• April 15, 2009

In a published decision by the Minnesota Court of Appeals, the Court reversed a Scott County District Court whose decision had been adverse to an insured defendant in a car accident case. The defendant reported the accident to his insurer and then, apparently, could not be located when the lawsuit was filed. The insurer hired defense counsel who undertook the defense of the action, never having met with their client, the insured defendant.

This did not sit well with the trial court, who held that insurance counsel could not represent a client in court with whom they had not formed any attorney-client relationship. The trial court had held that insurance counsel had no attorney-client relationship with the defendant. The Court ordered the defendant to attend a deposition (through counsel???); he failed to attend and the Court entered a default judgment in favor of the plaintiff for about $125,000.

The Court of Appeals reversed, pointing out that the insurer had a duty to defend and, had it not undertaken the duty, it would have been in breach of its insurance policy. Therefore, the insurance counsel had authority to represent the defendant and there was no default. Query: “cooperation clauses” are common if not ubiquitous in insurance contracts and, if the insured could not be located, would he not have violated his duty to cooperate and thus absolve the insurer of its duty to defend? Query: consistent with ethical and court rules, can insurance counsel answer pleadings without any knowledge or information from their nominal client? Query: could insurance counsel settle the claim without any acknowledgement of the terms by the defendant/insured?

The Court of Appeals could have avoided these issues in light of the fact that the Court also held that plaintiff’s attempted “service by publication” on the defendant was invalid.

The Minnesota Defense Lawyers Assocation filed an amicus brief. The central thrust was that the insurance contract itself should constitute the defendant’s agreement to enter into an attorney-client relationship with insurance counsel. The MDLA emphasized that insurers must be able to come into court to represent their insureds in situations where they are unable to reach the insured for one reason or another and ruling otherwise would create costly problems for insurers and insureds.

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