Minnesota Court Rejects “Blame The Lawyer” Argument In Construction Insurance Dispute

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The Minnesota Court of Appeals has rejected the “Blame the Lawyer” argument.  In Remodeling Dimensions, Inc. v. Integrity Mutual Insurance Co., a contractor argued that its attorney’s representation was so bad as to constitute a breach of the insurer’s obligation to appoint counsel.   As Shakespeare said, “The first thing we do, let’s kill all the lawyers.”

Here’s the short version:  Contractor was sued because its work caused water intrusion.  Contractor sought indemnity from insurer.  Insurer said no, because the contractor had performed the work, and therefore, the “your work” exclusion applied.  The homeowners had submitted their claim to binding arbitration, as was required by the contract.  The insurer-appointed attorney didn’t ask for a “reasoned” arbitration award at the outset of the arbitration.  Therefore, when the award came down, it was a bunch of numbers, with no explanation.

The insurer persisted in denying indemnity, and the contractor blamed its lawyer for this.  The contractor’s argument was something like this (greatly paraphrased):

Woe is me.  If only my insurer-appointed lawyer had asked for a reasoned arbitration award, I then would have known whether any of the award was attributable to work that fell outside of the “your work” exclusion.  And, assuming (as I must, because I want the cash) that at least some of the damages were covered, I would have gotten paid.  Therefore, lawyer, I blame you.  And because you were paid by the insurance company, I blame it.  And therefore, the insurance company should be barred from denying me coverage.

Makes perfect sense, right?

The Court of Appeals rejected this argument, albeit  on a very odd basis.  Instead of saying, “Hey, no breach of contract, you got a lawyer,” it does an extensive conflict-of-interest analysis within an insurance context.  It reasons that:

Because RDI’s [the contractor] attorney did not represent Integrity Mutual, the attorney had no duty towards Integrity Mutual to request an explanation of the arbitration award.  Absent such a duty, Integrity Mutual cannot be held responsible for the attorney’s failure to timely request an explanation of the arbitration award.

What’s odd is that the Court of Appeals seems to accept the presumption that the contractor would have benefited from a reasoned award.  Who can really say?  What if the reasoned award simply articulated that all of the damage was the contractor’s own work.  If that had happened, would the contractor not blame the lawyer for requesting a reasoned award?

Photo: http://www.flickr.com/photos/62233881@N04/5805926575/