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August 28, 2017

2

Court of Appeals Rules on Authority of Insurance Defense Counsel

by WSBA
A client and attorney
Appeals court addresses an insurance defense counsel’s authority when the counsel had no contact with the insured throughout litigation.

A client and attorneyDivision II of the Court of Appeals recently addressed the authority of insurance defense counsel in an unusual scenario: where defense counsel had no contact with the insured throughout the course of the litigation involved. Kruger-Willis v. Hoffenburg, 198 Wn. App. 408, 393 P.3d 844 (2017), arose out of an automobile accident. The defendant drove a truck into the plaintiff’s parked car. The defendant’s insurer paid for the property damage involved, but then the plaintiff sued the defendant for the diminished value of the vehicle. The defendant prevailed at trial, and the trial court awarded the defendant $11,490 in fees and costs. In the course of litigating the fee award, defense counsel admitted that he had never had any contact with the defendant.

At that point, the plaintiff filed a motion under RCW 2.44.030, which allows a party to challenge opposing counsel’s authority to act for the adverse party, and an accompanying motion to stay all proceedings until defense counsel produced his authority. The trial court denied the motions and, after further skirmishing in both the trial court and on appeal, the authority issue came before the Court of Appeals. At least where the amount involved is entirely within the insured’s coverage and there is no reservation of rights, the Court of Appeals concluded that insurance defense counsel had the requisite authority to appear for the defendant even though he never had any contact with the insured.

The Court of Appeals reasoned “that when an insurer has a contractual obligation to defend its insured, that insurer has the implied right to authorize defense counsel to represent its insured even in the absence of the insured’s express authority.” 198 Wn. App. at 415. In doing so, the Court of Appeals relied on both substantive insurance law and RPC 1.2(f)—which addresses authority to act. The Court of Appeals noted that RPC 1.2(f) includes both express authority and implied authority that is authorized by law. The Court of Appeals concluded that “[a]n insurer necessarily has implicit authority under its contractual duty to defend—to authorize defense counsel to represent its insured.” 198 Wn. App. at 417.

2 Comments Post a comment
  1. John Schedler
    Aug 28 2017

    Isn’t there still a problem here? Under WA law, assigned counsel have only one client: the insured. How does a lawyer appear and act for client he or she has not met and for whom he or she has not consented?

    Reply
    • Aug 31 2017

      Great question! The Court of Appeals noted that Washington is a “one-client” state for insurance defense under Tank v. State Farm, but then focused primarily on the authority derived from the insurance contract itself (at least in a case within limits and without a reservation):

      “¶17 However, RPC 1.2(f) does not always require express authorization from the client. An attorney can represent a client if authorized ‘by law.’ RPC 1.2(f). An insurer necessarily has implicit authority under its contractual duty to defend—to authorize defense counsel to represent its insured. Otherwise, the insurer would have no way of fulfilling its broad duty to defend when the insured cannot be located, is uncooperative, or temporarily unavailable.”

      Thanks again for your excellent question.

      Mark

      Reply

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