Defense counsel's liability to insurer for excess liability

I.

INTRODUCTION

In the realm of insurance litigation, insurers are subject to a number of duties to the insured to avoid claims for bad faith. A cause of action for bad faith is derived from the covenant of good faith and fair dealing which is implied in every contract. When an insurance company acts unreasonably in delaying payment or refusing to settle a valid claim, it is subject to tort liability under the rules of bad faith.' If there is tortious conduct, the insurance company may be held liable for compensatory damages, including damages for emotional distress,2 and when the insurer acts with malice, punitive damages. With the high damage awards at stake,3 insurance companies must be cautious when denying claims.

However, when dealing with an insurance claim, the insurer is not the only party making the decisions. The defense counsel, whom the insurer hires, is the person who takes control of the litigation. What the defense counsel does may impact the insurer, resulting in additional liability for the insurer. Furthermore, mistakes by the defense counsel may open that attorney to liability to the insured or an excess insurer. Therefore the defense counsel must understand his or her duties to the respective parties. This article explores the duties defense counsel owes to the insurer and insured. It first provides a brief history of bad faith. Then, it focuses on the instances when an insurer may be held liable for defense counsel's malpractice. Third, it looks at the advice defense counsel can provide to the insurer to avoid bad faith liability for the insurer. The article next explores the duties defense counsel owes to the insured, insurer, and excess insurer, and when that attorney may be held liable for malpractice. Finally, this article explores the direct exposure of defense counsel for bad faith.

II.

QUICK HISTORY OF BAD FAITH

Bad faith stems from the covenant of good faith and fair dealing which is implied in every contract. When an insurer breaches this covenant, the insurer has committed "bad faith." Bad faith arises in the insurance context due to the adhesive nature of insurance contracts4 - adhesion that is inherent in the disparity of bargaining power between the insurer and insured. To equalize this disparity, a covenant of good faith and fair dealing is implied in all insurance contracts. Under this covenant, the insurer has an affirmative duty to act reasonably toward the insured. A breach of the implied covenant of good faith and fair dealing will result in both tort and contract liability.5

III.

INSURER LIABILITY FOR DEFENSE COUNSEL MALPRACTICE

A. No Vicarious Liability Allowed

California has taken the approach that an insurer is not liable for the mistakes of its counsel. In Merritt v. Reserve,6 the California court of appeals held that the insurer was not liable for defense counsel's negligence in defending the suit. Instead, the proper remedy was a suit against the defense counsel for malpractice. Similarly, in State Farm Mutual Automobile Insurance Co. v. Traver, the Texas Supreme Court recently held that an insurer is not vicariously liable for the malpractice of an independent attorney it selects to defend an insured.7

B. Vicarious Liability Allowed

Several cases have allowed an action to proceed against an insurer for the negligence of defense counsel.8 This trend began in Smoot v. State Farm Mutual Automobile Insurance Co.9 There the insurer was sued for bad faith and negligent conduct by the defense counsel, intended to benefit the insurer. When the insured sued the insurer for the excess of the judgment over the policy limits, the insurer defended on the theory that it was not liable for mistakes made by the defense counsel. The court rejected this theory and held that the attorney was an agent of the insurer; therefore the insurer was liable for the attorney's acts.

Similarly, in Hartford Accident & Indemnity Co. v. Foster,'o the Mississippi Supreme Court held that an insurance carrier is liable for any damage caused by the defense counsel's breach of fiduciary duty to the insured when there is a conflict of interest between the insured and the insurer.

Florida also allows an insurer to be held liable for bad faith arising from the conduct of defense counsel. In Torres v. Nelson," an insured sued defense counsel for legal malpractice after the original plaintiff sued the insurer for bad faith and lost. The appellate court found that the subsequent malpractice action was not barred. Since the standard for legal malpractice and bad faith are different in Florida, the subsequent malpractice action was not barred by the prior decision. In making such a finding, the appellate court implicitly held that the insurer would have been liable for the attorney's actions had they amounted to bad faith.

