§77.4 Liability of Insurer for Acts of an Attorney

The Case: Trau-Med of America, Inc. v. Allstate Ins. Co., 71 S.W.3d 691 (Tenn. 2002).

The Basic Facts: Plaintiff brought suit against Defendant insurance company for tortious interference with a business relationship, conspiring to destroy Plaintiff's business reputation and a number of other claims after Defendant allegedly, inter alia, made libelous statements and created "defamatory documents for the purpose of ruining its reputation in the legal community." 71 S.W.3d at 695-697.

The Bottom Line:

• "The preliminary issue in this case is whether an insurance company can be held vicariously liable for the actions of counsel hired by the company to represent the insured." Id. at 697.
• "However, where, as here, the insurer is alleged to have 'controlled the details of the attorney's performance, or dictated the strategy or tactics employed,' or otherwise directed the attorney's conduct of the actual litigation, the insurer may be held vicariously liable for the conduct of that attorney. Givens v. Mullikin, [75 S.W.3d 383 (Tenn. 2002)]." Id.
• "After carefully examining the factual averments in the complaint, we conclude that Trau-Med has made sufficient allegations that, if proven, would give rise to vicarious liability on the part of Allstate. Specifically, Trau-Med claims that in several actions filed in the Circuit Court of Shelby County, Allstate 'instigated and caused [Motions] in Limine to be filed,' which alleged that Trau-Med was engaging in unlawful activity. Trau-Med further maintains that 'the allegations in these Motions in Limine were instigated by Allstate through its financial clout with the attorneys it hired to represent its policyholders; that the allegations are totally false[, and] were maliciously made with the intent to destroy [Trau-Med] and its business.' Consequently, if the proof supports the allegations in the complaint that Allstate exercised actual control over the attorneys hired to defend the insureds by directing them to file defamatory motions, Allstate is vicariously liable under the laws of agency for the harm proximately resulting from the attorneys' conduct." Id. at 697-98.

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