Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
May 24, 2022
Lawyer Appointed by Insurer had a Duty of Zealous Representation

DEFENSE LAWYER HIRED BY INSURER DOES NOT BIND INSURER
Read the full article at https://lnkd.in/g4sZvcXe and at https://zalma.com/blog plus more than 4200 posts.

Posted on May 24, 2022 by Barry Zalma

Comegys, an independent insurance agency, had an independent contractor relationship with Safeco, a liability insurer-in short, Comegys marketed Safeco insurance policies to the public. Comegys was allegedly negligent in procuring automobile insurance for one of its clients, Robert Smith. Comegys had provided Smith with an automobile insurance policy from Safeco, which Smith eventually needed to rely on when he caused a car accident that ended in a motorcyclist’s death. Comegys offered to settle (and did settle through the errors and omissions policy it had with Endurance) the potential negligence claim Smith had against it.

In Endurance American Specialty Insurance Company et al v. Liberty Mutual et al, No. 19-14664, United States Court of Appeals, Eleventh Circuit (May 16, 2022) the Eleventh Circuit resolved the dispute.
FACTS

Relying on the indemnification provision between Safeco and Comegys, Endurance sued Safeco. Endurance wants to be indemnified by Safeco because the attorney Safeco provided to Smith after the car accident pointed out the potential negligence claim Smith had against Comegys.

At trial, the jury found that, because Safeco had refused to indemnify Comegys, Safeco had both breached its contract with Comegys and violated the implied covenant of good faith and fair dealing. The jury awarded Endurance, the errors and omissions insurer for Comegys, about $1.6 million in damages plus a $25,000 deductible and $30,000 in attorneys’ fees paid by Comegys during litigation. Safeco appealed.

Comegys and Safeco operated under a contract, the Limited Agreement, that allowed Comegys to act as an independent contractor for Safeco “for the limited purpose of placing Safeco insurance products.”

The Limited Agreement contained a set of indemnification clauses between Comegys and Safeco. The indemnification agreements provided:

Safeco agreed to take responsibility when it messed up and its mess-up affected Comegys (and Comegys agreed to do likewise), and

Whether Safeco (or Comegys) messed up was defined by the terms of the Limited Agreement.

Smith’s Safeco automobile insurance policy became important when his car caused an accident with a motorcyclist in June 2015. About two weeks after the incident, the motorcyclist died in the hospital of his injuries.
No alt text provided for this image

Twelve days after the motorcyclist’s death, Safeco tendered Smith’s $1.25 million policy limit to the motorcyclist’s estate by mail. The estate rejected the tender because the estate believed its claim was more than the policy limit. In compliance with the insurance policy, Safeco then provided Smith with a defense attorney, whose job it was to represent Smith in any case the estate brought against him.

Smith’s attorney and the estate’s attorney then began discussing how to settle. In reviewing the history of the case, Smith’s attorney realized that Comegys might have been negligent in procuring automobile insurance for Smith. After the estate officially filed a wrongful death action against Smith in state court in December 2015, Smith’s attorney reached out to Comegys, asking Comegys to indemnify and defend Smith on the basis that Comegys had negligently procured insurance for Smith prior to the accident.

After a non-binding arbitration found Smith responsible for $7 million in damages, Smith and the estate entered into a joint stipulation and agreement. The terms of the joint stipulation were that the parties would agree to a mutual release of all claims, in exchange for Safeco’s $1.25 million policy limit on Smith and Smith’s assignment to the estate of his negligent procurement claim against Comegys.

The estate then sent Comegys a demand for $2 million based on Smith’s negligent procurement claim. Comegys’s errors and omissions insurance with Endurance had a policy limit of $2 million. Comegys and the estate settled for about $1.5 million in exchange for Comegys’ release from all liability. The settlement explained that Comegys was not at all admitting fault or wrongdoing in procuring insurance for Smith. As Comegys’ errors and omissions insurer, Endurance paid out this sum to the estate.

Endurance, on Comegys’ behalf, filed suit against Safeco for, among a host of other things, breach of the indemnification agreement between Comegys and Safeco in the Limited Agreement and breach of the implied covenant of good faith and fair dealing.