IV.

INSURER'S RELIANCE ON THE ADVICE OF COUNSEL

While the defense counsel is an agent of the insurer, causing the insurer to be held liable for the attorney's acts, an insurer may avoid liability in some jurisdictions through the "advice of counsel" defense. The advice of counsel defense evolved as a way of proving that the insurer acted reasonably in denying a claim. If an insurer relies on competent counsel's advice in denying a claim, such reliance will tend to show that the insurer is acting in good faith. However, reliance on the advice of counsel alone is insufficient to completely absolve an insurer from liability; it is simply a factor that may be taken into account in determining whether the insurer acted in bad faith.'2 In order to prove the insurer acted in reliance on the advice of counsel, the insurer generally must prove several elements. These include demonstrating: that the insurer acted in good faith reliance on the advice; that the insurer is not so knowledgeable of the legal standard as to know that counsel's advice was erroneous; that the insurer made a full disclosure of all the relevant facts to the attorney to warrant the attorney's informed judgment; and the insurance company's willingness to reconsider the claim after it is determined that the advice was erroneous. If these elements are met, the insurer likely will demonstrate that its conduct was reasonable.

An insurer must carefully decide whether or not to assert reasonable reliance as a defense in a bad faith action, since the insurer waives its attorneyclient privilege by asserting the advice of counsel defense. This is a severe consequence, requiring an evaluation of whether it would be in the insurance company's best interests to assert this defense.

V.

ATTORNEY'S DUTIES

An attorney who defends a bad faith action has a number of issues to consider. First and foremost, the defense counsel must remember that the primary duty is owed to the insured. This is true even though the defense counsel was retained, and paid by, the insurer. If there are divergent interests between the insured and the insurer, the attorney is placed in a precarious position.

A. Attorney's Duties To The Insurer

1. Authority Supporting Duty Between Defense Counsel and Insurer In Home Indemnity Co. v. Lane Powell Moss and Miller,'3 the court of appeals for the Ninth Circuit held that under Alaska law there is an attorneyclient relationship between the insurer and defense counsel when there is no conflict of interest between the insured and the insurer. Since an attorneyclient relationship exists between the two, the insurer can bring a legal malpractice claim against its defense counsel. In Home Indemnity, the insurer offered a settlement for what it determined were the policy limits, less medical bills and attorney's fees. The plaintiff refused this offer and made a counter offer for what he believed remained of the policy limits. The insurer refused this settlement believing that it could not be sued for bad faith because defense counsel had advised the insurer that it had already offered policy limits. Thereafter, the plaintiff was awarded a judgment on his claim. Later, the plaintiff purchased an assignment of rights from the insured and sued the insurer for bad faith. The insurer settled for $7 million, but then sued the defense counsel for malpractice, breach of an agent's duty, and contribution. The appellate court upheld the malpractice action, reasoning that there was an attorney-client relationship between the insurer and the defense counsel.

Under California law an insurer likewise may bring an action directly against defense counsel. The California court of appeals held, in Unigard Insurance Group v. O'Flaherty & Belgum, 4 that a defense counsel owes a duty of care to the insurer which supports an independent right to bring a legal malpractice action against such counsel. This case involved a failure by the defense counsel to raise an affirmative defense in a personal injury action. As a result, the insurer paid the $500,000 policy limit in order to avoid a larger jury verdict. The court allowed the insurer to sue the defense counsel even though the attorney was representing the insured in the action. The court reasoned that it was the insurer who hired the attorney; therefore the insurer might bring suit against counsel as long as there was no conflict of interest between the insured and the insurer. This case places California in the peculiar position of not recognizing an equitable subrogation action by an insurer against the defense counsel, but allowing the insurer to sue such counsel directly on a theory of legal malpractice.

