Insurer not vicariously liable for defense goof-ups.

A liability insurer is not vicariously liable for the conduct of an independent attorney it selects to defend an insured, the Texas Supreme Court held in State Farm Mutual Automobile Insurance Co. v. Traver, 980 S.W.2d 625 (1998). In so doing, the court withdrew an opinion it had issued some 16 months before.

The case arose from a two-car automobile collision in which a passenger in one car sued both the driver of that car and the driver of the other vehicle. Both cars were insured by State Farm, and it retained separate defense attorneys for its insureds. The jury found one driver 100 percent at fault and awarded the injured plaintiff damages that exceeded the policy limit. After that judgment defendant died, her executor sued State Farm, alleging among other causes of actions, that the retained defense attorney for his decedent committed malpractice for which State Farm was vicariously liable responsible and that State Farm orchestrated the malpractice to avoid potential failure to settle claims with respect to the other insured.

The intermediate appellate court held that State Farm was responsible for the malpractice of the attorney it retained. 930 S.W.2d 862, 871.

Reversing, the supreme court emphasized that a retained defense attorney is an independent contractor who "has discretion...