When a law firm assigned by an insurance company to defend its insured settles the case well within policy limits, which does not cost the insured any money, the insured client is happy and the law firm has done a good job, right? Not according to Arch Insurance Company.
Arch sued the law firm it assigned to represent one of its insureds, claiming that it had the right to bring a legal malpractice claim against the attorneys it had assigned to defend its insured. Arch filed the lawsuit because it believes that the law firm it assigned made a mistake while defending the case, a mistake it claims caused Arch to pay more money in settlement than it should have paid.
Arch’s malpractice claim has been dismissed twice in the Florida courts. Arch has been told by Florida courts at two levels that it is not authorized to bring a claim for legal malpractice against the law firm. In legal terms, the courts ruled that Arch lacks standing to bring a claim against the law firm for malpractice. The case is now pending before the Florida Supreme Court.
If the Florida Supreme Court authorizes Arch to bring a legal malpractice claim against the law firm it assigned to represent its insured, this will present a substantial risk to all business and individuals who buy liability insurance in Florida — in other words, almost of all the citizens in Florida.
Why? Because lawyers and law firms across the nation are hired by insurance companies to defend their insureds and those lawyers have, in every state, an absolute ethical duty of loyalty to protect the interests of their clients – – the insureds. This ethical duty does not change by virtue of the lawyers being hired by the insurance companies to defend those insureds.
Business pressure already exists on these lawyers, because the insurance companies can stop sending them clients for any reason they choose, which often means those lawyers lose a substantial amount of business. This unique relationship between lawyer, insurance company, and insured cannot be further compromised by giving insurance companies the right to sue those lawyers for malpractice. Giving the insurance companies this additional power will further compromise the ethical duties that these lawyers have to their insureds, and create a conflict of interest which will jeopardize the rights of all insureds who have their lawyers chosen for them by insurance companies.
Lawyers who get hired by insurance companies to defend insureds need to keep a careful eye on this case, and we fear for all Florida consumers who buy liability insurance with the expectation that the lawyers the insurance companies hire are hired to protect them, not the insurance companies. If the Florida Supreme Court allows this case to go forward, we hope the Florida legislature takes action to protect its policyholders.
The case is called Arch insurance Company v. Kubicki Draper LLP, Case 4D17-2889, pending in the Florida Supreme Court.
If you are an insurance policyholder who has questions or concerns regarding how your case is being defended by the lawyers hired by your insurance company, do not hesitate to give us a call.
Evan S. Schwartz
Founder of Schwartz, Conroy & Hack