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July 20, 2015

Court of Appeals Revisits ‘Who Is the Client?’ Question in Insurance Defense

by contributor
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The Court of Appeals recently reaffirmed Washington’s “one client” standard for insurance company defense counsel.

whoThe Court of Appeals recently reaffirmed Washington’s “one client” standard for insurance company defense counsel.

In late May 2015, Division I of the Court of Appeals revisited the issue of who is the client of an insurance defense counsel. States vary in their approach. Under Tank v. State Farm Fire & Casualty Co., 105 Wn.2d 381, 388, 715 P.2d 1133 (1986), and WSBA Advisory Opinion 195 (1999), Washington is in the “one client” camp; the insured is the only client and the carrier is a third-party payor.

This can have important implications if there is alleged malpractice in handling an insured’s case. In Stewart Title Guaranty Co. v. Sterling Savings Bank, 178 Wn.2d 561, 311 P.3d 1 (2013), the Supreme Court held that because the only client is the insured, the carrier did not meet one of the required elements for a legal malpractice claim — an attorney-client relationship with the lawyer being sued. The Supreme Court in Stewart Title also rejected the alternative argument that a carrier is an intended beneficiary of an insured’s attorney-client relationship and, therefore, qualifies under the narrow test articulated in Trask v. Butler, 123 Wn.2d 835, 872 P.2d 1080 (1994), for vesting a non-client with standing to bring a malpractice claim. Division II of the Court of Appeals made those same points last year in Clark County Fire Dist. No. 5 v. Bullivant Houser Bailey, P.C., 180 Wn. App. 689, 699-70, 324 P.3d 743 (2014), in finding that Stewart Title established a bright line rule rather than simply a case-by-case template for analysis.

The carrier in Doctors Company v. Bennett Bigelow & Leedom, P.S., 2015 WL 3385264 (Wn. App. May 26, 2015) (unpublished) tried to maneuver around Stewart Title by arguing that the law firm advised the carrier directly — and, therefore, had also established an attorney-client relationship with the carrier — in addition to defending the insureds. Division I concluded that this co-client argument was not sufficiently developed in the record below and refused to consider it on appeal. The Court of Appeals then relied on both the “one client” standard and the Stewart Title rule in affirming summary judgment for the defendant law firm.

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