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Lloyd's Launches $30M Fight
Insurer says lawyers botched defense of apartment owner in swimming pool accident
Lloyd's of London filed suit Thursday in Florida against the law firms Carlton Fields and Cozen O'Connor, seeking to recover a previously undisclosed $30 million settlement the insurance giant paid in a 2003 swimming pool negligence case.
The London-based insurer alleges that lawyers from the two firms committed a variety of blunders and oversights in representing the defendant building owner, which carried a $1 million liability policy from Lloyd's.
In the 45-page complaint filed in Broward County Circuit Court, Lloyd's is suing under the theories of legal malpractice and equitable subrogation. It not only seeks to collect the $30 million settlement but all expenses, costs and attorney fees it paid to Carlton Fields and Cozen O'Connor during the litigation.
One of the key contentions in the suit -- which is being handled by the prominent Miami plaintiff firm Grossman & Roth -- is that the defense lawyers failed to properly advise Lloyd's that the damages could far exceed the policy limit and that the carrier should quickly offer the limit to avoid the high risk of a big judgment.
Carlton Fields' general counsel, Peter J. Winders, said that after conducting a review of the case, "we have determined that nothing we did or didn't do resulted in any loss to Lloyd's." He said his Tampa-based firm's role was limited in the case -- even though his firm's attorneys served as the trial lawyers under the oversight of Cozen O'Connor.
Representing Philadelphia-based Cozen O'Connor, Thomas Tew, a partner at Tew Cardenas in Miami, contended that Lloyd's was well aware of the risks of a big judgment in the pool liability case.
"When all of the evidence is in, it will show that the underwriters knew the duty and the risk they were running," Tew said. "Who better than Lloyd's would know these things? To me, they are just trying to lay off the $30 million without giving due weight to their contributory negligence."
The malpractice suit contends that the defense lawyers negligently failed to settle the case for the policy limit of $1 million. Instead, they took the case -- which was filed by the family of a catastrophically injured girl -- to trial last year and lost a $100 million jury verdict.
Under Florida law, if the insurer pays the policy limit, the carrier faces no further liability. If the policy limit is not paid, however, then the insurer is liable for the entire judgment.
"The defendants failed to advise underwriters of its affirmative duty to resolve the case even absent a demand in light of clear liability and catastrophic damages, likely to be in excess of the available insurance policy limits," the suit claims.
The decision by Lloyd's to hire Stuart Z. Grossman and Neal A. Roth to handle the malpractice claim is unusual because insurers like Lloyd's generally hire larger, full-service firms for legal representation.
Cozen O'Connor has more than 450 lawyers in 20 offices in the United States and London, but has no presence in Florida. Carlton Fields has six offices in Florida and recently announced plans to open a new office in Atlanta. In the Miami Daily Business Review's annual Review 15, Carlton Fields' South Florida offices ranked as No. 14 among the region's largest firms and reported $30.5 million in revenue in 2003.
The case arose from a May 2001 swimming pool accident at a Hollywood, Fla., apartment complex. Two-year-old Loren Hinton wandered away from her parents, pushed open a pool gate that had a broken latch, and nearly drowned in the pool. She suffered permanent and catastrophic brain damage.
The Hintons sued the owner of the apartment complex, 2231 Adams Street Corp., which had a $1 million liability insurance policy with Lloyd's. They claimed the apartment owner negligently failed to maintain a secure latch on the pool gate and had ignored previous warnings about the problem.
In January 2003, a Broward Circuit Court jury awarded $100 million to the little girl and her parents, Lonnie and Lorri Hinton.
According to the lawsuit, Lloyd's first retained Cozen O'Connor in the case, then hired Carlton Fields to serve as Florida counsel. At trial, the Hintons were represented by Michael A. Haggard and William Andrew Haggard of Haggard Parks Haggard & Bologna in Coral Gables, Fla., while Lloyd's was represented by John F. Kennedy and Paul L. Nettleton from Carlton Fields' Miami office.
In an interview, Grossman said that Lloyd's approached him last November to represent the insurer in trying to settle the case, then to file a malpractice suit to try to win the settlement back. Interest on the $100 million verdict was accruing at an annual interest rate of 6 percent.
On May 13, six days before the 4th U.S. District Court of Appeal was scheduled to hear the defendant's appeal of the verdict, a settlement was reached for $30 million. Grossman and Roth represented Lloyd's in the settlement negotiations with Michael and Andrew Haggard. At the time, the $30 million settlement was not disclosed, but the amount was mentioned in the malpractice suit filed Thursday.
"We had to get the monkey off [Lloyd's] back," Grossman said about the settlement. "Now it's our turn to sue for the $30 million."
SENT CHECK TOO LATE
The malpractice complaint alleges that right after Loren Hinton's accident, the defense attorneys realized that the damages were likely to exceed the $1 million policy limit. But on three separate occasions, attorneys from Carlton Fields and Cozen O'Connor failed to advise their client to pay the policy limit.
The lawsuit claims that Lloyd's should have been advised to pay the policy limit before payment was even demanded. Then, when the policy limits were demanded by Michael Haggard on two subsequent occasions, the $1 million should have been paid, according to the suit.
The second demand letter required that $1 million be tendered by Oct. 25, 2001. According to the lawsuit, the money was promised on the appointed date but not delivered. It wasn't until Nov. 5, 2001, that Kennedy of Carlton Fields sent the check for $1 million.
Haggard returned the check, claiming that the check was required to have been delivered by Oct. 25. Haggard argued that Lloyd's was too late and now in bad faith for not protecting its policyholder.
The lawsuit alleges that the lawyers from Carlton Fields and Cozen O'Connor did not understand the vulnerable position Lloyd's would be put in if the demand dates were not met. It also claims that the lawyers did not understand that the payment had to be made by the demand date.
In addition, the complaint says the defense lawyers acted in a cavalier manner by, for example, sending documents to Lloyd's offices in London by regular mail rather than fax or overnight delivery as the critical deadlines approached.
Grossman also said that the lawyers at Carlton Fields and Cozen O'Connor waited more than year to bring a motion to enforce the settlement agreement when they should have done so right away.
Such a motion eventually brought before Broward Circuit Judge Charles M. Greene, who was presiding over the case. But he denied it.
Finally, the lawsuit alleges blunders at trial. The complaint says that Carlton Fields assigned relatively inexperienced trial lawyers to the case.
As a result of the alleged errors by the defense lawyers, Lloyd's claims that its appellate counsel determined there was little chance of success on appeal.
"It was clear that there was very little likelihood of a reversal on appeal based on a lack of meritorious issues," the complaint alleges. Consequently, the underwriter, pursuant to Florida law, "was required to mitigate its damages rather than being subject to an enormous affirmed judgment. It did so by settling the case for $30,000,000."
But Thomas Tew, representing Cozin O'Connor, argued that Lloyd's should have proceeded with the appeal and would have prevailed.
The underlying issue that now must be resolved before determining whether malpractice occurred, he said, is whether Lloyd's engaged in bad faith conduct. That should have been decided in the appeal, he said,
but now the judge in the malpractice case will have to make that determination.
"The judge will have to decide whether there was bad faith to tender the money several days after the [demand] deadline," he said.
Tew also said the judge will have to determine whether the Lloyd's reliance on the advice of the law firms was the proximate cause of its $30 million loss.
"This is Lloyd's," he said. "They are experienced underwriters and they knew the risks. Their position that they did not understand their duty to negotiate and settle is farfetched."
