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GEICO: On the Hook For Legal Malpractice || By Dale Swope
July 8, 2015

For what appears to be the first time in Florida, an insurance company was held liable for the legal malpractice of its in-house defense attorneys. 

The case arose out of a routine auto accident caused by a newly-licensed teenager with a $10,000 policy. GEICO offered only $5,000 in response to an express policy limits offer accompanied by all the medical records – except the one record recommending surgery. 

GEICO’s in-house lawyers defended the ensuing litigation. It took them over fourteen months of litigation to discover that surgical recommendation, which predated the lawsuit, and by then plaintiff was no longer willing to accept the limits. The verdict came back in the high six figures. 

The bad faith case against GEICO got removed to federal court, of course, and GEICO’s defense was the predictable “he set us up” by withholding medical records. Ho-hum. 

But, after fairly extensive forensic discovery, it became clear that the plaintiff’s law firm probably did have the surgical recommendation in its possession when the demand was served. The law firm also ignored the carrier’s requests for medicals for over a year, then served a 30-day demand dated more than 45 days before GEICO received it. 

In fairness, the plaintiff’s firm had many people working on the case, and the demand writer was probably unaware of the requests for medical records, but it still looked worse than most “he set us up” defenses. 

Then, as trial approached at the normal glacial pace of federal litigation, GEICO’s main adjuster locked it down in her depo by saying it was the defense attorney’s responsibility to get the record. And certainly, if she had only known of the recommendation earlier, she would have tendered immediately. 

Of course, the general rule is the insurer is not liable for malpractice of the attorneys they hire to defend insureds. See Aetna Cas. & Sur. Co. v. Protective Nat. Ins. Co. of Omaha, 631 So. 3d 305 (Fla. 3d DCA 1993). But here, the attorney she was tossing under the bus was sporting that gecko lapel pin they all like to wear. 

That led to an amended complaint against GEICO requiring application of the relation back doctrine, since the legal mal statute of limitations had run. Kalmanowitz v. Amerada Hess Corp., 125 So. 3d 836, 840 (Fla. 4th DCA 2013). At trial, no standard of care expert was presented by the plaintiff because the processes the lawyer should have used to get the surgery recommendation, had he acted diligently, were so simple that even a – well you know. 

The jury found that while there was no bad faith (which requires more than negligence), there was legal malpractice. 

GEICO’s argument was that since it did not (and could not) interfere with the independent professional judgment of its in-house counsel, it was not exercising control over them sufficiently to establish the basis for respondeat superior. It relied on crane rental cases – yes, like construction projects – where cranes were rented to others with an operator, and a transfer of control over that borrowed employee, precluded imposing damages against the actual employer. 

Other states have bit on this, but not Florida, and as the trial court succinctly put it: if GEICO wants to wade into the law firm business, they are going to have to take the good with the bad – the liability with the profitability. By affirming the trial court’s decision permitting the cause of action, the Eleventh Circuit has opened up a whole new window of insurer liability in cases where the adjuster’s conduct is “mere negligence.” See Hilson v. GEICO General Ins. Co., 2015 WL 1380094 (11th Cir. Mar. 27, 2015) (unpublished). 

Competing With Law Firms Owned by Multi-National Conglomerates of Non-Lawyers. 

The Hilson case opens up the larger question of whether it is appropriate for insurance companies to sell legal services to the public. As a general rule, corporations other than professional associations owned entirely by attorneys are not permitted to practice law for profit. That is codified in Rule 4-5.4(e) of the Rules of Professional Conduct. 

When insurance companies are challenged about it, they will always point to Rule 4-7.21(g), which they claim creates an exception for them. It does not. Rule 4-7.21(g) relates only to names of law firms. It acknowledges that there are lawyers who work for insurance companies who represent both the companies and their insureds, when there is not a conflict, but does not authorize it. It says only that, so long as these lawyers are truthful with the judge and counsel and their clients about who they work for, they can go ahead and lie to the jury

It basically doubles down on the statutorily-authorized fraud that is the Florida Non-Joinder Statute, by allowing these lawyers to create the impression to the jury that they are part of an independent, private firm. They use a name like “Law Firm of Smith and Jones,” when actually they are employed directly by [insert insurer name here]. 

