An Attorney Divided -- Long-Time Coverage Lawyer Disqualified From “Bad Faith” Suit Against Former Client Insurer

The Fifth District Court of Appeal has held that an attorney who provided ongoing coverage advice to an insurer for thirteen years must be disqualified from representing the claimants in a “bad faith” suit against that insurer.

Attorney James Wilkins provided insurance coverage advice to Fireman’s Fund Insurance for some thirteen years before leaving the law firm at which he had done that work and starting a new firm of his own. At his new firm, Wilkins took on the representation of the plaintiffs in a suit for breach of contract and “bad faith” against Fireman’s Fund. The bad faith case involved questions concerning coverage available under a Fireman’s Fund policy. Fireman’s Fund moved to have Wilkins and his firm disqualified from acting in the case, based upon Wilkins’ former representation of Fireman’s Fund. The trial court denied the motion. Fireman’s Fund appealed, and the appellate court has ruled that Wilkins must be disqualified, placing its principal reliance on its own earlier decision in a similar case:

In Jessen v. Hartford Casualty Insurance Company, 111 Cal.App.4th 698, we held that, ‘when ruling upon a disqualification motion in a successive representation case, the trial court must first identify where the attorney’s former representation placed the attorney with respect to the prior client. If the court determines that the placement was direct and personal, this facet of Ahmanson is settled as a matter of law in favor of disqualification and the only remaining question is whether there is a connection between the two successive representations, a study that may not include an ‘inquiry into the actual state of the lawyer’s knowledge’ acquired during the lawyers’ representation of the former client.”

Rejecting the attorney’s arguments that his former representation of the insurer in providing coverage advice for thirteen years was not “connected” to his assertion of “bad faith” claims against that same insurer, the court risked stating the obvious:

Wilkins advised and assisted FFIC in making coverage decisions when he acted as FFIC’s California coverage counsel. An insurer’s acceptance or denial of coverage necessarily raises legal issues about whether the insurer conducted an adequate investigation, whether the insurer gave sufficient consideration to the interests and expectations of the insurer, whether the insurer reasonably construed and applied the relevant policy language, and whether the insurer’s construction and application of the relevant policy language was consistent with its treatment of other similarly situated insureds. . . . Coverage disputes are substantially related to bad faith actions for the purpose of attorney disqualification because they both turn on the same issue -- whether or not there is coverage under the terms of the policy.

Under the circumstances, the appellate court concludes that the trial court had no discretion in the matter: disqualification was mandatory.

The opinion in Farris v. Fireman’s Fund Insurance Company (June 17, 2004), Case No. F043531, can be read at these links in PDF and Word formats.

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[Joseph Testa]

COMMONWEALTH LAND TITLE COMPANY SNUBS THEIR NOSES AT THE FLORIDA DEPARTMENT OF FINANCIAL SERVICES

BY JOE TESTA

On March 26, 2006 Commonwealth Land Title Company, through their attorney, Carlton Fields, adamantly refused to provide information to the Florida Department of Financial Services regarding their alleged violations of FLORIDA ADMINISTRATIVE RULE 690-186/003. The Department requested the documentation of certain closings conducted by their agent, Southern Escrow and Title Company of Destin. It has been alleged, by an insured of Commonwealth, that certain other of their eligible insureds were denied the reissue discount as provided by RULE 690-186/003. The insured provided the Department the names of over 100 of the insurers client that appear to have been overcharged. Commonwealth cited privacy constraints as their reason for refusing the Department the information requested. LandAmerica Financial Group, the holding company for Commonwealth, has had many class actions brought against its underwriting companies, including Commonwealth. All have thus far been settled in favor of the insureds. What we have to see now is how the Department handles this slap in the face it received by Commonwealth.
627.7845 Determination of insurability required; preservation of evidence of title search and examination.
3) The title insurer or its agent or agency must maintain a record of the actual risk premium and related title service charges made for issuance of the policy and any endorsements in its files for a period of not less than 7 years. The title insurer, agent, or agency must produce the record at its office upon demand of the (DFS).
2 624.316 Examination of insurers.
(2)(a) Except as provided in paragraph (f), the office may examine each insurer as often as may be warranted for the protection of the policyholders and in the public interest, and shall examine each domestic insurer not less frequently than once every 3 years.

3 624.317 Investigation of agents, adjusters, administrators, service companies, and others.
If it has reason to believe that any person has violated or is violating any provision of this code, or upon the written complaint signed by any interested person indicating that any such violation may exist:
(1) The department shall conduct such investigation as it deems necessary of the accounts, records, documents, and transactions pertaining to or affecting the insurance affairs of any general agent, surplus lines agent, adjuster, managing general agent, insurance agent, insurance agency, customer representative, service representative, or other person subject to its jurisdiction, subject to the requirements of s. 626.601.

It appears as if Commonwealth’s stay in Florida may be just about up.

[please contact me joe]

similar problem. i would like info.

[Joseph Testa]

Commonwealth Land Title Insurance Company allegedly has sunk to new depths in coming up with pretexts to deny insureds valid claims.

Comes a story from Okaloosa County where Commonwealth’s agent, Southern Escrow and Title Company, of Miramar Beach, did not inform an insured as to a discrepancy that existed with the legal description on the insured’s Residential Sale and Purchase Contract. It turned out that the property being purchased by the insured, was not as it was purported by the sellers.

The insured believing, pursuant to Florida law, that a title insurer has a duty to disclose anything, which may subject the insured to financial loss, filed a claim under his policy, citing the Florida Supreme Court decision in First American Title Insurance Co. v. First Title Service Co., 457 So.2d 467, 472 (Fla.1984), which defined the general nature of the duty involved with title insurance: “The issuance of the title commitment places a duty on a title insurer to skillfully and diligently search for and disclose to the insured any reasonably discoverable information that would affect the insured's decision to close the contract to purchase.” The insured also claimed that Commonwealth failed to procure insurance as the insured had requested, in his sales contract, citing Caplan v. La Chance, 219 So.2d 89 (Fla. 3d DCA 1969)(holding that an insurance agent's negligence in failing to procure the proper insurance coverage requested by the insured is a recognized cause of action).

Commonwealth answered the insureds first allegation concerning disclosure by saying that they were not attorneys allowed to practice law in Floirda, and to divulge information discoved during the abstract constituted the unlawful practice of law. Well, goodbye to Florida decisional law. It looks as if Commonwealth has found a new rock to hide under to keep from paying valid claims.

As to the insureds second claim regarding Commonwealth’s alleged failure to procure insurance as requested, a long held and well-establish premise in Florida, Commonwealth asserted the economic loss rule. They pointed to no case law, (little wonder).

The insured brought up the Internet advertising of Commonwealth. Commonwealth allegedly induces potential customers to purchase its title polices for the protection an abstract of title and title examination offers them. They guarantee a security for the insureds investment from a myriad of hazards that only a professional search and analysis of the public records can supply. The catch is that if they do uncover a “hidden” problem during the abstract it remains hidden deep within the title policy legal verbiage. Talk about a Catch 22. Well I bet it keeps their claims payments down. Would you buy a title policy from this company?