Man Bites Dog, Again

In journalism, the adage goes: “Dog Bites Man” is not news; “Man Bites Dog” is. The phrase captures the essence of the extraordinary — an event so contrary to the natural order that it demands attention.  In the insurance context, we are witnessing a version of this phenomenon develop right before our very eyes.  At first, insurance companies began suing the very lawyers they appointed to represent their policyholders, claiming legal malpractice because they did not like how the underlying litigation turned out. Now, insurance companies have gone next level, suing coverage lawyers who represented them if those coverage lawyers did not achieve the desired result.  See Great Lakes Insurance SE v. Doerner, (N.D. Okla. 2026).  This recent development sends a clear message to opposing counsel – if you lose a case because of your client’s bad faith conduct, you may get blamed.

Phase I – Insurance Carriers Turn on Insurer Appointed Defense Counsel

What was once unheard of is now a discernible trend. As reported in the Claims Journal several years back, insurance defense counsel, had become a new target of legal malpractice.  Insurance Defense Counsel a New Target of Legal Malpractice Claims.  According to a broker survey referenced in that article, there was no concern about malpractice claims in the insurance defense area of practice from 2010 to 2020. But in 2021, eighteen percent of responding insurers reported claims against defense counsel — a startling emergence of a phenomenon that simply did not exist in the data a year earlier. Several recent cases illustrate the concern.

Great American E&S Insurance Co. v. Gordon Rees Scully Mansukhani, LLP (Wash. Ct. App. 2026)

In this case, Great American defended C3 Manufacturing, maker of an auto belay device involved in a climber’s serious fall, under a reservation of rights. The case did not go well, as there were sanctions and ultimately a $5 million settlement. Defense counsel simply got hammered by plaintiff’s counsel.  Great American was not a fan of paying that settlement, so they looked for a way to place blame.  They took an assignment of C3’s malpractice claims and sued their own retained lawyers.

Fortunately, the Court of Appeals of Washington saw through what was happening and held that public policy does not permit an insured to assign legal malpractice claims against defense counsel to the liability insurer that retained that counsel, at least where a potential conflict exists between insurer and insured. Judge Birk wrote that “Washington law is clear that defense counsel must serve the insured’s interests, and only the insured’s,” and that allowing such suits would create “competing loyalties” that undermine the principle of unitary representation.

The state of Washington did not look favorably on Great American’s tactics.

Arch Insurance Co. v. Kubicki Draper, LLP (Fla. 2021)

The Florida Supreme Court’s 2021 decision in Arch Insurance Co. v. Kubicki Draper represents the other side of the coin — a court that opened the door to suspect insurer conduct, but with significant caveats.  Arch hired Kubicki Draper to defend an insured accounting firm. After the case settled, Arch sued the defense firm, alleging that failure to timely assert a statute of limitations defense inflated the settlement cost. The Florida Supreme Court held that an insurer with a contractual subrogation clause has standing to bring such a claim, reasoning that the insurer “steps into the shoes” of its insured.

Although not the intended use of a subrogation clause, in Florida, at least, insurers can go after defense counsel if they are unhappy with the result.

Sentry Select Insurance Co. v. Maybank Law Firm, LLC (S.C. 2019)

The South Carolina Supreme Court similarly permitted an insurer’s direct malpractice action against defense counsel where the attorney failed to timely answer requests for admission, allegedly forcing a $900,000 settlement on a case estimated at $75,000 to $125,000. This case illustrates how important requests to admit can be.  The court held that the insurer may recover only when the breach is the proximate cause of damages, the insurer’s interests are completely aligned with the insured’s, and the insurer proves its case by clear and convincing evidence.

Clearly courts are grappling with important attorney client issues, which are always complex in the context of insurance.

Phase II – Insurance Carriers Turn on Coverage Counsel

Only recently, though, have insurers expanded their blame game to coverage counsel who represent them in insurance coverage litigation.

Great Lakes Insurance SE v. Doerner, Saunders, Daniel & Anderson, LLP (N.D. Okla. 2026)

Perhaps no case better illustrates the absurdity of this trend than the lawsuit filed by Great Lakes on April 9, 2026, in the United States District Court for the Northern District of Oklahoma. Great Lakes, a Munich Re subsidiary, insured an apartment complex owner under a commercial property policy. When a fire caused approximately $27,000 in damage, the carrier denied the claim. The policyholder sued for bad faith, and Great Lakes retained attorney Michael Linscott of the Doerner firm to defend the case.

After a three-day trial in April 2024, the jury returned a verdict of $65 million in actual damages and $27,426,640 in punitive damages — over $92 million total, on what started as a $27,000 denied claim. Rather than examining whether its own claims-handling decision to deny a $27,000 claim was the true catalyst for this equitable result, Great Lakes sued its coverage counsel, alleging that Linscott failed to object during opposing counsel’s voir dire and trial arguments, which is utterly ridiculous.

The insurer denied a $27,000 claim, got hammered by a jury for bad faith, and then blamed its lawyers for not objecting enough during voir dire. This is not accountability; it is the displacement of institutional responsibility onto individual advocates who, at most, tried their best to justify your bad faith conduct.

This case got my attention because it is similar to a 112 Million Punitive Damages Award we achieved for a client in a property damage insurance coverage suit. That case could have been settled for less than $10 million, but the carriers were adamant that they had done everything right and got hit with a $112 million judgment.  The jury heard from the lead claims examiner that there was nothing he would have done differently if he had the opportunity.  This tone-deaf arrogance led to an award of significant punitive damages. Similarly, in Great Lakes, rather than stepping back and looking at Munich Re’s bad faith claims practices, Munich Re was toe-deaf and chose to blame their attorney.  This is easier than admitting that Minich Re’s bad faith claims practices turned a $27,000 claim into a $92 million loss.

I wish I could say that this kind of conduct is the outlier when it comes to insurance coverage cases, but it is not.  Insurers routinely commit bad faith in the corporate insurance context, and are seldom held accountable for their actions, so naturally they think that they can do no wrong.  They are so used to being in charge, that it is difficult for them to self-reflect, even when they get hammered with a bad faith verdict.