Opinion ID: 4530325
Heading Depth: 2
Heading Rank: 2

Heading: Negligent Hiring

Text: Gant also maintains that Progressive’s decision to hire McMaster to represent the Birk defendants was negligent because (1) McMaster had mishandled settlement discussions in the past and (2) allowing McMaster to represent all the Birk defendants created potential conflicts of interest.2 1 In the alternative, Gant argues that there is a question of fact as to whether Progressive had a duty to discover and disclose the Bitco policy. Because the existence of a duty can sometimes depend on the foreseeability of harm, he contends that summary judgment is improper. But that argument fails because he offers no possible facts that would support liability in this case. 2 Progressive asserts that we need not reach the merits of Gant’s negligent-hiring claim because it was not pleaded below and because such a claim cannot be assigned. But the issue was preserved by the allegation in Gant’s amended counterclaim that Progressive negligently and in bad faith breached its contractual duty to hire competent counsel. And because the negligent-hiring claim is part of Gant’s breach-of-contract claim asserting bad faith and negligence—not a separate tort claim as Progressive contends—it appears to be assignable. See Glenn v. Fleming, 799 P.2d 79, 91 (Kan. 1990). 12 As to the first claim, Progressive does not dispute that it was contractually obligated to provide the Birks with competent counsel to defend the claim. The Kansas Court of Appeals has explained that “[i]nherent within the duty to exercise good faith in hiring independent counsel is the duty to hire counsel that is competent to defend the allegations against its insured and to provide such counsel with adequate resources to competently defend the suit.” Hackman v. W. Agric. Ins. Co., No. 104,786, 2012 WL 1524060, at  (Kan. Ct. App. Apr. 27, 2012). The Restatement of the Law of Liability Insurance recognizes that breach of the duty can create liability3: If an insurer undertakes to select counsel to defend a legal action against the insured and fails to take reasonable care in so doing, the insurer is subject to liability for the harm caused by any subsequent negligent act or omission of the selected counsel that is within the scope of the risk that made the selection of counsel unreasonable. Restatement of the Law of Liability Insurance, § 12(1) (2019) (Restatement of Liability Insurance). Gant’s briefs in this court have endorsed § 12 of the Restatement. As evidence of what Gant characterizes as McMaster’s “extensive history of impeding settlements,” Aplt. Br. at 35, Gant offers statements from three attorneys informing Progressive of McMaster’s alleged misconduct while representing Progressive insureds. One attorney notified Progressive in 2007 that McMaster had failed to appear for a settlement-approval hearing and stated that “McMaster is known for causing delay 3 The district court declined to use the Restatement “as a means to overturn or expand Kansas law” in part because the text had not yet been published. Progressive NW. Ins. Co. v. Gant, No. 15-9267-JAR-KGG, 2018 WL 4600716, at  (D. Kan. Sept. 24, 2018). But it has since been published. 13 and increased expenses,” causing Progressive’s insureds to “continue[] to have excess personal exposure . . . .” Aplt. App., Vol. XIII at 2748. Another attorney, from the same law firm as the first, informed Progressive in 2009 that “McMaster has still refused to schedule a friendly settlement hearing,” thereby “exposing Progressive’s insureds to a lawsuit and personal excess liability.” Id. at 2750. The same letter alleged that this issue was “a common problem with Mr. McMaster.” Id. The third attorney submitted an affidavit in this case asserting that during the same week that Gant’s complaint was filed, he had informed Progressive in another matter that “McMaster’s obstructionist tactics w[ere] placing Progressive’s insured at substantial risk for an excess judgment, punitive damages, and being forced to participate in unnecessary litigation.” Id. at 2757. But in the highly competitive world of personal-injury litigation, complaints of allegedly unreasonable conduct of opposing counsel are hardly uncommon. McMaster’s career had already spanned more than 30 years. He testified that he had served as defense counsel for an insurer over a thousand times, that he had handled thousands of suits involving serious bodily injury or wrongful death, and that there were very few lawyers in his area of the country who had tried more jury trials than he had. His law license had never been revoked, suspended, or otherwise limited. And Gant does not dispute Progressive’s contention that the cases he offers to support McMaster’s alleged incompetence all settled without excess exposure to Progressive’s insureds. In that light, the complaints of the three attorneys relied on by Gant are inadequate to support a finding that Progressive was unreasonable in thinking that McMaster would provide competent representation of the Birks. 