But that certainly did not authorize insurers to cross that line they did a few years ago by starting to sell pre-paid legal services, and even advertising to businesses that they supposedly deliver legal services better and cheaper than private attorneys can. 

Other states are taking action to protect consumers such as Ms. Hilson. See, e.g. http://www.isba.org/sites/default/files/ ethicsopinions/89-17.pdf.  If The Florida Bar is not going to step up and stop this practice by enforcing its rules, it will be up to the consumer rights attorneys of the state to stop it through litigation and, when appropriate, punitive damage claims arising from the unauthorized practice of law. 

PFS Statute Obscured Worse Than Ever 

This pristinely-written statute has been horribly beaten up by years of hopelessly misguided and inconsistent judicial decisions. It is the perfect poster child for why neither the courts nor the Rules Committee of the Florida Bar should attempt to write – or even edit – clear legislation. 

It is so bad that our appellate courts are deciding issues like whether the statute and rule require a PFS to contain a certificate of service (they do not) and whether using “his” instead of “her” to refer to a female plaintiff rendered a PFS ambiguous (it did not). Floyd v. Smith, So.3d , 40 FLW D848c (Fla. 1st DCA 4-9-15). Honestly, that’s where we are now. And still, the inconsistent opinions keep coming. 

The Supreme Court addressed a different issue to try and settle an inter-district split. A single auto accident victim served a PFS to settle her own claims and her husband’s loss of consortium claims. The Supreme Court held that although the PFS listed only one offeror, it “had the effect of settling claims by two plaintiffs against one defendant,” and must be treated like a joint proposal. Thus, to be valid, the proposal should have apportioned the amount to settle the claims between each plaintiff. Audiffred v. Arnold, So.3d , 40 FLW S199a (Fla. 4-16-15). 

But two weeks later, the Second DCA decided a case with almost identical facts to Audiffred – except that the offeror was one of two defendants seeking to settle all claims by a single plaintiff. The court there held, “Simply because the proposal required Mrs. Nash to release both [defendants] did not render the proposal a joint one.” Miley v. Nash, So.3d , 40 FLW D991a (Fla. 2d DCA 4-29-15). 

Once an exquisitely clear statute, § 768.79 is now utterly gummed up by an unnecessary, unhelpful court rule and inconsistent, indecipherable decisions. It hurts to say it, but the only hope now is for the Florida Legislature (itself hardly a model of efficiently functioning government) to restate a single, workable rule that the courts should be prepared to follow. 

PIP Medicare Schedule Election 

An Allstate policy stated, “Any amounts payable under this coverage shall be subject to any and all limitations, authorized by section 627.736 . . . including, but not limited to, all fee schedules.” This provided adequate notice, as required by the PIP statute, of Allstate’s election to use the Medicare schedule. Allstate Fire & Cas. Ins., Etc. v. Stand-up MRI of Tallahassee, P.A., So.3d , 40 FLW D693b (Fla. 1st DCA 3-18-15). 

Expert Discovery (Double) Standard 

A trial judge ordered a CME doctor in a UM case to disclose the total amount of money paid to him by the defendant or its insureds, as well as documents showing the amount or percentage of defense expert work he performed over a three-year period – if the documents existed. 

The judge no doubt felt confident as he signed this order, since the Fourth DCA had expressly upheld similar discovery from a treating physician in Brown v. Mittleman, 152 So.3d 602 (Fla. 4th DCA 2014).
“Surely, if this disclosure can be required of a treater, who is just involved to help someone get well, it can be required of a professional witness who voluntarily engages into the litigation for profit,” mused the learned judge as he allowed the ink to dry. 

But then, on cert review no less, the Fourth DCA ruled that the judge had departed from the essential requirements of law. #Double-standard #You’rekiddingme #thatcantbethelaw #Butwaitwhatnow. Grabel v. Sterrett, So.3d , 40 FLW D1014b (Fla. 4th DCA 4-29-15). 

Let’s slow down, and even back up a minute. Twenty-five years ago, the idea of doing financial relationship discovery on retained experts had flourished and, in the eyes of the Supreme Court, had gotten a little out of hand. In Elkins v Sykens, 672 So. 2d 517 (Fla. 1996), they approved the Third DCA’s decision that laid out relatively clear rules on what sort of intrusive discovery would be permitted into financial relationship bias of specially-retained experts. 

