SC Lawyer, March 2007, #2. Heads up, defense lawyers.

AuthorBy John Freeman

South Carolina Lawyer

Ethics Columns.

SC Lawyer, March 2007, #2.

Heads up, defense lawyers

South Carolina LawyerMarch 2007Heads up, defense lawyers!By John FreemanOver the years you encounter things that burst forth as innovative and wonder why the seemingly obvious advance took so long to emerge. Consider Post-Its and Velcro as examples. Both are ubiquitous, low-tech products that undoubtedly have caused users to mutter, "Why, I could have invented that."

In law, breakthroughs sometimes happen the same way. A mundane fact situation gets looked at in a new light, and suddenly the status quo changes. And so, comparative liability supplants contributory negligence, or sex discrimination comes to the fore, or products liability suits and class action cases start to spread like kudzu.

New York's Court of Appeals recently ruled that a law firm hired by an insurer to defend a policyholder presumptively owes a duty to investigate whether there is excess insurance coverage available to the insured. In so holding, the court rejected the defendant law firm's contentions that appointed counsel "never has any obligation to investigate coverage issues, as that 'would violate every principle of the tripartite relationship that exists between an insurer, an insured, and appointed defense counsel.'" The case is Shaya B. Pacific, LLC, v. Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, ___ N.Y.S.2d ___, 2006 WL 3733752 (N.Y. App. Div. 2006).

In Shaya, the tort victim, Mr. Golebiewski, had been severely injured in a construction accident at one of defendant Shaya's properties. Damages in excess of $50 million were sought. Shaya had primary coverage with Lloyds of London with a $1 million policy limit. The insured was notified by a Lloyds representative about the excess claim and was encouraged to retain separate counsel regarding excess judgment issues. Meanwhile, Lloyds appointed the Wilson Elser firm to represent the insured.

The case rocked along, and summary judgment on the liability issue was granted for Golebiewski. At that point, Lloyds tendered the policy limits and Wilson Elser tendered the case to National Union Fire Insurance Co. for further defense and potential indemnification as to any excess claims. Besides denying Shaya was an insured, National Union rejected the tender on the ground that it had not received timely notice...

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