Opinion ID: 1793652
Heading Depth: 1
Heading Rank: 6

Heading: coker, williamson and hartford

Text: While no bad faith can be attributed to Hartford in its refusal to accept the offer of settlement based upon its assessment of Sims's lawsuit, our inquiry cannot end here. The next, and more difficult question is whether Coker and Williamson by a breach of fiduciary duty to Foster gave him a cause of action against Hartford as well as the attorneys. Hartford contends that even if Coker and Williamson breached their duty to Foster, as attorneys they were independent contractors and their bad faith, if any, was not imputable to Hartford. In Merritt v. Reserve, supra, 110 Cal. Rptr. 511, the California court of appeals held that the insurance carrier was not liable for the negligence of trial counsel in defense of the suit. We do not have this question here. Coker and Williamson are not charged with any negligent defense of the Sims case. The question here is whether Hartford is liable for a breach of fiduciary duty, if any, on the part of Coker and Williamson of which Hartford was the intended beneficiary. Although Coker and Williamson were attorneys for Foster as well as Hartford, it must be recalled that Hartford had the exclusive right to employ counsel and conduct the defense. At least to the extent of any charge of bad faith by attorneys, we prefer the holding of Smoot v. State Farm Mutual Auto. Ins. Co., 299 F.2d 525 (5th Cir.1962). In that case the insured instituted a suit against his carrier for both negligent and bad faith conduct of his defense by the attorney for the carrier. In holding the carrier liable for any negligent as well as bad faith conduct by the attorneys, the Court of Appeals stated: Another basic contention of the Insurer should likewise be put to rest. In spite of the outright promise to defend any suit against the insured alleging such injury    even if such suit is groundless, false or fraudulent  , the Insurer now insists that it has no responsibility for damage sustained by the Assured even if it should be caused by legally culpable neglect or bad faith on the part of the attorney supplied by it to maintain the defense. In other words, the Insurer asserts that its duty is fulfilled by selecting competent counsel whose acts thereafter are that of one akin to an independent contractor. The cases urged by the Insurer do not support any such view. The duty to defend is an important and frequently distinguishable part of the insurance contract. American Fidelity & Casualty Co. v. Pennsylvania Threshermen, 5 Cir., 1960, 280 F.2d 453. 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 the customary legal liability. 299 F.2d at 530. We are not called upon to address in this case the question of whether negligent conduct of a trial by a defense attorney, which harmed the carrier as well as the insured, is imputable to the carrier in a subsequent malpractice or bad faith suit by the insured against the carrier. We have no difficulty in holding that where an insurance carrier has employed the defense counsel, who faced with a conflict of interest between the insured and the carrier, breaches his fiduciary duty to the insured by favoring the carrier, the carrier is legally liable along with the attorney for any ensuing damage to the insured. Also: Nat'l Farmers Union Property & Cas. Co. v. O'Daniel, 329 F.2d 60, 65 (9th Cir.1964); Petersen v. Farmers Cas. Co., 226 N.W.2d 226 (Iowa 1975); Evans v. Steinberg, 40 Wash. App. 585, 699 P.2d 797 (1985); 7C Appleman, § 4687.