A while back I wrote a blog post on a district court ruling that an insurer did not have an obligation to disclose in its insurance policy that it would use staff counsel to defend the insured. The Seventh Circuit recently affirmed the district court’s decision granting the insurer’s motion to dismiss.
In Golden v. State Farm Mutual Automobile Insurance Company, No. 12-3901, 2014 U.S. App. LEXIS 4531 (7th Cir. Mar. 11, 2014), the court focused on the Indiana Supreme Court’s decision in Cincinnati Ins. Co. v. Willis, 717 N.E.2d 151 (Ind. 1999), finding that Willis concluded that the disclosure requirement was a matter for the state insurance commissioner to decide. The insurer had adequately disclosed staff counsel’s employment by the insurer at the time that staff counsel was engaged to defend the plaintiff. Given that the insurance commissioner had not issued any new regulation since Willis was decided in 1999, the court held that there was no obligation to disclose the use of staff counsel in the insurance policy itself. The court also noted that the plaintiff did not allege that her representation by staff counsel was detrimental to her in any way. She did not object to the representation, and the insurer paid the small judgment that was entered against her. It seemed to me that the plaintiff also had no standing to sue here, although the court did not frame its decision on standing grounds. The court declined to certify the question to the Indiana Supreme Court because it found the existing precedent sufficiently clear.
The use of staff counsel was hotly contested years ago, but has not been the subject of much litigation in recent years. The theory alleged here was creative but, particularly in light of the outcome here, it seems unlikely we’ll see a lot of class action filings on this issue.