Professional indemnity policies commonly provide that the insurer will pay the legal costs of the defence.
Conflicts between the insurer and insured can put a solicitor who represents both in an invidious position, particularly where the solicitor has received confidential information from one party, and may result in multiplicity of legal representation.
In practice however, there is an enormous reluctance to invoke such clauses, partly because of the expense of instructing King's Counsel to advise, and partly because of the insurer's need to maintain good relations with the insured.
Some general liability policies contain a converse version the traditional KC clause; viz., that the insurer does not need to pay out on a claim against the insured unless a King's Counsel advises that there is no reasonable prospect of successfully defending the claim.
KC clauses were considered judicially by Lord Devlin (in relation to another issue) in West Wake Price & Co v Ching [1956] 3 All ER 821.