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THE ADJUSTER - San Diego Insurance Adjusters
Association
August, 2004
How many of you read all 53 pages of the
Montrose decision? I did, though I had to painstakingly read it a few
times to understand the subtleties.
We seem to be blessed by jurists who
want to ensure precision in their written opinions and seemingly do so
by writing lengthy, and oftentimes boring, treatises. As a practitioner
of insurance law, I need to read the decisions handed down to remain
current with the ever-changing state of insurance law.
Since I read all of the cases, I can
make your life just a little easier by using this periodical as a forum
to share with you an abstract of the appellate and Supreme Court
decisions which affect the insurance industry. With this inaugural
column, we’ll look at a decision discussing the disqualification of an
attorney in a “bad faith” lawsuit.
Recently, an attorney and his law firm
were disqualified from representing an insured of Fireman’s Fund
Insurance Company (FFIC) in a lawsuit against FFIC alleging “bad faith”
and breach of insurance contract because the attorney had previously
represented FFIC. While you may conclude that a previous relationship
with the defendant insurance company would automatically result in
disqualification, a “substantial relationship” must exist between the
subject of the former representation of the defendant and the subject of
the current plaintiff’s litigation.
In granting the motion to disqualify,
the Court of Appeal in the case styled Farris V. Fireman’s Fund
Insurance Company, 14 Cal.Rptr.3d 618, 2004 WL 1366798 (Cal.App. 5
Dist.), found the required “substantial relationship” because during the
13 year relationship with FFIC and while a member of a different law
firm, the attorney (and his previous firm) provided coverage and claims
handling advice to senior employees and decision makers at FFIC,
including settlement, litigation and claims handling strategies in
connection with coverage matters, and participated in confidential
communications with top-level FFIC employees.
The attorney, while with his previous
firm, had also been a presenter in educational seminars given to FFIC
employees on issues related to coverage disputes and bad faith actions.
The Court concluded that given the factual and legal issues in the
present case, the information material to the evaluation, prosecution,
settlement, or accomplishment through the attorney’s earlier
representation of FFIC was also material to the evaluation, prosecution,
settlement, or accomplishment of the current representation. The lesson
here is that if you’re sued by a former attorney/law firm, you should be
able to disqualify them if they provided to or received from your
company confidential information which could be used against your
company in the threatened suit. Interestingly, other cases involving
conflicts like this have allowed the current law firm to erect a wall so
that the conflicted attorney was quarantined from the file.
Now the legal disclaimer: This column is
provided as a reference for the benefit of members of the insurance
industry. The opinions and comments contained herein are intended to
inform and educate. Legal counsel should be consulted before applying my
reasoning to your question.
James M. Roth is a
shareholder in The Roth Law Firm. Mr. Roth’s practice includes
representing TPAs and insurance carriers in coverage, SIU,
extra-contractual liability, and third party defense matters. Please
submit any questions or comments for future columns to Mr. Roth at
TheRothLawFirm.com.
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