14 In addition, Gant has not provided the necessary evidence of causation. Progressive would be liable only for “harm caused by any subsequent negligent act or omission of the selected counsel that is within the scope of the risk that made the selection of counsel unreasonable.” Restatement of Liability Insurance § 12(1) (emphasis added); see also Roberts v. Printup, 595 F.3d 1181, 1187 (10th Cir. 2010) (recognizing Kansas law that “‘there must be a causal link between the insurer’s conduct and the excess judgment against the insured’” (quoting Hawkins v. Dennis, 905 P.2d 678, 690 (Kan. 1995)). Yet Gant has made no effort to draw a connection between the types of deficiencies of McMaster alleged in the past (unresponsiveness in settlement discussions) and the failure to determine that the Bitco policy provided coverage and subsequently disclose it. There is no allegation that McMaster actually knew there was coverage under the Bitco policy. And even if he was negligent in not realizing there was coverage (although Gant has not argued that McMaster was negligent in that respect), Gant has offered no evidence that Progressive was on notice that McMaster was inept in interpreting insurance policies. We also question whether there is adequate evidence that Gant would have settled even had the Bitco coverage been discovered earlier. See, e.g., Aplt. App., Vol. VIII at 1650 (Gant deposition testimony that he rejected the offer of $1,250,000 because “we wanted to see it through”). Moreover, there was no apparent harm from the deficiencies in McMaster’s performance (none of which related to alleged obstructive misconduct in settlement negotiations) that led to his dismissal by Progressive. Gant points to McMaster’s role in the imposition of sanctions causing the admission of hundreds of requests for admission 15 (RFAs), the exclusion of Birks’ cell-phone expert, and the treatment of Birk Oil as an alter ego of Mr. and Mrs. Birk. But the state trial court indicated that deemed admission of the RFAs would not preclude the introduction of independent evidence, Gant’s counsel did not refer to them during his closing argument at the state trial, and the trial court’s opinion rendering judgment for Gant made no mention of them. As for the Birks’ cellphone expert, his testimony was excluded not only as a sanction but also on the ground that it was inadmissible under the rules of evidence because it was unreliable and would be substantially more prejudicial than probative. And the alter-ego sanction turned out to make no difference because Birk Oil is a general partnership of which Mr. and Mrs. Birk are members (so it apparently would not matter whether liability was assessed against them personally or against the company). The second component of Gant’s negligent-hiring claim is that Progressive was negligent in retaining McMaster to represent all the Birk defendants despite potential conflicts of interest. Gant asserts that the conflict “derive[d] from the right of all parties to compare the fault of one another, and from Birk Oil’s potential vicarious liability for Justin Birk’s actions.” Aplt. Reply Br. at 20. He relies on his expert’s claim that “there existed a clearly divergent conflict of interests among the four Birk Defendants which neither Progressive nor McMaster timely recognized, addressed and/or attempted to resolve.” Aplt. App., Vol. XIII at 2671. But the family members had no desire to place blame on one another. As Linda Birk testified and the district court recognized, the family sought to advance a unified position that Justin was not at fault for the accident and that he was not on the job at the time of the accident. 16 Most importantly, McMaster obtained a conflict waiver signed by all defendants (Justin, Linda, and Edward, both individually and as president of Birk Oil) after consultation with their personal attorney. It states in relevant part: This is [sic] will confirm that we have spoken to you and your personal counsel regarding representing you individually and collectively in connection with the above referenced matter. We have reviewed and discussed the facts and circumstances surrounding the accident together with all the claims being presented and determined that there currently exists no conflict which would prohibit us from representing you individually and collectively. Consistent with our discussions there exist[s] a possibility that a conflict could arise in the future. All your questions regarding the potential of a conflict have been discussed and answered and it is our understanding that you have agreed to waive any potential conflict and you have no objections to the undersign[ed]’s representation of you individually and collectively. You are also aware that if an unforeseen and unexpected conflict w[]ere to arise during our representation you will have the right to review this waiver of conflict. Aplt. App., Vol. IX at 1839. Gant asserts for the first time in his reply brief that “McMaster failed to appreciate the legal conflict among the four Birk Defendants and, therefore, could not have obtained a knowing waiver from his clients.” Aplt. Reply Br. at 20. We need not consider this untimely argument. See In re Motor Fuel Temperature Sales Practices Litig., 872 F.3d 1094, 1105 n.2 (10th Cir. 2017) (declining to consider “different, albeit related, argument” of district-court error raised for first time in reply brief). But even if we did, we fail to see any factual basis. Gant has offered no evidence of what explanation was given to the Birks by their personal attorney or McMaster; and he has not explained how their interests could conflict if they had a common view of the 17 facts and wished to advance a common defense. On the record and arguments presented to it, the district court properly granted summary judgment on this claim.