The balance they struck was designed to preserve legitimate disclosure of bias, while preventing discovery from becoming an out-of-control sideshow intended to demoralize even hardened professional witnesses. The Supreme Court wrote: 

In essence, an overly burdensome, expensive discovery process will cause many qualified experts, including those who testify only on an occasional basis, to refrain from participating in the process, particularly if they have the perception that the process could invade their personal privacy. To adopt petitioners’ arguments could have a chilling effect on the ability to obtain doctors willing to testify and could cause future trials to consist of many days of questioning on the collateral issue of expert bias rather than on the true issues of liability and damages. 

An approximation of these guidelines was adopted into the Florida Rules of Civil Procedure. Nobody really thought treating doctors, remediation contractors, or similar “experts” – who only get wrapped up into a case by trying to help someone who needs it, rather than by accepting an engagement as a professional witness – would ever get involved in this mess. 

But then it started, with defendants nitpicking about letters of protection. And now, Brown v. Mittleman is only one of the latest in a line of cases permitting essentially limitless discovery into the financial relationship between a treating physician and the plaintiff’s attorneys. See Tips for Auto Practitioners, Oct./Nov. 2014. 

In fact, treating physicians now face a higher level of intrusion into their personal affairs than paid, professional witnesses who do nothing else with their medical degrees except, ironically, declare dozens of people a week to be malingerers bending the truth for money. 

The Fourth DCA held that the rule mandating disclosure from retained experts is actually a protective one that gives special favorable treatment to CMEs and other retained experts, but not treating physicians. Here is how it distinguished Brown

There is no dispute that the doctor here is an expert witness retained by the insurer, and protected by Rule 1.280. He candidly testified that 99 percent of his litigation work is on behalf of the defense. He has testified for the defense on 57 occasions related to examinations since 2006. He appeared at his deposition and provided the information required by Rule 1.280(b)(5). And, as noted by the insurer’s counsel, plaintiff has obtained, or can obtain, records regarding payments from the insurer to the doctor, pursuant to Allstate Ins. Co. v. Boecher, 733 So.2d 933 (Fla. 1999). This is more than sufficient information to reveal any potential bias. 

Grabel, 40 FLW D1014b. 

So if an expert abandons all pretense of fairness, and just confesses that he has sold himself out to stand in service to the insurance industry, he will be immunized from further discovery. Meanwhile, the Harvard-trained pediatric neuro-surgeon, who treats a child’s spinal injury on the promise of payment whenever the liability carrier gets around to paying the claim, gets no protection at all from intrusion into their personal finances. 

Instead, plaintiff’s treating physicians can be subjected to extensive and obtrusive financial discovery to ferret out the full extent of the relationship between the physician and the plaintiff’s attorney if there is any suggestion at all of a “referral relationship.” Steinger, Iscoe & Greene, P.A. v. GEICO Gen. Ins. Co., 103 So.3d 200 (Fla. 4th DCA 2012). 

In Lytal, Reiter, Smith, Ivey & Fronrath, L.L.P. v. Malay, 133 So.3d 1178 (Fla. 4th DCA 2014), the court compelled plaintiff’s law firm to provide a list of all payments made to the plaintiff’s treating physician over the last three years, where the doctor did not have any records. 

How is it, we wonder, that no district court feels the need to establish protective boundaries for treating physicians as the Elkins court did two and a half decades ago for retained experts? There is an echo in the courthouse hallway. It is a distant call, but the message from Justice Stephen Grimes in the Elkins Supreme Court opinion is clear: 

To allow discovery that is overly burdensome and that harasses, embarrasses, and annoys one’s adversary would lead to a lack of public confidence in the credibility of the civil court process. The right to a jury trial in the constitution means nothing if the public has no faith in the process and if the cost and expense are so great that access is basically denied to all but the few who can afford it.

By Dale M Swope || Mr. Swope is the founder of Swope, Rodante, P.A. in Tampa. He is a member and sernior fellow of the FJA Executive Committee and founder and past President of the Tampa Bay Trial Lawyers Association. He specializes in cases involving catastrophic personal injury, wrongful death and insurance bad faith claims.

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