Lawyer Appointed by Insurer had a Duty of Zealous Representation: The Business Of Insurance Is Subject To The Law Of Unintended Consequences As If It Were On Steroids.

The law of unintended consequences is not statutory. No state or federal government has enacted it into law. No executive has signed the law. It is, rather, a law of the nature of people. It is an adage or idiomatic warning that an intervention in a complex system always creates unanticipated and often undesirable outcomes.

General observation requires the hypothesis that actions of people, especially of governments, will always have effects that are unanticipated or unintended, has been proved. Economists and other social scientists have heeded its power for centuries. Regardless, for just as long, politicians, insurers and popular opinion have largely ignored the law of unintended consequences to their detriment.

There is no common-law duty for a court, especially in a heavily regulated sector of the economy like insurance to create new rules. Every court should be loathe to invent duties unmoored to any existing precedent. The law of unintended consequences counsels against it.

To find a good illustration of the law of unintended consequences, one need look no further than the Supreme Court's decision in Williamson County Regional Planning Comm'n v. Hamilton Bank of Johnson City, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985). The Court's actual holding was pedestrian: that Hamilton Bank's takings claim was unripe because the bank had not exhausted its administrative remedies, specifically its right to ask the County for a variance to develop the property in the manner proposed. In dictum, however--dictum in the sense that the Court's pronouncement was at that point unnecessary to its decision--the Court went on to say that the bank's claim was "not yet ripe" for a "second reason. That reason too was couched in terms of exhaustion: that under state law "a property owner may bring an inverse condemnation action to obtain just compensation for an alleged taking of property"; and that, until the bank "has utilized that procedure, its takings claim is premature." The Court's implicit assurance, of course, was that once a plaintiff checks these boxes, it can bring its takings claim back to federal court.

That assurance proved illusory. State-court judgments are things to which the federal courts owe full faith and credit. That obligation means that takings claims litigated in state court cannot be relitigated in federal. Thus--by all appearances inadvertently --Williamson County all but guarantees that claimants will be unable to utilize...