Similarly, in Assurance Co. of America v. Haven,ls a California appellate court held that an insurer may bring suit against Cumis'6 counsel if that counsel breaches a statutory duty owed to the insurer. In Haven, the injured party (Greg Hill) sued Bremco Construction for negligence and peculiar risk. Bremco's insurer, Assurance Company of America ("ACA"), hired Ronald Haven to defend Bremco. Haven then assumed the role of Cumis counsel in the case due to a conflict of interest between Bremco and ACA. ACA sued Haven for his failure to assert certain affirmative defenses, which forced ACA to tender a one million dollar settlement offer. Because Haven failed to timely assert affirmative defenses regarding the statute of limitations and peculiar risk, ACA was forced to accept Hill's settlement offer without a judicial determination of Bremco's affirmative defenses. ACA claimed that it had lost the chance to win the case. The court determined that the insurer could sue Cumis counsel in this case for breach of a statutory duty, but not for failing to "investigate, prepare, assert, establish, or perform similar functions" characteristic of how counsel defend a suit."7 Since Cumis counsel, by definition, is only necessary when there is a conflict of interest between the insured and the insurer, the court reasoned that the insurer may only sue for professional negligence when the Cumis counsel owes a statutory duty to the insurer.18 This limitation on the duties owed to the insurer exists not only because the insurer's interests are adverse to those of the insured, but also to avoid placing counsel in the "oftentimes subtle ethical dilemma of worrying about being sued and having this interfere with representation of the insured."19

As these cases indicate, defense counsel can be held liable directly to an insurer for legal malpractice, even though counsel owes a primary duty to the insured. Therefore, in jurisdictions adopting this theory, defense counsel owes special duties to both the insured and the insurer and must be prepared to vigorously protect both.

2. Authority Indicating No Duty Between Defense Counsel and Insurer

Not all jurisdictions agree that there is an attorney-client relationship between the defense counsel and the insurer. In Atlanta International Insurance Co. v. Bell,zo the appellate court stated, "[n]o attorney-client relationship exists between an insurance company and the attorney representing the insurance company's insured. Rather, an attorney's sole loyalty and duty is owed to the client alone, the client being the insured, not the insurance company."21 The Michigan Supreme Court agreed with the appellate court, finding that no attorney-client relationship existed between the insurer and defense counsel. However, the court allowed the insurer to proceed with its claim of malpractice on the theory of equitable subrogation.22 The court reasoned that extending the attorney-client relationship to the insurer would impinge on the attorney's duty of loyalty to the insured by creating strong conflicts of interest. Equitable subrogation, on the other hand, is allowable when the interests of the insurer and the insured are similar. In this case, the defense counsel failed to raise comparative negligence as a defense, resulting in a verdict against the insured which the insurer was forced to pay.

California courts are split on the issue of whether an insurer may sue the defense counsel for malpractice.23 In Firemans's Fund Insurance Co. v. McDonald, Hecht & Solberg,24 a California appellate court held that the primary insurer could not sue the defense counsel for legal malpractice. The court began by stating that legal malpractice claims are personal and cannot be assigned. Although equitable subrogation technically differs from assignment, the court reasoned that non-assignable claims were not subject to subrogation. The court then noted that the policy against assigning malpractice claims applied equally to equitable subrogation. Allowing the insurer to sue the defense counsel for malpractice would: "(1) encourage unjustified lawsuits, (2) generate increased malpractice lawsuits, burdening the profession, the court system and . . . the public, and (3) promote champerty."25 The court refused to allow the use of equitable subrogation to circumvent the doctrine of non-assignability of claims. Instead, the California court determined to "protect the integrity of the uniquely personal and confidential attorney-client relationship." 26

Although the facts of McDonald, Hecht & Solberg involved attorney representation at the pre-trial stage, the conclusions are still valid in the "defense of the insured" context. In McDonald, the attorneys represented the insured housing developers on matters of disclosure to prospective buyers. The buyers later brought suit against the insured for misrepresentation of facts. Approximately one year after the claim was filed, the law firm ceased representing the insured. The insurer later settled the action without the law firm's assistance and brought suit against the law firm that had advised the insured about which disclosures to make.

