GALBRAITH v. ALLIED MUTUAL involves a case where insureds were suing their insurance company for not offering them their full amount of underinsured motorist benefits earlier. According to the opinion, Timothy Galbraith sustained head injuries Wendell Warntjes crossed the centerline of the road and struck his vehicle. He sued Warntjes and his wife, the co-owner of the vehicle. He later amended the petition to assert that Warntjes was working for Scott Guy at the time the collision occurred, who was added as a defendant. He also added Allied, based on a claim that the defendants were underinsured.
In the course of settlement negotiations, it came up that Guy might not have an insurance policy to cover this loss, presumably (the opinion doesn't specify) he didn't have enough assets on his own to contribute. Warntjes' policy was only for $100,000, and the loss was arguably worth over $150,000, so the Galbraiths wanted Allied to cough up it's $50,000 as part of the settlement. Allied first wanted proof that Guy's policy wasn't going to pay, because if it did pay, and if the amount it would pay was sufficient to cover the Galbraith's loss, then it was off the hook.
The claim moved along, and on May 4, 2001, the Galbraith's attorney told Allied that if it didn't pay it's limits by the time the settlement was finalized, they'd add a bad-faith claim against Allied. Bad faith is a tort separate from the contractual duty to pay the $50,000 if owed. So if they won on the merits, it could allow the Galbraiths and their attorney to get money above the policy limits - whatever amount a jury would think would be sufficient to deter Allied from further bad conduct, within certain legal limits. Currently the theory is an "up to nine times the actual damages" rule, based on this case, but that's all loose. Allied responded by asking to take Guy's deposition.
On May 21, the Galbraiths moved to add the bad faith claim. On June 11, Allied offered half it's limits as a compromise. On June 15th, the Galbraiths rejected that, enclosing an affidavit from Guy that apparently included the info Allied needed, and a statement that they'd accepted the Warntjes' insurer's offer. On June 25, Allied offered its limits. On June 27th, the Court allowed the Galbraiths' claim of bad faith to be added to the petition. On June 28th, the Galbraiths settled with Warntjes.
Allied moved for summary judgment on the bad faith claim, alleging that the facts were undisputed and there was no basis under the law that the Galbraiths could win. Allied argued that because it didn't technically have a duty to make UIM payments until the settlement of the case with the Warntjes, by definition it wasn't late. The District Court gave them the summary judgment, but the Court of Appeals overruled it. Their rationale: "In order to uphold the district court’s conclusion it must appear, as a matter of law based upon undisputed facts, that no settlement agreement occurred prior to June 25, the date Allied tendered the underinsured motorist policy limit. If there is a disputed issue of material fact regarding whether an enforceable settlement agreement was reached prior to this date, the district court must be reversed." Because they found that the settlement had arguably been reached in May, they felt there was sufficient facts to go to the jury. The Supreme Court disagreed:
An underinsured-motorist carrier cannot be expected to make payment to its insured prior to the time that the underlying tort litigation has been fully resolved and a determination has been made concerning the presence or absence of liability insurance available for payment of the claim. The insurer is not required to accept the insured’s word as to such matters and may demand adequate documentation.
The fact that the Galbraiths may have been able to enforce an earlier oral agreement if no written agreement had been forthcoming did not defeat Allied’s right to insist on a signed written agreement as documentation for payment of the Galbraiths’ claim. Moreover, it appears that throughout the negotiations both the Galbraiths and Allied were proceeding on the basis that the Guy affidavit was essential to the conclusion of any settlement. Allied was not advised as to the obtaining of the Guy affidavit until June 15, the time at which its earlier settlement offer was rejected. The insurer was not required to accept this affidavit as true on its face and could reasonably take additional time to investigate the provisions of Guy’s liability policy with another company that had been identified in the affidavit. As the district court correctly concluded, the timing of the negotiations and the settlement were such as to preclude a determination of bad faith on Allied’s part with respect to the time at which it paid the Galbraiths’ underinsured-motorist claim.
