DEFENSE LAWYER HIRED BY INSURER DOES NOT BIND INSURER


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Comegys, an independent insurance agency, had an independent contractor relationship with Safeco. Comegys was allegedly negligent in procuring automobile insurance for one of its clients, Robert Smith. Comegys offered to settle (and did settle through the errors and omissions policy it had with Endurance) the potential negligence claim Smith had against it.


In Endurance American Specialty Insurance Company et al v. Liberty Mutual et al, No. 19-14664, United States Court of Appeals, Eleventh Circuit (May 16, 2022) the Eleventh Circuit resolved the dispute.


FACTS


Relying on the indemnification provision between Safeco and Comegys, Endurance sued Safeco. Endurance wants to be indemnified by Safeco because the attorney Safeco provided to Smith after the car accident pointed out the potential negligence claim Smith had against Comegys.


ANALYSIS


Endurance apparently distracted the jury with facts that are totally irrelevant to this appeal. The distraction method may have worked with the jury in this case, but it did not work with the Eleventh Circuit.


In a very generous reading of Endurance’s arguments at trial, it is basically saying that Safeco acted through the attorney it provided to Smith, ultimately prompting Comegys to voluntarily settle with the estate without Comegys admitting any fault. Endurance argued, because Comegys settled with the estate as a volunteer, Safeco now must indemnify Comegys even though Comegys never admitted any liability.


Endurance’s position was that Endurance equates the actions of Smith’s attorney with the actions of Safeco. 


Because the indemnification provision between Safeco and Comegys hinges on Comegys having some sort of liability or demonstrating that Safeco’s actions caused loss, Safeco is not liable where Comegys is a volunteer in settlement. A court cannot create coverage out of whole cloth where it otherwise would not exist.


The case was remanded for entry of judgment in favor of Safeco.


ZALMA OPINION


Comegys convinced a jury that a lawyer appointed by an insurer to defend an insured is the insurer when, in fact, the lawyer is retained only to defend the insured, Smith, to the best of his or her ability. The lawyer’s action, working to best defend Smith cannot be claimed as wrongdoing against another. Comegys could not convince the Eleventh Circuit because it, unlike the lawyer for Comegys and the jury, read the contract.

 

 (c) 2022 Barry Zalma & ClaimSchool, Inc.


Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected].


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