B. Duty Between Defense Counsel and Excess Insurer

1. Authority Supporting Duty

A few jurisdictions have gone a step beyond allowing a primary insurer to sue for malpractice. These have allowed an excess insurer to sue the defense counsel for malpractice under the theory of equitable subrogation. In American Centennial Insurance Co. v. Canal Insurance Co.,27 the Texas Supreme Court upheld an excess insurer's right to sue the defense counsel under the theory of equitable subrogation. However, this right was limited to those claims available to the insured as against the attorney who had mishandled the insurance claim. Since the excess insurer's rights are thus limited to enforcing duties the defense counsel already owes the insured, permitting the excess insurer to bring suit would create no additional liability. Additionally, the court noted that allowing the action under the theory of equitable subrogation would not "interfere with the relationship between the attorney and the client nor result in additional conflicts of interest." 28

2. Authority Indicating No Duty

Jurisdictions are split over the issue of whether an excess insurer may sue the defense counsel on the theory of equitable subrogation. Refusing to extend the law in such fashion, the Louisiana federal district court, applying Louisiana law, stated:

"The legal relationship of attorney and client is purely contractual and results only from the mutual agreement and understanding of the parties concerned.... The duty to defend or represent imposes upon a member of the legal profession grave responsibilities which he may accept or decline at his election and for whatever reasons he chooses. An obligation of such gravity and magnitude may not be involuntarily thrust upon an attorney-at-law." 29

Connecticut also finds no duty between the excess insurer and the attorney. The court in Continental Casualty Co. v. Pullman, Comley, Bradley & Reeves30 found that defense counsel owes no duty to the excess insurer when defending the insured. This case involved a medical malpractice action against the Griffin Hospital for injuries to a newborn. Aetna Casualty & Surety Company was the insurer for the hospital, and Continental Casualty Company was the excess insurer. Aetna hired the law firm of Pullman, Comley, Bradley & Reeves to defend the hospital, and a trial resulted in a ten-million dollar judgment against the insured. Thereafter, Continental sued Aetna for bad faith and sued Pullman for malpractice. Applying Connecticut law, the district court decided that there was no duty between the excess carrier and defense counsel. Since the defense counsel owes a duty of "`entire devotion to the interest of the client,"'31 it would not be wise to create an additional duty between the attorney and the excess insurer, a non-client. To support this conclusion the court explained that creating a duty between the excess carrier and the defense counsel would open the door for potential conflicts of interests.32 For example, the insured's interest and the excess carrier's interests might conflict. The insured might wish to continue litigation because the insured thinks the claim is unfounded and a settlement will damage his or her reputation and result in higher insurance premiums. The excess carrier, on the other hand, might want to settle the claim within policy limits due to the high risk it bears if the case goes to trial. These conflicts would trample the special duty defense counsel owes to the client and would position defense counsel among irreconcilable duties. Continental went on to argue, however, that it was equitably subrogated to the insured's right to sue for legal malpractice. The court again disregarded this theory, citing a Michigan appellate court determination that the interests of the insured and the excess insurer are not identical and often conflict. Furthermore, the court observed that allowing an excess carrier to sue the defense counsel would create an incentive for excess carriers to sue defense counsel whenever they were unhappy with the need to pay within policy limits. The court was concerned that such an action would strain the attorney-client relationship between the insured and the defense counsel, and it was unwilling to place that relationship in jeopardy.

C. Other Duties

Attorneys have an additional duty to notify both the insured and the insurer of settlement offers. Even though the insurer hires the attorney and directs the defense, the insured still has the right to know of any settlement offer because the insured is the client.33 This knowledge allows the insured to take whatever action is necessary to protect his or her own interests. In Miller v. Byrne,34 the insurer authorized a settlement of $95,000 but refused to pay the policy limits of $100,000. The plaintiff had made a settlement offer for the policy limits which the attorney rejected without direction from the insured or notification to the insured. The insured later settled with the plaintiff for $1.2 million and assigned 98 percent of any claims the insured had against the attorney and the insurer. The court held that the attorney breached a fiduciary duty by not communicating the settlement offer to the insured. Although the defense counsel claimed that the settlement offer from the plaintiff was not a bona fide offer but an attempt to "set up" the attorney and the insurer for a bad faith claim, the court nevertheless found that there remained a duty to inform the insured of the offer. Thus, it does not matter whether the settlement offer is legitimate or not. Since the attorney represents the insured, the attorney must advise the client of any settlement offer so that the insured may protect his or her interests. This case bears witness to the danger inherent in forgetting that the defense counsel still owes the primary duty to the insured.

