"California Court Finds No Duty Owed to Reinsurer by Defense Attorney Who Was Hired by the Primary Carrier
May 15, 2007
Zenith Insurance Company v. Cozen O’Connor, ___Cal.Rptr.3d___, 2007 WL 841119 (Cal.App. 2 Dist. 2007)
The California Court of Appeal for the Second District affirmed the dismissal of a legal malpractice claim brought by a reinsurer against a law firm hired by the primary carrier to represent the insured. The court held that the firm owed no duty of care to the reinsurer because no attorney-client relationship existed under an implied contract, nor was the reinsurer a third party beneficiary of the underlying attorney-client relationship.
Royal Insurance Company (“Royal”), the primary carrier, had entered into a reinsurance agreement with Zenith Insurance Company (“Zenith”) for coverage provided by Royal to Foss Maritime (“Foss”) regarding liability for the environmental cleanup of the Middle Waterway of Commencement Bay in Tacoma, Wash. (the “Middle Waterway claim”). Royal advised Zenith that there were 22 other insurers potentially liable for the same claim. Royal engaged the Cozen O’Connor firm to provide legal services to Royal regarding this claim, as well as other Foss pollution claims in the State of Washington. "