IOWA SUPREME COURT BOARD OF PROFESSIONAL ETHICS AND CONDUCT v. W. MICHAEL SHINKLE involves an ethical rule that many non-lawyers might find counter-intuitive. There were two claims brought against Shinkle: 1) That he had neglected his client's case and covered it up; and 2) That he had improperly loaned his client money. The first claim was refuted by Shinkle to the Court's satisfaction. It was a work comp case involving a notice of final payment or suspension of compensation payments, that had given the client one year from the date of the letter to file any objections. Shinkle's client was trying to say that Shinkle had blown off that deadline and tried to cover it up. Turns out, his client never gave him the letter, so he had no idea there was the deadline until it was too late.
On the second claim, the facts were as follows:
Notwithstanding the fact that Lard received over $46,000 in compensation benefits, the only compensation Shinkle received from Lard for his services in this matter was $500. Shinkle’s trust account ledger shows that he received a $500 retainer from Lard on October 11, 1990. Although Lard claims he had a contingent fee contract, Shinkle testified there was no such agreement. Other than Lard’s testimony, there is no proof that such an agreement was reached. The trust account ledger showing a retainer for $500 is the only written evidence on this point. This evidence supports Shinkle’s testimony.
Shinkle admits from time to time he gave money to Lard, Deborah, and their daughter in response to specific requests from them during the representation and after the representation ended. From November 1989 until October 1993—the time during which Shinkle represented Lard—he wrote checks to Lard totaling $1750.
Both Lard and Deborah testified that Shinkle was advancing the funds and that Shinkle would get the money back when he settled the case. The money, they said, was used to help pay bills because Lard was out of work. There is no written evidence to support the Lards’ claim that Shinkle would get the money back when he settled the case.
Shinkle on the other hand testified that he gave the money because of his long association with the family and he wanted to help them. In addition, Shinkle said he felt bad that he and Deborah may have pushed Lard too strongly to undergo the first surgery over Lard’s objections and his failure to convince Lard to undergo the second surgery. Shinkle denied that he gave the money expecting it to be paid back out of any settlement. Shinkle also denied the Board’s claim that he gave the money to placate Lard, hoping that the case would go away.
So basically, the guy didn't get paid beyond his $500, and loaned them $1750, and they're complaining. Ooookay. But that doesn't negate the point.
The ethical rule at issue:
DR 1.102 Misconduct.
(A) A lawyer shall not: . . .
(6) Engage in any other conduct that adversely reflects on his fitness to practice law.
(My note: specific, huh? Actually, if you keep up with the caselaw, you have a shot at knowing the boundaries. Which is why every lawyer in Iowa is required to have 2 hours of ethics classes every two years to keep his or her license. It's also a d*mn good idea.)
In looking at Stickle's case, the Court points out:
DR 1-102(A)(6) implicates more than legal competence. Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Stowers, 626 N.W.2d 130, 133 (Iowa 2001). It also embraces one’s character and one’s suitability to act as an officer of the court. Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Mulford, 625 N.W.2d 672, 683 (Iowa 2001). Giving a client money that resulted in miscommunication or unrealistic expectations and prevented the client from seeking other remedies certainly reflects on Shinkle’s fitness to practice law because such conduct lessens public confidence in the legal profession. See Stowers, 626 N.W.2d at 133 (“DR 1-102(A)(6) applies to ‘conduct that lessens public confidence in the legal profession.’” (Citation omitted.)).
In deciding punishment, the Court compared it to cases where, unlike here, the attorney had specifically loaned money to the plaintiffs that was to be paid back out of settlement proceeds. That's a no-no under a different ethics rule, because it gives an attorney a financial interest in the litigation above and beyond his or her fee. Yes, arguably contingency fees do the same thing. But 5-103 techncially exempts them from the rule:
DR 5-103 Avoiding Acquisition of Interest in Litigation.
(A) A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation he is conducting for a client, except that he may:
(1) Acquire a lien granted by law to secure his fee or expenses.
(2) Contract with a client for a reasonable contingent fee in a civil case.
The Court stated:
We have said that violation of DR 5-103(B), avoiding acquisition of an interest in litigation, alone “does not constitute a serious infraction.” Humphreys, 524 N.W.2d at 398. One attorney received a two-month suspension for violating this provision by advancing money to clients, neglecting a client’s matter in respect to clearing a title objection in a real estate matter, having twenty-six probate delinquencies, and adding his name as payee on a client’s check. Bitter, 279 N.W.2d at 524-25, 527.
In light of everything, the Court gave Stickle a public reprimand.
No comments:
Post a Comment