VI.

ATTORNEY LIABILITY FOR BAD FAITH

There are numerous policy considerations that weigh against allowing a cause of action for bad faith against defense counsel. First and foremost, the attorney is not a party to the insurance contract. Since the tort of bad faith is predicated on the covenant of good faith and fair dealing which is implied in the insurance contract, it would be illogical to hold counsel liable on a contract to which counsel is not a party. Additionally, in many jurisdictions, the insurer already has a right to sue the defense counsel for malpractice or to sue on the theory of equitable subrogation. Therefore, no need exists to create an additional cause of action against the attorney.

A. Authority Indicating No Liability to Insured For Bad Faith

As indicated above, most jurisdictions disallow a cause of action by the insurer against the attorney under the theory of bad faith because the attorney is not a party to the contract of insurance, and the cause of action for bad faith arises out of the insurance contract. Furthermore, the attorney's conduct cannot supply proximate cause, at least for failure to settle the claim. Since the insurer controls the litigation, the insurer decides whether to follow counsel's advice. Because an attorney may not force an insurer to settle, the attorney is not the proximate cause of the damage.

There are additional reasons to exclude the defense counsel from an action for bad faith. The court in Lysick v. Walcom35 enumerated the policy reasons for precluding an insured from suing defense counsel for bad faith. Lysick involved an automobile accident where the defense counsel was authorized to settle for the policy limits of $10,000. In an effort to save money for the insurer, the defense counsel only offered $9,500 to settle the claim. The plaintiffs refused and the case went to trial, resulting in judgment for the plaintiffs in the amount of $225,000. Subsequently, the plaintiffs received an assignment of rights from the insured and sued the defense counsel for bad faith. The jury found for the defendant. The appellate court in turn rejected the plaintiffs' contention that the attorney has the same obligation to the insured of good faith and fair dealing as does the insurance company. Instead, the attorney's duty is based on a general standard of professional care.

B. Authority Indicating Liability to Insured For Bad Faith

There is at least one case holding that an attorney may be liable for part of a bad-faith judgment. In Mid-America Bank & Trust Co. v. Commercial Union Insurance Co.,36 the insured's truck struck a thirteen-year-old boy causing him brain damage. Although defense counsel was authorized to settle for the policy limits of $50,000, he only offered the plaintiff $30,000 in a "take it or leave it" offer without notifying the insured. The plaintiff withdrew all settlement offers and the case was tried, resulting in a verdict exceeding $900,000 for the plaintiff. The insured then assigned his claims to the plaintiff who sued the insurer for bad faith. The court allowed the insurer to file a third-party complaint against the defense counsel seeking indemnity and contribution. Although the jury found the insurer liable and assessed twenty-five percent fault against the defense counsel, the appellate court remanded the third-party claim for retrial. The issue there was apportionment of fault because the trial court had overruled an objection to certain expert testimony. Although the apportionment issue was thus vacated, the appellate court still maintained attorney liability since it found error only in allowing expert testimony.

Similarly, the court in Davis v. Nationwide Mutual Fire Insurance Co.37 held that an insured could state a cause of action against the attorney and the insurer for bad faith. This case likewise involved an automobile accident. The insurer who covered the automobile, however, differed from the insurer who covered the driver. The same attorney represented both companies. Allegations that the attorney represented both insurance companies and that he misrepresented the coverage to the parties resulted in no offer of settlement by the plaintiffs. These allegations withstood a motion to dismiss.

