As the above Order just issued from the Middle District of Florida reflects, where the interests of the carrier and insured are aligned, the defense lawyer owes a duty of due care to both. Where the interests of the carrier and the insured conflict, then the defense attorney's obligations, and associated duty of due care, flow uniquely to the insured. Alternatively, when the interests diverge on an issue, the defense attorney may refrain from a given scope of representation . The defense attorney must be ever mindful of any potential divergence of interest and comport his behaviors accordingly. This behavior includes making a clear statement to the carrier where a pending issue creates a conflict and results in a unique duty to the insured, or where an issue arises that the defense lawyer cannot properly advocate for either (i.e., a coverage issue).
Here, the retaining insurer's and the insured's interests in minimizing any financial exposure to the plaintiff were clearly aligned. The alleged settlement opportunity eliminated the insured's exposure and reduced the insurer's. It is alleged that the defense lawyer's lack of due care resulted in this beneficial settlement opportunity being lost. If proven, the only damaged party is the carrier, as the carrier paid its total limits and protected the insured. There is no evidence that the defense attorney felt that he could not properly act in the best interests of both the insurer and insured in acting upon a settlement opportunity. As such, his duties ran to both the insurer and insured in this context.
I am thrilled to see carriers assert that a lawyer undertakes a professional obligation when attempting to negotiate and document a beneficial settlement. Further, that any breach of the duty of professional care in this regard is actionable for recovery of the lost settlement protection WITHOUT ANY SHOWING OF "BAD FAITH", UNFAIR ACTIONS OR DISREGARD FOR THE INTERESTS OF THE INSURER.
I believe that courts should embrace this position and expressly apply this same standard of due care to carriers, and get rid of any confusion that a connotation of "bad faith" has in a failure to settle case.
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