Within The Range Of Reasonable Alternatives
The Washington State Court of Appeals Division II has held that a trial court properly granted summary judgment to defendants
Roff and Bobbi Arden appeal the trial court’s summary judgment order dismissing their claims against Forsberg & Umlauf, PS, and attorneys John Hayes and William “Chris” Gibson (collectively Forsberg) for breach of fiduciary duties and legal malpractice. Property and Casualty Insurance Company of Hartford (Hartford), the Ardens’ homeowners’ insurance company, retained Forsberg to defend a lawsuit filed against the Ardens. Hartford provided the defense under a reservation of its rights to deny coverage for any judgment entered against the Ardens.
First, the Ardens argue that Forsberg breached its fiduciary duty of loyalty to them by defending them in a reservation of rights context while also representing Hartford in other cases. We hold as a matter of law that Forsberg’s representation of the Ardens while it also represented Hartford did not create a conflict of interest and that Forsberg had no obligation to notify the Ardens that they represented Hartford in other cases. We also hold that there is no evidence that Forsberg breached its duty of disclosure regarding the potential conflicts of interest between Hartford and the Ardens.
Second, the Ardens argue that Forsberg breached its fiduciary duty of loyalty to them during settlement negotiations. We hold that (1) as a matter of law, Forsberg had no duty to the Ardens to persuade Hartford to accept the claimants’ initial settlement offer; (2) there is no evidence that Forsberg breached a fiduciary duty regarding the Ardens’ interest in a swift resolution of the lawsuit; (3) a question of fact exists as to whether Forsberg breached its duty to consult with the Ardens before rejecting settlement demands, but there is no evidence that any breach injured the Ardens; and (4) even if Forsberg had a duty to consult with the Ardens before making settlement offers, there is no evidence that Forsberg breached any such duty regarding its first settlement offer and that the breach of any duty for the second settlement offer injured the Ardens.
Third, the Ardens argue that Forsberg was negligent in requesting an extension of the start of settlement negotiations when they had an interest in a prompt settlement. We hold that there is no evidence that Forsberg was negligent regarding its judgment decision to extend the start of settlement negotiations.
The case
The Ardens and Wade and Anne Duffy were neighbors in Shelton. In December 2011, Roff Arden shot and killed the Duffys’ puppy. He claimed that the shooting occurred after the puppy and another dog chased him and Bobbi down their driveway. The Mason County Sheriff’s Office investigated, and referred the investigation to the prosecutor’s office to pursue animal cruelty charges…
The Duffys filed suit against the Ardens in May 2012 after settlement negotiations broke down. The lawsuit apparently alleged that the Ardens were liable for (1) willful conversion of the dog, (2) malicious injury, (3) intentional or reckless infliction of emotional distress, and (4) gross negligence and willful or reckless property damage. The Ardens requested insurance coverage for the lawsuit from Hartford under the liability portion of their homeowners’ insurance policy. Hartford initially refused to defend the lawsuit based on an intentional act exclusion in its policy.
Holding
We assume, without deciding, that an attorney representing an insured in a reservation of rights case has an obligation to consider the insured’s “personal” interests, even though they may not directly affect the merits of the case. Under Tank, only the insured is the defense attorney’s client, and a defense attorney arguably cannot disregard his or her client’s interests. However, a client may have many, sometimes competing, interests that the attorney must consider in the exercise of his or her professional judgment in defending the case. Under the attorney judgment rule, the question is whether an attorney’s particular judgment decision is within the range of reasonable alternatives or whether the attorney was negligent during the decision-making process. Clark County Fire, 180 Wn. App. at 704.
Here, the Ardens had an interest in the prompt settlement of the case. However, they were not willing to settle unless Hartford funded the settlement. Therefore, the Ardens’ predominant interest was having Hartford fund any settlement. When the Duffys made a settlement demand before providing their discovery responses, the Ardens’ two interests conflicted. Without discovery responses, Hartford did not have enough information to evaluate the settlement demand. Therefore, without an extension of time there was no possibility that Hartford would agree to fund the $55,000 settlement demand.
The evidence shows that Forsberg made a judgment decision about the best way to obtain a settlement of the Duffy lawsuit with Hartford funding that settlement. Forsberg determined that the best strategy was to obtain an extension of time for responding to the Duffys’ settlement demand until after Hartford had enough information to determine the settlement value of the claim. The Ardens presented no evidence that this decision was outside the range of reasonable alternatives from the perspective of a reasonable, careful, and prudent attorney in Washington or that Forsberg somehow failed to exercise reasonable care in making that judgment decision. Accordingly, we hold that there is no evidence that Forsberg was negligent in delaying the beginning of settlement negotiations.
(Mike Frisch)