Court Limits Liability of Lawyers, Experts Who Testify for Insurers

The state Supreme Court, limiting the ability of claimants to win damages in insurance cases, ruled unanimously Monday that the attorneys for an insurer may not be sued for conspiring to improperly deny payment of a claim.

The court held that lawyers and expert witnesses who testify for insurance companies may not be held liable as conspirators when they are acting solely as the insurers’ agents--and not for their own personal gain.

The decision represented another restriction by the high court on efforts to obtain damages on the grounds that an insurance claim has been refused or delayed in bad faith.

Last August, the justices, reversing a milestone 1979 ruling, barred any future bad-faith lawsuits against insurers under a state law prohibiting unfair insurance practices.

In Monday’s ruling, the court, in an opinion by Justice Marcus M. Kaufman, overturned a novel 1983 appeal court ruling that allowing such suits against lawyers had caused widespread concern among attorneys for insurers and policyholders.

In briefs to the court, lawyers for the Assn. of Southern California Defense Counsel, the Assn. of California Insurance Companies and other groups had contended that the appellate decision would improperly force attorneys to guard against being sued by trying to divide their loyalties between the insurers they represented and the claimant against the insurer.

Alan G. Martin, a Beverly Hills attorney for the insurer in the case before the court, welcomed Monday’s ruling. He said he hopes it will help reverse a recent flurry of conspiracy suits against lawyers in hard-fought legal disputes.

“Lawyers have to have some freedom of action, to be able to represent their clients without fear that in doing so they are opening themselves up to lawsuits,” Martin said.

Bruce G. Fagel of Beverly Hills, an attorney for a Riverside boy who brought a conspiracy suit against the insurer and its lawyers, charged that the ruling, combined with last year’s high court decision, would make it more difficult than ever to contest bad-faith refusal to honor insurance claims.

“The Supreme Court has been gradually whittling away at individual rights and making it harder to collect damages in these cases,” Fagel said. “It’s going to make it even harder to get a good result in court.”

Fagel said that because the case was brought before last year’s ruling barring bad-faith suits against insurers, he will still be able to seek damages against the insurance company itself.

The case arose from a medical malpractice suit brought by attorneys for 8-year old Jose Antonio Valencia against Dr. M. F. Osman, a Riverside physician, and a Riverside County hospital for injuries the boy received at birth in 1979. Ultimately, after a long court case, the youth won a settlement of $1.75 million in the malpractice case from the doctor’s insurer and the hospital.

Separately, attorneys for Valencia brought another suit under the state insurance statute against Osman’s insurer, The Doctors’ Co.; the Santa Ana law firm of Rigg, Dean & Mower, which represented the insurer and the doctor; and Dr. Keith Russell, a physician who testified as an expert witness in defense of Osman.

This suit charged that the insurer and its lawyers conspired in violation of the law by improperly refusing to settle Valencia’s malpractice claim and plotted to withhold evidence of Osman’s alleged negligence from Russell, their own expert.

The defendants sought to win dismissal of the conspiracy charges but the suit was upheld by the state Court of Appeal, citing the 1983 appellate ruling allowing such suits.

The high court, reversing the appellate ruling on Monday, said that under the state insurance law the insurer’s lawyers and its expert witness could not be held liable for civil conspiracy.