Opinion ID: 1793652
Heading Depth: 1
Heading Rank: 3

Heading: Relationship of Insurer and Attorney

Text: Hartford contends Coker and Williamson were independent contractors whose misconduct, if any, could not be imputed to Hartford. See, Mississippi Power Co. v. Brooks, 309 So.2d 863 (Miss. 1975) (employer of an independent contractor has no vicarious liability for torts of independent contractors.) Caselaw analyzing the status of an attorney who is retained to fulfill an obligation of an insurance company is divided. Hartford cites Merritt v. Reserve Insurance Co., 34 Cal. App.3d 858, 110 Cal. Rptr. 511 (1973), which held that an attorney retained by an insurance company to represent an insured is an independent contractor. Id. 110 Cal. Rptr. at 527. See also, Spindle v. Chubb/Pacific Indemnity Group, 89 Cal. App.3d 706, 152 Cal. Rptr. 776 (1979). To the contrary, Blakely v. American Employers Ins. Co., 424 F.2d 728 (5th Cir.1970) held that the retained attorney was an agent for which the insurance company was liable. Explaining the rationale behind its ruling, the Court stated: The duty to defend is an important and distinguishable part of the contract of insurance. In spite of American's outright promise to defend, the insurer now seeks to avoid responsibility for damages sustained by the assured by relegating its responsibility over to legal counsel as someone akin to an independent contractor. Those whom the insurer selects to execute its promises, whether attorneys, physicians, no less than Company-employed adjusters, are its agents for whom it has customary legal liability. Highway Insurance Underwriters v. Lufkin-Beaumont Motor Coaches, (Tex. Civ.App.) 215 S.W.2d 904; Smoot v. State Farm Mutual Automobile Ins. Co., 299 F.2d 525 (5 Cir., 1962). Blakely v. American Employer's Ins. Co., 424 F.2d at 734. See also, National Farmers Union Property & Casualty Co. v. O'Daniel, 329 F.2d 60 (9th Cir.1964). In addition, Mallen and Levit, supra § 525, p. 630-31 makes the following observations: The majority of jurisdictions have concluded that the insurer's duty to defend is nondelegable and therefore an insurer cannot insulate itself from liability merely by hiring competent counsel. These courts, either expressly or implicitly (by imposing imputed liability) hold that counsel is the insurer's agent, and thereby render it liable to the insured for any negligence in the handling of the defense. One rationale for this conclusion is that since the insurer maintains the exclusive right to control the defense, it should not disclaim the correlative responsibility. In this context, the test of the insurer's liability is not whether it complied with the implied covenant of good faith and fair dealing, but whether the attorney's conduct fell below the standard of care. The facts to which both Coker and Hartford's claim manager testified clearly evidence that the company controlled the settlement negotiation. The claim manager testified that part of his duty was to evaluate claims and that in fact did seek from Coker his opinion and advice. However, clearly it was the claims manager who controlled the final decision of rejecting or authorizing an offer. Since control is the primary distinction between the principal agent relationship, as opposed to an independent contractor relationship, the facts of this case squarely fit the former. This Court, following the majority view, holds that Coker and Williamson, acting as attorneys for Foster, were also acting as agents of Hartford. Hartford therefore is liable for the breach of the standard of conduct of Coker and Williamson when committed within the scope of their employment. See, Odier v. Sumrall, 353 So.2d 1370, 1372 (Miss. 1978).
Having analyzed the authorities from this and other jurisdictions, this Court holds the complaint properly asserted a cause of action against Coker and Williamson for the conflict of interest held by them in representing the interests of the insurer and insured. The Court holds the evidence at trial created a jury question whether Coker and Williamson breached their fiduciary duties to Foster. The Court also holds the jury was properly instructed. Further, applying the standards for appellate review to the motion for directed verdict, peremptory instruction, and judgment notwithstanding the verdict, the trial court's actions were proper. As to Hartford's liability, this Court finds no error in the trial court's action. An insurer's liability is predicated upon its contractual right to control litigation, and its liability for its agents. In the present case, the jury found that Coker and Williamson gave preferential treatment to the interests of Hartford over the interests of Foster. Because Coker and Williamson were agents of Hartford acting within the scope of their employment, their actions constitute bad faith for which Hartford is responsible. See, Odier v. Sumrall, 353 So.2d at 1372.