There are a number of ways to look at Baker Donelson Bearman & Caldwell, P.C. v. Muirhead, 2006 WL 177593 (Miss. January 26, 2006). First, it shows why forum shopping is alive and well, because this case would not have happened in a state with different bad faith laws, like Oregon. Second, it can be looked upon as a rags to riches story about a guy who beat someone up in a parking lot and wound up several years later with a judgment in his favor for $1.6 million. Third, it shows why insurance coverage is considered a specialty field best left to the experts. It is full of minefields, traps for the wary and unwary alike, abandoned wells and deadfalls.
The bizarre events of the case began with a hotel drinking party attended by numerous employees of a company, followed by a fight in the parking lot between one of the employees, Jack Muirhead, and a stranger. The stranger’s leg was broken, and he sued Muirhead. Muirhead hired his own attorney, and for some reason did not tender the defense to his company’s insurer. The insurer, however, became aware of the lawsuit after the plaintiff amended the complaint and added Muirhead’s employer and the hotel as defendants.
The insurer, Great River, did not obtain a coverage opinion from an attorney, but instead apparently came to the conclusion on its own that it had no duty to defend Muirhead. In any event, he didn’t ask for a defense, and a jury returned a $12,000 verdict against him for assaulting the plaintiff. Then Muirhead asked that Great River reimburse him for his defense costs and pay the judgment. At that point, Great River hired Baker Donelson for a coverage opinion. The firm’s opinion was that Great River should deny Muirhead’s claim. Following the denial, Muirhead then sued Great River for bad faith.
Great River hired Baker Donelson to defend it in the bad faith suit. The firm produced another coverage analysis that basically indicated the bad faith suit was unlikely to succeed. Muirhead then won summary judgment on the duty to defend (a much broader duty than the duty to indemnify, or actually pay a judgment). Great River re-evaluated, hired new lawyers, settled with Muirhead for $500,000 and assigned 75 percent of the insurer’s malpractice claims against Baker Donelson to Muirhead.
The malpractice case then went to trial, and the jury returned a verdict of $1.6 million, including punitive damages and attorney fees. Eventually, the case wound up before the Mississippi Supreme Court, which overturned the jury verdict as being against the great weight of the evidence because, the court said, Baker Donelson had as a matter of law not committed malpractice.
Now, some may be curious what I thought of the Baker Donelson coverage opinions. I am not going to tell you, because the snippets I read in the court’s opinion can’t do justice to the totality of the analysis, and I don’t know Mississippi law. I will say, however, that this case made me reflect that it is quite easy even for experienced practitioners to get mixed up on the duty to defend and to confuse what is alleged in the complaint with what the facts actually are, especially when an analysis is done after the facts are already determined. The question of when conduct constitutes uncovered intentional acts is also an analysis that is a lot trickier than it might sound. Insurance coverage analysis is often like walking through a bog on a moonless night: it’s important to be able to tell a bush from a bear, but unfortunately it’s easier said than done until you fall right into it.
This case also made me reflect on Oregon law, which has no “bad faith” damages of the type feared by the insurer in this case. Under Oregon law, under the circumstances described, the insurer’s potential liability likely would have been the $12,000 underlying judgment plus the relatively small underlying attorney fees, not millions.