Articles

Law Firm Disqualification: Defining the Insurer as a Client to Determine the Scope of the Duties of Loyalty and Confidentiality in a Bad Faith Action

When an attorney moves from one private firm to another, conflicts rules apply. The conflicts analysis becomes more complex when the new firm is bringing a bad faith cause of action against an insurer and the insurer previously retained one or more of the firm’s attorneys to defend the policyholder. In these circumstances, is the insurer the client when conducting the conflicts analysis under the the American Bar Association (“ABA”) Model Rules of Professional Conduct, Rules 1.9 (personal disqualification) and 1.10 (imputed disqualification)? This article discusses both Model Rules of Professional Conduct as well as the recent opinion issued in Nevada Yellow Cab Corp., Robert Vannah and Vannah Costello Vannah & Ganz v. Eighth Judicial District Court of State of Nevada and Insurance Company of the West, 152 P.3d 737 (Nev. 2007).

Gaps in coverage created by insolvencies and settlements for less than policy limits almost invariably reduce the insurance available to policyholders facing products liability, environmental, and other long-tail claims. In the last few years, a number of trial court decisions in California have approved an allocation methodology enabling policyholders to maximize their coverage by avoiding the need to absorb such gaps as a precondition for accessing the overlying excess coverage.

What if correspondence from counsel was written in anticipation of bad faith coverage litigation? Is it nonetheless vulnerable to production as evidence of bad faith? Many courts have now concluded that an insurer may not avoid the consequences of bad faith conduct just because it engages in litigation concerning coverage issues with its policyholder.

Coverage is subject to a three-step analysis. The first step is whether the claim comes within the insuring agreement of the policy. The insuring agreement is the clause that specifies the general risks insured against. If the claim comes within the insuring agreement, then the next step is whether it falls within an exclusion. If the claim comes within the insuring agreement and is not excluded, then the third step is whether the insured breached a condition precedent or subsequent.

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Katrina Storm Surge Damage Excluded From Homeowners' Policy Coverage

A Mississippi federal court has held that an exclusion for water damage in a homeowners’ insurance contract bars coverage for storm surge which damaged the policyholders’ house during Hurricane Katrina. Leonard v. Nationwide Mut. Ins. Co., No. 1:05CV475 (LTS-RHW) (Aug. 15, 2006).

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Articles from the 2006 Insurance Coverage Litigation CLE Seminar

» Reimbursement of Uncovered Defense Costs
Andrew Weiner, Stephen M. Kelley
» State Tort Reform's Impact on Asbestos Bankruptcy Proceedings
Gretchen A. Ramos
» The States Still Want Their Money: Direct Actions by States Against Insurers for Environmental Claims
Laura Hanson, Amy Woodworth