PERSONAL INJURY CORNER
Liability of Defense Attorney to Insurer
TED BABBITT
Arch Insurance Company vs . Kubicki Draper , LLP ; was a legal malpractice case certified by the Fourth District Court of Appeals in Arch Insurance Company v . Kubicki Draper , LLP ; 266 So . 3d 1210 ( 4th DCA 2019 ). The Supreme Court unanimous opinion at SC 19-673 . The rephrased certified question by the Supreme Court was “ WHETHER THE INSURER HAS STANDING THROUGH IT ’ S CONTRACTUAL SUBROGATION PROVISION TO MAINTAIN A MALPRACTICE ACTION AGAINST COUNSEL HIRED TO REPRESENT THE INSURED WHERE THE INSURER HAS A DUTY TO DEFEND .”
The case involved a legal malpractice action by an insurer against the law firm retained to represent it ’ s insured in a separate accounting malpractice case . In that case the insured , Spear Safer CPA ’ s and Advisors ( Spear Safer ) settled a case shortly before trial for 3.5 million dollars . Spear Safer ’ s insurer , Arch Insurance Company brought an action against Kubicki Draper , who was hired to defend Spear Safer , alleging that Kubicki Draper failed to raise a Statute of Limitations defense which would have vastly reduced the amount of the settlement . The trial court granted a summary judgment on behalf of Kubicki Draper , finding that Arch Insurance lacked standing to sue Kubicki because there was no privity of contract or attorney client relationship between Arch and Kubicki because the client was Spear Safer not Arch and therefore there was no privity .
The Fourth District affirmed the Trial Court ’ s finding , reasoning that the insurer was not in privity with the law firm and thus lacked standing to sue the law firm . Arch Insurance Co , 266 So . 3d at 1211 .
The Supreme Court in a unanimous opinion agreed with both the Circuit Court and the Fourth District that Kubicki was in privity with Spear Safer as a client rather than Arch . However , the Supreme Court found that Arch had standing based upon the subrogation provision in the insurance policy issued to Spear Safer .
The Supreme Court specifically found that an insurer has standing to maintain a legal malpractice action against counsel hired to represent it ’ s insured where the insured is contractually subrogated to the insured ’ s rights under the insurance policy .
The Supreme Court held Arch ’ s right to contractual subrogation was expressly provided for in the insurance policy in the following clause .
“ To the extent of any payment under this policy we ( Arch ) shall be subrogated to all of your ( Spear Safer ) rights of recovery , therefore against any person , organization , or entity and you shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights . You shall do nothing after any loss to prejudice such rights .”
“ The language of the subrogation provision is clear – Arch is contractually subrogated to the rights of Spear Safer , which would include claims for legal malpractice against counsel retained to defend the insured .*** Where an insurer has a duty to defend and counsel breaches the duty owed to the client insured , contractual subrogation permits the insurer , who – on behalf of the insured – pays the damage , to step in the shoes of its insured and pursue the same claim the insured could have pursued .”
Thus the Supreme Court held that Arch had standing through contractual subrogation to maintain a malpractice action against counsel it hired to represent its insured . While it is true that there was a lack of privity between the insurer and the law firm because the insured was in privity with the law firm , contractual subrogation allowed the insurer to step into the shoes of the insured and sue it for legal malpractice . At 15 the Supreme Court holds “ for the above reasons , we answer the rephrased certified question in the affirmative , quash the Fourth Districts decision in
Arch Insurance Company , and remand for proceedings consistent with this opinion . In doing so , we conclude that the insurer has standing to maintain a legal malpractice action against counsel hired to represent its insured where the insured is contractually subrogated to the insureds rights under the insurance policy .”
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