Your new client is sued for wrongful conduct. You are not an insurance coverage lawyer; you do not have time to analyze the client’s portfolio of insurance policies; and your client does not know if its earlier insurance policies have been validly terminated, cancelled or renewed (“TCR”).
“My insurance agent said the lawsuit is not covered by my GL or D&O policies,” Your client says. “Can you defend the lawsuit?”
You do not discuss with your client investigating insurance coverage or the tender of the lawsuit to an insurer for defense. Your retainer agreement with your client does not exclude the duty to investigate insurance coverage for the lawsuit or the duty to tender the lawsuit for defense to an insurer.
Do you advise the client to tender the lawsuit to the insurers for defense? Yes. Why? Because in Jordache Enterprises Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739,745, the Supreme Court implied that a lawyer may have a duty to inquire about a client’s insurance coverage and a duty to tender a case for defense to the insurer.
The following suggestions should be reviewed with your client, and documented, to avoid potential prejudice or liability to the client:
1. Tender the lawsuit for defense to all known insurers identified in writing by the client;
2. Tender the lawsuit for defense under the any earlier insurance policies because they may not have been validly TCR;
3. Request each insurer of a TCR policy to provide proof of a valid notice sent to the insured about the changes made to a previous policy;
4. Notify the insurer that a responsive pleading is due on a date certain;
5. Obtain and confirm in writing an extension of time to file responsive motions and pleadings to challenge the claims and the jurisdiction over your non-resident corporate client; and
6. Advise the insurer that if it does not defend the client, you will and the client will request reimbursement of legal fees and costs.
Related Cases to Read Fields v. Blue Shield of Cal.(1985) 163 Cal.App.3d 570, 579, says insurance companies are “bound by the greater coverage in an earlier policy when a renewal policy is issued but the insured is not notified of the specific reduction in coverage.”
Koltar v. Hartford Fire Ins. Co. (2000) 83 Cal.App.4th 1116, 1121, fn. 3 provides that the “named insured” entitled to notice of cancellation under Cal. Ins. Code section 677.2(b) includes “additional named insureds” who are added as insureds after the policy issues.
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