New Plumbing Contractors v. Edwards, Sooy & Byron

Opinion

BEDSWORTH, J.

New Plumbing Contractors, Inc., appeals from summary judgment for the law firm of Edwards, Sooy & Byron in a professional negligence action. It argues there are triable issues of fact. We disagree, and so affirm.

[801]

New Plumbing provides plumbing services to developers and general contractors. Between 1985 and 1991, it carried comprehensive general liability insurance issued by Nationwide Mutual Insurance Company.

1

The policy contained a “consent clause” that gave Nationwide the right to settle claims against its insured: “[Nationwide] may at our discretion investigate any ‘occurrence’ and settle any claim or ‘suit’ that may result.”

Nationwide provided the contractor with a defense in numerous construction defect cases.

2

In 1996, they hired the law firm of Edwards, Sooy & Byron (Edwards) to defend New Plumbing in a case the parties refer to as “Brown/Emery.” On November 15, 1996, the contractor purchased insurance for the coming year (through Nov. 15, 1997) from a new insurer (Gerling) at a substantially higher premium and deductible than its prior coverage (with Fireman’s Fund for the years 1994 to 1996). Then, on December 18, 1996, at the recommendation of Edwards, Nationwide and the other insurers involved agreed to settle the Brown/Emery matter for $130,000, of which Nationwide paid $48,750. The settlement was within the policy limits.

The instant action was commenced in April 1999. The record does not contain that pleading, but only a fourth amended complaint filed in 2000. There, New Plumbing set out causes of action for professional negligence and breach of fiduciary duty against Edwards.

3

The operative allegations in both are the same—Edwards did not notify the contractor of the settlement negotiations, and it failed to properly defend the action, ignoring valid defenses that would have absolved New Plumbing of any liability. As a result of the settlement, New Plumbing alleged it had to pay higher premiums, accept lower coverage and higher deductibles, and deal with financially weaker carriers to obtain insurance thereafter. Edwards moved for summary judgment on the ground that New Plumbing could not establish causation or damages, because the insurer had the absolute right to settle the case and there was no evidence that the contractor’s increased premiums in 1997 were the result of the Brown/Emery settlement.