A unit in Meadowbrook Insurance Group Inc. is not liable for breach of contract and claims in bad faith for refusing to pay for the independent lawyer hired by its policyholders, a federal appellate court said Monday, confirming a lower court decision.
] The origin of the dispute between Tulane, California-based G&J Heavy Haul Inc. and the Meadowbrook unit Williamsburg National Insurance Co., based in Southfield, Michigan, was an accident in 2014, in which the trucking company was sued, among other things, for allegations of negligence and local liability, according to court documents in G and J Heavy Haul Inc .; Gordon Barrett Archer v. Williamsburg National Insurance Co.
After Williamsburg issued a reservation of rights in the case, G&J hired his own lawyer. The G&J sued the insurer at the U.S. District Court in Pasadena, California, accusing him of breach of contract and bad faith when Williamsburg refused to pay for the lawyer.
The district court ruled in Williamsburg's favor and was upheld by a three-judge panel. G&J "argues that Williamsburg's reservation of rights created a conflict of interest requiring independent counsel" under California civil law, and that failing to pay the attorney had violated the insurance contract and the implied convent for good faith and fair handling, the court said.
"It is well established in California case law that" not every reservation of rights creates a conflict of interest that requires the appointment of an independent representative, "the judgment said, referring to a previous case.
" There was no genuine question of material facts as to whether there was a conflict of interest between Williamsburg and G&B Heavy Haul, "the judgment said, by upholding the dismissal of the claim for breach of contract, and also dismissing the bad faith claim.
Lawyers in the case did not respond to requests for comment. [1