10th CIRCUIT FINDS THAT THE INSURANCE COMPANY IS NOT VICARIOUSLY LIABLE FOR THE NEGLIGENCE OF HIRED DEFENSE COUNSEL

On Behalf of | Dec 31, 2020 | Insurance Law

In Progressive Northwestern Ins. Co. v. Gant, 957 F.3d 1144 (10th Cir. 2020) (interpreting Kansas law), the 10th Circuit Court of Appeals acknowledged that liability insurance companies had a duty to exercise reasonable care in the hiring of competent defense counsel to defend its insureds.  The Court found that unless the insured or claimant presented evidence that the liability insurance company had reason to know the hired defense attorney had made mistakes similar to those that were alleged to have been negligent in defending the insurer in the current action, the insurance company would not be vicariously liable for the negligence of counsel that it hired to defend its insured, notwithstanding the fact that defense counsel guidelines required the defense counsel to obtain the insurer’s approval before performing various tasks, including performing more than one hour of legal research.

The Court in Gant noted that there was a heavy burden on plaintiffs to seek vicarious liability on an insurer for insurance defense counsel’s negligence.  The fact that the insurer had the right to control the defense was not enough to impose derivative fault on the insurance company.  Under the facts of the case, the insurer did not interfere with defense counsel’s independent judgment.  With respect to the defense counsel guidelines, the guidelines did not amount to control over the attorney’s independent judgment according to the 10th Circuit.  It was not enough for the insurer to have the right to exercise control over defense counsel, the evidence must establish that the insurer actually exercised that control in a way that gave rise to negligence.

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