cannot reserve its rights and thereby surrender control of the defense, and still reasonably expect that it will pay the same amount of legal fees that it would have paid had it accepted coverage and retained control of the defense. Through its reservation of rights, the insurer's duty to defend is transformed into a duty to reimburse its insured for reasonable attorney's fees incurred by the insured's chosen counsel.”
Rass Corp. v. Travelers Cos., No. 15-P-358, 2016 WL 6636281, at *9 n.16 (Mass. App. Ct. November 10, 2016). This statement of the risks involved is direct and to the point, but it states the prevailing law very well depending on the nature of the coverage defense which the carrier reserves. See generally 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith § 13.13, "Attorney's fees--Settlement or defense of third party's claim" (3d ed. Thomson Reuters West; 2016 Supplements).
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