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As a coverage firm, this is a proud day for us! We represent the very prestigious UNITED POLICYHOLDERS in connection with an Amicus brief that we filed today. UP, of course, is a non-profit 501(c) (3) organization that is an independent information resource and a voice for insurance consumers in all 50 states.

Our brief was filed in the case Hakimfar v. ROC Design, Inc. (Demler, Armstrong & Rowland, Real Party in Interest), Case No. B228541.  UP (and several others) are asking the Court of Appeal, Second District, Div. 5, not to allow dismissal of an appeal  which Lexington Insurance  has made moot by settling with plaintiffs during the appeal. Why should the case not be dismissed? Because the record of this case establishes that insurer-selected counsel, as a matter of industry-wide, pattern and practice, choose not to comply with the California Rules of Professional Conduct, Rule 3-310. These are the “rules of the road” for lawyers. They include the duties to (a) identify and (b) disclose in writing conflicts of interest and (c) to not accept or continue representation of clients absent an informed written consent by both the insured and the insurer. UP says “policyholders are entitled to expect transparent fidelity.”

Here’s the way our brief put it: “Given Lexington’s admission of the existence of conflicts, the [insurer-selected] firm’s refusal to explain the conflicts and the actual and reasonably foreseeable adverse consequences puts the insured in the position of being a passenger in the backseat of a car in which the muted “driver” will not disclose the hoped-for destination, the planned route or even the likely road hazards along the way.”

Early in my legal career, I was lucky to have worked under the watchful eye of the late Edgar L. (“Ted”) Fraser. As many will attest, Ted was the real deal—brilliant, funny and always the consummate gentleman. One day, Ted taught me this:

“When a client comes to see you, the client comes to see you.”

Ted’s simple eloquence meant that clients actually have the right to expect more than “just” a lawyer’s skills, expertise, experience and training. (That’s only the brain thing.)

Clients also have the right to expect compassion. Compassion: the “sympathetic consciousness of others’ distress together with a desire to alleviate it.”

We’ll get back to all the legal stuff soon. For now, have a nice weekend!

You are a subcontractor or an attorney representing a subcontractor, which laid the foundation for a commercial building. Now, with the building almost complete, the owners claim the entire building must be demolished and rebuilt because of the defective foundation.

The owner sues the subcontractor. Subcontractor’s insurer denies coverage.

The old way of thinking was there was no insurance coverage for subcontractor because the building was not yet complete and the demolition arose from the subcontractor’s defective work.  Not necessarily.

Recent federal cases have held the defective workmanship exclusion, “j(6),” applies only to the actual defective work.  Insurers have a duty to defend the subcontractor and may have to cover the cost of removing and replacing all the non-defective work in order to allow repair or replacement of the defective work.

In construction defect cases, the cost of removing and replacing work which itself is not damaged can be quite significant and insurers frequently resist this cost. In some instances, such as the defective foundation, the demolition and subsequent rebuild required to gain access to the defective work is far more costly than the replacement of the defective work, which is not covered. Insurers’ arguments should not be accepted.

“Burning Limits?” Here’s the hot 4-1-1!

 Since at least the early 1980’s, most professional liability policies, director and officer (D&O) policies and employment practices liability (EPL) policies, among others, are “Defense Within Limits” (DWL) in nature. These are often called “burning limits” policies because the available limit is reduced or “burned” down by defense expenses such as attorneys’ fees, experts and other litigation costs.

We think Courts across the country will embrace exactly the following rule:

Where the amount of a claim against the policyholder (or other insured) under a DWL policy combined with the amount of reasonably foreseeable defense expenses might exceed the available limit, the insurer must relinquish control of the defense and pay for independent counsel selected by the insured, unless an informed, written consent has been obtained from both the insured and the insurer.

To read more, see Bill Ford’s paper, “Defense within limits: “Burning” Ethical Issues for Defense Counsel Selected by the Insurer.  ABA (TIPS) February 2011© presented in Phoenix. (Or, heck, just call.)