Monday, June 21, 2004
Insurer’s Former Lawyer Should Have Been Disqualified—C.A.
Work as Coverage Counsel Was ‘Substantially Related’ to Bad Faith Case Against Former Client, Court Says
By DAVID WATSON, Staff Writer
A lawyer who provided advice to an insurer on coverage issues should have been disqualified from representing the plaintiff in a bad faith case against the same insurer, the Fifth District Court of Appeal ruled Friday.
Justice Nickolas J. Dibiaso said Fresno Superior Court Judge Mark W. Snauffer erred in denying a motion by Fireman’s Fund Insurance Company to disqualify James H. Wilkins and his law firm, Wilkins, Drolshagen & Czeshinshi, in a bad faith suit stemming from injuries suffered by users of an inflatable slide at a business insured by FFIC.
The injuries occurred in late 1997, soon after Wilkins left the firm of McCormick Barstow Sheppard Wayte and Carruth. He joined that firm, which represented FFIC in coverage matters, as an associate in 1984 and became a partner in 1990.
FFIC disputed whether the slide involved in the personal injury action against its insured had been added to the policy, and the business operator assigned his claim against FFIC to the personal injury plaintiffs in 1998. Wilkins and his new firm then brought the bad faith suit.
Snauffer was mistaken, Dibiaso said, in focusing his inquiry on the knowledge acquired by Wilkins during his work for FFIC with the McCormick firm and on the relevance of that knowledge to the bad faith action.
It was undisputed, the justice pointed out, that Wilkins worked directly and personally with FFIC on coverage issues. Citing Jessen v. Hartford Casualty Insurance Company (2003) 111 Cal.App.4th 698, Dibiaso said that under those circumstances Wilkins was presumed to have obtained confidential information from the insurer.
The only issue for Snauffer to determine in ruling on FFIC’s motion under Rule 3-310(E) of the Rules of Professional Conduct of the State Bar of California, Dibiaso explained, was whether the factual and legal similarities between the two representations made them substantially related.
Quoting Jessen, the appellate jurist declared:
“Successive representations will be substantially related ‘when the evidence before the trial court supports a rational conclusion that information material to the evaluation, prosecution, settlement or accomplishment of the current representation given its factual and legal issues is also material to the evaluation, prosecution, settlement or accomplishment of the current representation given its factual and legal issues.’”
Snauffer’s finding that the services Wilkins performed in assisting FFIC with coverage determinations were not closely related to those he would perform for his clients in the bad faith case was beside the point, Dibiaso asserted. Jessen, he noted, held that the relevant consideration is the degree of similarity “between the legal problem involved in the former representation and the legal problem involved in the current representation.”
The justice commented:
“Whether an attorney, for example, drafts a contract or provides an opinion letter is irrelevant if the legal problem motivating the service in the former representation is substantially related to the legal problem motivating the service provided in the subsequent representation.”
Dibiaso called Wilkins’ contention that the knowledge the attorney gained in over a decade of working closely with senior FFIC employees on coverage issues would not help him in litigating the bad faith case “disingenuous at worst and naive at best.” But he went on to say:
“In any event, whether he actually possesses confidential information that would work to his advantage in his current representation is not the test. Rather, the test is whether a substantial relationship exists between the subjects of the two compared representations.”
Coverage disputes, the justice said, “are substantially related to bad faith actions for the purpose of attorney disqualification because they both turn on the same issue—whether or not there is coverage under the terms of the policy.”
Ban Not ‘Indefinite’
Dibiaso noted that Snauffer expressed concern that a rule which would disqualify Wilkins might preclude too many attorneys from representing plaintiffs against nationwide insurance companies in too many cases. But he cautioned that any ban on representation would not be “indefinite.”
“We certainly can envision circumstances where the passage of time might be shown to have eliminated a prior substantial relationship due to such events as changes in corporate structure, turn over in management, and the like,” he wrote.
Diabiaso said the court was skeptical that its interpretation of Jessen would adversely impact either Wilkins or any other litigators.
“[W]e doubt that the several carriers Wilkins may have directly represented during his tenure at the McCormick firm comprise the universe of insurance companies that have issued and now issue liability policies in this state,” he observed. “It is unlikely Wilkins will be starved for work on behalf of insureds who wish to bring contractual and bad faith actions against insurers.”
The justice reasoned:
“A large multi-jurisdictional company has no less an interest than any other more modest legal consumer in assuring that confidential information imparted during a representation remains confidential....If employment opportunities are curtailed, the sacrifice is to be born by the attorney, not by the former client.”
Justices Steven M. Vartabedian and Betty L. Dawson concurred.
The case is Farris v. Fireman’s Fund Insurance Company, 04 S.O.S. 3069.
Copyright 2004, Metropolitan News Company