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Settlement or Verdict Amount:

Case Name:

Case Number and Date

Ana Jimenez, Craig A. Miller, San Diego


Facts and Background:

On November 26, 1989, defendant #1 issued an automobile insurance policy to plaintiff. The insurance policy provided liability coverage for bodily injury and property damage. On Feb. 17, 1990, plaintiff was involved in a motor vehicle collision and, one year later, was sued.

On or about June 11, 1991, defendant #1 retained defendant #2 to “defend” plaintiff against the personal injury allegations. At that time, defendant #1 informed defendant #2 that the accident was “suspicious”. Defendant #1 knew its suspicions created a conflict of interest between it and plaintiff, but did nothing to apprise her of her right to Cumis counsel.

Shortly after its assignment, defendant #2 began to communicate with defendant #1’s attorneys about the possibility of the plaintiff’s fraud. Defendant #2 never informed plaintiff of its activities or of the suspicions of her insurance company. Defendant #2 provided defendant #1’s attorneys with photographs, pleadings and discovery. Eventually, defendant #2 learned that defendant #1 was going to sue its client, the plaintiff, but did not tell her.

Eventually, defendant #1 did sue plaintiff, but failed to serve her with the complaint. As a result, plaintiff did not respond to the complaint. Although defendant #1 knew that it never served plaintiff, it nevertheless filed a request for entry of default and judgment in the amount of $38,000.

Plaintiffs’ Contentions:
Plaintiff contended that defendant #1 failed and refused to provide plaintiff with Cumis counsel despite its knowledge of a profound conflict of interest. This undisclosed conflict allowed defendant #1 to void coverage under the policy. Plaintiff further contended that defendant #1 had engaged in the identical wrongful conduct with defendant #2 on previous occasions in order to achieve the same ill-advised objective. Finally, plaintiff contended that defendant #2 breached its fiduciary duty and engaged in legal malpractice by failing to disclose plaintiff’s right to independent counsel and its participation in the plan to defraud her.

Defendants’ Contentions:
Defendant #1 contended that plaintiff actively participated in a staged accident in an effort to defraud it. This contention was based on plaintiff’s extensive accident history, her involvement in other accidents defendant #1 deemed fraudulent, the unusual factual circumstances of the accident in question, the unsavory individuals involved in the subject accident, and plaintiff’s failure to cooperate with defendant #1’s investigation.

Legal Malpractice, Malicious Prosecution, Breach of Implied Covenant of
Good Faith and Fair Dealing.