Insurer tells insured's counsel accident is "suspicious": Conflict of interest: Breach of implied covenant of good faith: Settlement

Law Reporter, Dec 2001

Doe v. Roe Ins. Co., Cal., Los Angeles County Super. Ct., confidential docket no., Dec. 28, 2000.

Doe was sued for personal injuries arising out of a motor vehicle collision. Doe's automobile insurer retained an attorney to defend Doe and informed the attorney that the accident was "suspicious." The attorney then began to communicate with attorneys for the insurer about the possibility of fraud by Doe-providing them with photographs, pleadings, and discovery-but did not notify Doe of these activities.

The attorney also learned that the insurer was going to sue Doe, but did not inform Doc of the insurer's intent. When the insurer later filed suit against Doe, it allegedly failed to serve her with the complaint and deliberately filed for entry of a default judgment when Doe did not respond to the complaint.

Doe sued the insurer and the attorney, alleging breach of the implied covenant of good faith and fair dealing, among other claims. Plaintiff asserted that the insurer did not inform her of her right to independent counsel even though it knew that its suspicions created a conflict of interest between it and plaintiff Plaintiff also contended that defendants had engaged in the same wrongful conduct before.

Suit against the attorney alleged breach of fiduciary duty and legal negligence for (1) failing to disclose plaintiff's right to independent counsel and (2) participating in the plan to defraud her.

The insurer countered that plaintiff actively participated in a staged accident in an effort to defraud it. The attorney claimed to have informed plaintiff of her rights, and that no privileged information was provided to the insurer.

The parties settled for a confidential amount.

Plaintiff's experts were David Cassleman, insurance claims handling, Tarzana, Cal.; Alvin Robbins, psychiatry, La Jolla, Cal.; and Robert C. Fellmeth, insurance regulatory issues, San Diego, Cal.

Plaintiffs Counsel

*Craig A. Miller, San Diego, Cal.

David L. Richards, Arroyo Grande, Cal.