These cases indicate some movement toward creating a cause of action against the defense counsel for bad faith. However, public policy should counter this trend. The attorney is not a party to the insurance contract, and the attorney is otherwise liable for professional misconduct.

VII.

CONCLUSION

Thirty years ago, it was rare for defense counsel to be sued by anyone either the insured, the insurer, or the injured plaintiff. The plaintiff could always sue the insurer for bad faith, as could the insured; there was no need to sue defense counsel. Moreover, the insured could assign rights to the plaintiff, and the plaintiff would give the insured a covenant not to execute. Therefore, the insured had no reason to pursue defense counsel. The insurance company simply "took its lumps" and did not pursue defense counsel, even though mistakes may have been made. This arrangement largely reflected the close and long-standing relationship between insurer and defense counsel.

As society and relationships have changed, so has defense counsel's exposure. The underlying plaintiff now seeks an additional person or entity to sue beyond the insurer. (And lawyers have never been very sympathetic defendants). In an increasingly litigious society, the insured may view the attorney as a potential source for recovery of emotional distress or other damages. The most significant change is that the insurer has begun to contemplate recouping its losses by suing defense counsel for mistakes - mistakes that were largely forgiven in the past or that otherwise simply occasioned a loss of business for counsel. This is no longer the case.

Defense counsel can protect against such exposure by adhering to the simple but fundamental rule which has endured for decades: the attorney's primary allegiance goes to the insured, even though the attorney has two clients. Sophisticated insurers appreciate the implications of these dual obligations. If the attorney adheres to the fundamental rule, he or she will alleviate potential exposure.

1Different jurisdictions use slightly different standards for determining bad faith. California, the leader in bad faith litigation, uses an unreasonableness or bad faith standard, and most states follow this standard. These include: Alabama, Arizona, California, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Vermont, Virginia, and Wisconsin.

Some jurisdictions use a negligence standard requiring that the insurer use due care in assessing and responding to settlement claims. Such states include: Colorado, Georgia, Indiana, Kansas, Massachusetts, New Hampshire, Oregon, South Carolina, and Texas.

2Insurers may be liable for emotional distress in bad faith cases because one of the primary reasons for purchasing insurance is to avoid the emotional and financial distress that accompanies personal disaster. Given this motivation for obtaining insurance, it makes sense that an insured who is denied coverage in bad faith may recover for emotional distress.

3In bad faith litigation, an insurer often will be liable for the entire judgment if it refuses to settle, even if the judgment is in excess of the policy limits. Thus, the insurer often assumes the risk of not settling a valid claim.

4Michael Cohen, Note, No Faith in Bad Faith, 41 HASTINGs L.J. 201, 202-03 (1989).

5Comunale v. Traders & Gen. Ins. Co., 328 P.2d 198, 203 (Cal. 1958). 6110 Cal. Rptr. 511 (Ct. App. 1973). 71998 Tex. LEXIS 136 (Tex. 1998).

8See, e.g., Pacific Employers Ins. Co. v. P.P. Hoidale Co., 789 F.Supp. 1117 (D. Kan. 1992); Boyd Bros. Transp. Co. v. Fireman's Fund Ins. Co., 729 F.2d 1407 (1I th Cir. 1984); Stumpf v. Continental Cas. Co., 794 P.2d 1228 (Or. Ct. App. 1990); Continental Ins. Co. v. Bayless & Roberts, Inc., 608 P.2d 281 (Alaska 1980). 9299 F.2d 525 (52 Cir. 1962). 'o528 So.2d 255 (Miss. 1988).

"448 So. 2d 1058 (Fla. Dist. Ct. App. 1984).

12See Merritt, 110 Cal. Rptr. at 523 (factors for determining whether an insurer acted in bad faith include the strength of the injured's claim, attempts by the insurer to settle, failure of the insured to properly investigate the claim, the advice of counsel, failure of the insurer to inform the insured of a compromise offer, the amount of financial risk to the insured and insurer in the event the claim does not settle, the fault of the insured in inducing the insurer's rejection of the compromise offer by misleading it as to the facts, and any other factors tending to establish or negate bad faith).

