Risk Update

Risk Roundup — “No Duty” for Court to Check Conflict, Insurer Malpractice Counsel Claims

Posted Dan Bressler

The Legal Profession Blog notes this update to a case we noted earlier: “No Duty To Inquire Into Co-Defendant Conflict” —

  • “One attorney represented two clients – husband and wife – who were charged in drug offenses after a search of their home. They both pleaded guilty. The husband got jail time; the wife did not. The appeal agues that the failure of the trial judge to inquire into possible conflicts required reversal of the conviction. The court today rejected the argument with a dissent.”
  • The opinion: “In this discretionary appeal, we consider whether a trial court has an affirmative duty to inquire into the possible conflict of interest created by an attorney’s dual or multiple representation1 of codefendants in a criminal case. Although making this inquiry is the better practice, we conclude that absent some factor which would alert the trial court about a possible conflict of interest created by such representation, the court has no affirmative duty to do so. We therefore affirm the judgment of the court of appeals.”
  • “Justice Brunner dissented: ‘I believe that the majority opinion’s analysis is incomplete. I would address the right to counsel in Article I, Section 10 of the Ohio Constitution and hold that it requires a trial court to make a prompt inquiry into whether a conflict exists any time two or more defendants facing charges arising out of the same matter are represented by the same attorney. Because the trial court in this matter did not conduct such an inquiry, I would remand this matter to the trial court for it to determine whether an actual conflict existed. Further, because the majority opinion indicates that inquiries into multiple representation should be addressed by a rule or a statute, I note several specific matters any such rule or statute must address to sufficiently protect the right to counsel.'”

“When Can Liability Insurers Sue Appointed Underlying Defense Counsel for Malpractice?” —

  • “Maybe there was an unusually large verdict that was unanticipated, or the case settled for what is seen as an inflated amount after a critical defense failed. In assessing the situation, the insurer may believe defense counsel mishandled the claim. This scenario raises a related thorny question: when can an insurer assert a legal malpractice claim against the attorney it appointed to defend the insured?”
  • “The Florida Supreme Court recently had occasion to address this very issue. In Arch Insurance Company v. Kubicki Draper, LLP, 2021 Fla. LEXIS 898 (Fla. June 3, 2021), an insurer (Arch) hired a law firm to represent its insured (an accounting firm charged with malpractice) in an underlying lawsuit. Arch did so pursuant to the defense provisions of a professional liability policy.”
  • “Shortly before trial, the underlying lawsuit settled. Arch then sued defense counsel, alleging that the firm committed malpractice by failing to raise certain defenses…”
  • “A Florida trial court and an intermediate appeals court both determined that Arch lacked standing to sue. They reasoned that Arch was not in privity with the firm. The appeals court in turn certified this ‘question of great public importance’ to the Florida Supreme Court.”
  • “The Florida Supreme Court agreed that the firm was in privity with the insured as the client rather than Arch. Nevertheless, it found that an insurer that is contractually subrogated to its insured’s rights under a policy has standing to bring a legal malpractice action against retained defense counsel: ‘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 into the shoes of its insured and pursue the same claim the insured could have pursued.'”
  • “In so holding, the court remarked that it was aware of the public policy concerns that caution against assigning legal malpractice claims to prevent creating an incentive for frivolous suits. It noted, however, that the contractual subrogation provided under the Arch policy actually advances public policy by keeping ‘premium rates down by allowing the insurers to recover indemnification payments from the tortfeasor who caused the injury.'”
  • “These theories create a complicated set of considerations for a court to examine when determining whether to permit an insurer’s legal malpractice claim. If an insurer believes that malpractice has occurred, its ability to bring a lawsuit will greatly depend on which state’s law applies, the relationship between the parties and relevant policy language.”