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7th Circuit rejects lawsuit on insurer’s use of in-house counsel

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The 7th Circuit Court of Appeals Tuesday agreed that a woman’s lawsuit against State Farm Mutual Automobile Insurance Co. should be dismissed because state law creates no obligation for an insurer to provide advance notice to an insured that it uses in-house counsel to defend its policyholders.

Cindy Golden, who is insured by State Farm, brought her lawsuit after State Farm in-house attorney Patrick J. Murphy represented her in a lawsuit that was a result of an accident she was in. Her policy says that in the event of the accident, State Farm will pay “attorney fees for attorneys chosen by us to defend an insured who is sued” for damages.

Murphy sent Golden a letter telling her that he worked full time for State Farm. The lawsuit went to trial, and State Farm paid the nearly $4,000 judgment entered against Golden.

She filed her purported class action, claiming that State Farm had a duty to disclose at the time of the policy issuance the possibly that house counsel would be used in the event of a third-part lawsuit. She alleged breach of “special, confidential and fiduciary duties and common law duties to disclose,” breach of duty of good faith and fair dealing, and unjust enrichment.

Golden cited Cincinnati Insurance Co. v. Wills, 717 N.E.2d 151, 155-56 (Ind. 1999), saying the state’s justices acknowledged such a duty exists. But the case is not on point with hers, the 7th Circuit noted, as the insurance company in that suit used in-house counsel but made it seem like they were from an outside firm.

Current law does not require an insurer to disclose at the outset that its choice of counsel in the event a claim arises may be in-house counsel. The level of disclosure required is up to the insurance commissioner to decide, and the Indiana Department of Insurance has not chosen to require the type of notice that Golden requests, Judge Ilana Rovner wrote in Cindy Golden v. State Farm Mutual Automobile Insurance Company, 12-3901.

The judges also rejected Golden’s request that the court certify the question of policy disclosure to the Indiana Supreme Court.

“As our discussion of Wills should make clear, we are not ‘genuinely uncertain’ about whether an insurer is obligated to disclose, at the time of policy issuance, its practice of using house counsel to defend insureds,” she wrote. “Nor do we believe this case presents a ‘matter of vital public concern’ worthy of certification to the Indiana Supreme Court.”
 

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  1. I just wanted to point out that Congressman Jim Sensenbrenner, Senator Feinstein, former Senate majority leader Bill Frist, and former attorney general John Ashcroft are responsible for this rubbish. We need to keep a eye on these corrupt, arrogant, and incompetent fools.

  2. Well I guess our politicians have decided to give these idiot federal prosecutors unlimited power. Now if I guy bounces a fifty-dollar check, the U.S. attorney can intentionally wait for twenty-five years or so and have the check swabbed for DNA and file charges. These power hungry federal prosecutors now have unlimited power to mess with people. we can thank Wisconsin's Jim Sensenbrenner and Diane Feinstein, John Achcroft and Bill Frist for this one. Way to go, idiots.

  3. I wonder if the USSR had electronic voting machines that changed the ballot after it was cast? Oh well, at least we have a free media serving as vicious watchdog and exposing all of the rot in the system! (Insert rimshot)

  4. Jose, you are assuming those in power do not wish to be totalitarian. My experience has convinced me otherwise. Constitutionalists are nearly as rare as hens teeth among the powerbrokers "managing" us for The Glorious State. Oh, and your point is dead on, el correcta mundo. Keep the Founders’ (1791 & 1851) vision alive, my friend, even if most all others, and especially the ruling junta, chase only power and money (i.e. mammon)

  5. Hypocrisy in high places, absolute immunity handed out like Halloween treats (it is the stuff of which tyranny is made) and the belief that government agents are above the constitutions and cannot be held responsible for mere citizen is killing, perhaps has killed, The Republic. And yet those same power drunk statists just reel on down the hallway toward bureaucratic fascism.

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