'343 F.3d 1322 (9th Cir. 1995). 14 48 Cal. Rptr.2d 565 (Ct. App. 1995).

'538 Cal. Rptr.2d 25 (Ct. App. 1995).

'6Cumis counsel receives its name from the California case of San Diego Federal Credit Union v. Cumis Ins. Society, Inc., 208 Cal. Rptr. 494 (Ct. App. 1984). The purpose of Cumis counsel is to protect the insured when there is a conflict of interest between the insured and the insurer. An insurer has a duty to defend the insured when there is a potential for liability under the insurance policy. A conflict of interest between the insured and the insurer may arise where the insured is trying to obtain coverage under the policy but the insurer is trying to avoid it. Consider an insured who is being sued by a plaintiff for a physical injury. It is in the insured's best interests to show that the plaintiff was injured by some negligent conduct of the insured. However, it will be in the insurer's best interest to show that the plaintiff was injured by some intentional conduct of the insured, thus relieving the insurer of any liability under the insurance policy. In a case such as this, the interests of the insured and the insurer diverge. Therefore, under Cumis, the insurer is required to provide the insured with independent counsel at the insurer's expense. "Haven, 38 Cal. Rptr.2d at 28.

18California codified the right to Cumis counsel in the California Civil Code 2860. This section provides that Cumis counsel must "disclose to the insurer all information concerning the action except privileged materials relevant to coverage disputes," must timely "inform and consult with the insurer on all matters relating to the action," and must "cooperate fully in the exchange of information that is consistent with . . . counsel's ethical and legal obligation to the insured." CAL. Civ. CODE 2860 (d)-(f) (West 1993). 19Haven, 38 Cal. Rptr.2d at 31.

20448 N.W.2d 804 (Mich. Ct. App. 1989), rev'd, 475 N.W.2d 294 (Mich.1991). 2'Id. at 805 (citations omitted).

22Atlanta Nat'l Ins. Co. v. Bell, 475 N.W.2d at 299.

23See supra note 14 and accompanying text. 24 36 Cal. Rptr.2d 424 (Ct. App. 1994). 2Id. at 427. 261d. at 430.

2'843 S.W.2d 480 (Tex. 1992).

28 Id. at 484.

29Acceptance Ins. Co. v. Grossel-Rossi, U.S. Dist. LEXIS 10820 (D. La. 1989) (quoting Delta Equip. & Constr. Co. v. Royal Indem. Co., 186 So. 2d 454, 458 (La. Ct. App. 1966)). 30709 F. Supp. 44 (D. Conn. 1989).

3"Id. at 48 (quoting Krawczyk v. Stingle, 543 A.2d 732, 736 (Conn. 1988)).

32The court did note that in this case the attorney was simply charged with professional negligence, not with any ethical improprieties. This suggests that the court might have found differently if there were ethical issues at stake as well. Id. at 49. 33Miller v. Byrne, 916 P.2d 566, 574 (Colo. Ct. App. 1995). 34Id.

3565 Cal. Rptr. 406 (Ct. App. 1968).

3587 N.E.2d 81 (Ill. App. Ct. 1992). 37370 So. 2d 1162 (Fla. 1979).

MICHEAL J. BRADY*

*The author is grateful to Shawna Heinmiller for her assistance in preparing this material.

Michael J. Brady is a member of the Redwood City, California firm of Ropers, Majeski, Kohn & Bentley. He received his undergraduate degree from Stanford and his J.D. from the Harvard Law School. Mr. Brady supervises his firm's appellate and insurance coverage departments. A frequent author and lecturer, he is a member of the Northern California Association of Defense Counsel, the International Association of Defense Counsel, Defense Research Institute, and the Federation of Insurance & Corporate Counsel, where he serves as Vice-Chair of the Insurance Coverage Section and a faculty member of its Litigation Management College.

Copyright Federation of Insurance & Corporate Counsel Fall 1998
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