Can the Counsel Attempt to Dictate Legal Strategies Retroactively After Having Breached Its Duty to Defend ?
In Aerosafe Intern., Inc. v. ITT Hartford of Midwest (N.D. Cal., July 23, 1993, No. C-92-1532 MHP) 1993 U.S. Dist, after the insurer refused to defend the insured, the insured hired its own counsel.
That counsel prepared but never filed a potential federal antitrust action and a state cross-complaint.
In the bad faith action, Hartford argued it should not be responsible for fees and costs related to preparing those actions and cross-complaints.
The court, applying California law, noted that "Hartford 'gave up the right to control the litigation.'
It cannot now complain that it will not pay for legal work-product that was prepared as part of Aerosafe's defense strategy simply because it was not filed.. . .
While Hartford may now opine that the preparation of such an action as part of Aerosafe's overall defense strategy was improvident or unreasonable, such an opinion hardly amounts to undeniable evidence.
Again, having breached its duty to defend, Hartford cannot now attempt retroactively to dictate the legal strategies of Aerosafe's lawyers.
The court will permit Hartford to provide evidence that the cross-complaint and federal antitrust action were unrelated to the defense of the Systron action.
However, under California's undeniable evidence standard, Hartford will have to show that the subject matter of these projects could not arguably be related to the Systron action." (Id.)