Fire Ins. Exchange v. Bell by Bell
In Fire Ins. Exchange v. Bell by Bell (Ind. 1994) 643 N.E.2d 310, the principal question was "whether, and to what extent, a party who is represented by counsel has the right to rely on a representation by opposing counsel during settlement negotiations." ( Id. at p. 311.)
In that case, an infant was severely burned at his grandfather's home when a water heater ignited a fire. The infant's mother retained counsel, Robert Collins, who contacted Farmers Group, Inc., which had issued the grandfather's homeowners policy.
In negotiating a settlement, the attorney for Farmers stated that the policy limits were $ 100,000 when they were actually $ 300,000, as he knew. Based on that false information, Collins advised the infant's mother to settle for $ 100,000 and she did so. In subsequent litigation against the manufacturer of the water heater, Collins learned that the Farmers policy had limits of $ 300,000.
Collins filed an action on behalf of the infant against Farmers and its attorney, alleging a cause of action based on the misrepresentation of the policy limits. The defendants moved for summary judgment, contending that Collins "had, as a matter of law, no right to rely on the alleged misrepresentations because he was a trained professional involved in adversarial settlement negotiation and had access to the relevant facts." ( Fire Ins. Exchange v. Bell by Bell, supra, 643 N.E.2d at p. 312 (Fire Ins. Exchange).)
The trial court denied summary judgment. The Indiana Supreme Court affirmed, stating:
"The reliability and trustworthiness of attorney representations constitute an important component of the efficient administration of justice. A lawyer's representations have long been accorded a particular expectation of honesty and trustworthiness. ...
"... The reliability of lawyers' representations is an integral component of the fair and efficient administration of justice. The law should promote lawyers' care in making statements that are accurate and trustworthy and should foster the reliance upon such statements by others." ( Fire Ins. Exchange , supra, 643 N.E.2d at pp. 312-313.)
The court concluded that, as a matter of law, Collins had the right to rely on opposing counsel's representation of the policy limits. ( Id. at p. 313.)