The case went to trial. In what the Eleventh Circuit concluded must have been the jury attributing the actions of Smith’s attorney to Safeco the jury then agreed with Endurance that Safeco had breached the indemnification provision and the implied covenant of good faith and fair dealing and entered a multi-million dollar judgment in favor of Comegys.
ANALYSIS

Under Florida law, indemnity contracts are subject to the general rules of contractual construction and must be construed on the express intentions of the parties. Looking at this breach-of-contract case, there is one problem according to the Eleventh Circuit, there was no breach. So, there was no legally sufficient evidentiary basis for Endurance to win this case.

Endurance apparently distracted the jury with facts that are totally irrelevant to this appeal. The distraction method may have worked with the jury in this case, but it did not work with the Eleventh Circuit.

What Endurance leaves off is that for Safeco’s actions to fall under the indemnification provision, the actions must fall into one of three buckets:

Safeco has breached the Limited Agreement;

Safeco has negligently or intentionally committed an act, error, or omission in the placement of business pursuant to the Limited Agreement; or

Safeco has negligently committed an act, error, or omission in the carrying out the terms of the Limited Agreement.

FIRST: Comegys was within the scope of its authority when it procured a Safeco insurance policy for Smith. Safeco then covered Smith. In due course, when Smith had an accident and needed his insurance coverage to kick in, Safeco tendered the policy limit within twelve days of the motorcyclist’s death. Safeco provided Smith with an attorney to negotiate the claim. And Safeco ultimately paid the policy limit pursuant to the settlement between Smith and the estate. In other words, Safeco covered Smith, just like it told Comegys it would in the Limited Agreement.

SECOND & THIRD: Endurance’s case is based on two facts: Smith’s attorney (provided by Safeco) 1) brought up the possible negligent procurement claim to the estate during negotiations and 2) recommended an insurance lawyer to the estate, if the estate wanted to assume the negligent procurement claim against Comegys in Smith’s place.

In a very generous reading of Endurance’s arguments at trial, it is basically saying that Safeco acted through the attorney it provided to Smith, ultimately prompting Comegys to voluntarily settle with the estate without Comegys admitting any fault. Endurance argued, because Comegys settled with the estate as a volunteer, Safeco now must indemnify Comegys even though Comegys never admitted any liability.

Endurance’s position was that Endurance equates the actions of Smith’s attorney with the actions of Safeco. However, the two are not the same. Safeco was bound by the terms of the Limited Agreement. Smith’s attorney, on the other hand, was not bound to protect Comegys in any way. Smith’s attorney had a duty of zealous representation, which is exactly what he provided to Smith in settling with the estate. Smith’s attorney was acting on behalf of Smith, not on behalf of Safeco.

The next problem with Endurance’s argument is that by looking at the plain (and clear) language of the Limited Agreement between Comegys and Safeco, it cannot be read as covering in any way, shape, or form how Safeco ultimately insures its policyholders.

Finally, Endurance’s breach-of-contract claim hinges on the fact that the indemnification provision protects Comegys from all liability or loss arising out of Safeco’s breach. The problem for Comegys is that in its settlement agreement with the estate it specifically disclaimed all liability, and it has not proven that it lost anything because of Safeco’s actions.

Because the indemnification provision between Safeco and Comegys hinges on Comegys having some sort of liability or demonstrating that Safeco’s actions caused loss, Safeco is not liable where Comegys is a volunteer in settlement. A court cannot create coverage out of whole cloth where it otherwise would not exist.

The Eleventh Circuit concluded that it refused to penalize Safeco for Comegys’ volunteer payment to the estate. Even if Comegys had been negligent and that fact had been proven in court by the estate, the Eleventh Circuit would still refuse to hold Safeco liable for Comegys’ own alleged negligence because Florida requires those kinds of arrangements to be clearly stated by contract. Safeco, therefore, was entitled to judgment as a matter of law. The case is remanded for entry of judgment in favor of Safeco.
ZALMA OPINION

Comegys convinced a jury that a lawyer appointed by an insurer to defend an insured is the insurer when, in fact, the lawyer is retained only to defend the insured, Smith, to the best of his or her ability. The lawyer’s action, working to best defend Smith cannot be claimed as wrongdoing against another. Comegys convinced the jury but could not convince the Eleventh Circuit because it, unlike the lawyer for Comegys and the jury, read the contract.
No alt text provided for this image

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].

Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe.

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
September 26, 2025
No Way Out After Murder Conviction

Intentionally Shooting a Woman With A Rifle is Murder

Post 5196

See the full video at and at and at https://zalma.com/blog and more than 5150 posts.

You Plead Guilty You Must Accept the Sentence

In Commonwealth Of Pennsylvania v. Mark D. Redfield, No. 20 WDA 2025, No. J-S24010-25, Superior Court of Pennsylvania (September 19, 2025) the appellate court reviewed the case of Mark D. Redfield, who pleaded guilty to third-degree murder for killing April Dunkle with malice using a rifle.

Affirmation of Sentence:

The sentencing court’s judgment was affirmed, and jurisdiction was relinquished, concluding no abuse of discretion occurred.

Reasonable Inference on Trigger Pulling:

The sentencing court reasonably inferred from the guilty plea facts that the appellant pulled the trigger causing the victim’s death, an inference supported by the record and consistent with the plea.

Guilty Plea Facts:

The appellant admitted during the plea hearing...

00:07:16
placeholder
September 25, 2025
Prelitigation Communications Privileged

The Judicial Proceedings Privilege
Post 5196

Posted on September 25, 2025 by Barry Zalma

See the full video at and at

Judicial Proceeding Privilege Limits Litigation

In David Camp, and Laura Beth Waller v. Professional Employee Services, d/b/a Insurance Branch, and Brendan Cassity, CIVIL No. 24-3568 (RJL), United States District Court, District of Columbia (September 22, 2025) a defamation lawsuit filed by David Camp and Laura Beth Waller against Insurance Branch and Brendon Cassity alleging libel based on statements made in a letter accusing them of mishandling funds and demanding refunds and investigations.

The court examined whether the judicial proceedings privilege applieD to bar the defamation claims.

Case background:

Plaintiffs Camp and Waller, executives of NOSSCR and its Foundation, sued defendants Insurance Branch and Cassity over a letter alleging financial misconduct and demanding refunds and audits. The letter ...

00:07:56
placeholder
September 24, 2025
Untrue Application for Insurance Voids Policy

Misrepresentation or Concealment of a Material Fact Supports Rescission

Post 5195

Don’t Lie to Your Insurance Company

See the full video at and at https://rumble.com/v6zefq8-untrue-application-for-insurance-voids-policy.html and at https://zalma.com/blog plus more than 5150 posts.

In Imani Page v. Progressive Marathon Insurance Company, No. 370765, Court of Appeals of Michigan (September 22, 2025) because defendant successfully established fraud in the procurement, and requested rescission, the Court of Appeals concluded that the Defendant was entitled to rescind the policy and declare it void ab initio.

FACTS

Plaintiff's Application:

Plaintiff applied for an insurance policy with the defendant, indicating that the primary use of her SUV would be for "Pleasure/Personal" purposes.

Misrepresentation:

Plaintiff misrepresented that she would not use the SUV for food delivery, but records show she was compensated for delivering food.

Accident:

Plaintiff's SUV was involved in an accident on August ...

00:07:48
September 09, 2025
The Dishonest Chiropractor/Physician

How a Need for Profit Led Health Care Providers to Crime
Post 5185
Posted on September 8, 2025 by Barry Zalma

See the full video at https://lnkd.in/gePN7rjm and at https://lnkd.in/gzPwr-9q

This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.

The Dishonest Chiropractor/Physician

How a Need for Profit Led Health Care Providers to Crime

See the full video at and at

This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime.

How Elderly Doctors Fund their ...

placeholder
September 08, 2025
The Dishonest Chiropractor/Physician

How a Need for Profit Led Health Care Providers to Crime
Post 5185
Posted on September 8, 2025 by Barry Zalma

See the full video at https://lnkd.in/gePN7rjm and at https://lnkd.in/gzPwr-9q

This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.

The Dishonest Chiropractor/Physician

How a Need for Profit Led Health Care Providers to Crime

See the full video at and at

This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime.

How Elderly Doctors Fund their ...

placeholder
September 03, 2025

Barry Zalma: Insurance Claims Expert Witness
Posted on September 3, 2025 by Barry Zalma
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit

© 2025 Barry Zalma, Esq., CFE

When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.

On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...

post photo preview
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals