Excess carrier may bring equitable subrogation claim against attorneys

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Decisions: Insurance

December 18, 2012

Excess carrier may bring equitable subrogation claim against attorneys 

The Mississippi Supreme Court held that an excess insurer may bring a claim for equitable subrogation against the law firm assigned to represent a nursing home named in a negligence suit.

The estate of former nursing home resident Huldah Chase sued Shady Lawn Nursing Home for negligence and inadequate health care. Shady Lawn’s primary insurer, Royal Indemnity Co., hired attorneys to defend the suit. Great American E & S Insurance Co., which provided umbrella coverage to Shady Lawn for claims above $1 million, requested and received evaluations and assessments of the negligence claim.

The law firm assigned to defend the lawsuit failed to designate defense experts, and Shady Lawn was left with no witnesses at trial. Royal Indemnity tendered its policy limits, and Great American subsequently settled for an undisclosed amount.

Great American then sued the firm for legal negligence and other claims, asserting it was entitled to recover under a theory of equitable subrogation. The trial court granted the defendant’s motion to dismiss. An appellate court reversed.

Reversing in part and affirming in part, the state high court found that when lawyers breach a duty owed to their clients, excess insurers who pay the resulting damage may pursue the same claim that the client would have pursued. To hold otherwise would provide negligent lawyers with an extra layer of protection, the court said.

Notwithstanding, the court declined to allow Great American’s direct suit for legal negligence. The case status reports the firm provided, without more, are insufficient to establish an attorney-client relationship. The court distinguished case law abolishing the attorney-client relationship requirement for third parties suing attorneys for negligently prepared title reports. Unlike title reports, which third parties foreseeably rely upon, sharing case status information is a courtesy that is provided with no expectation of an attorney-client relationship.

Citation: Great Am. E & S Ins. Co. v. Quintairos,  Prieto, Wood & Boyer, P.A., 2012 WL 4945958 (Miss. Oct. 18, 2012).

Excess carrier’s counsel: Christopher T. Graham, Michael A. Heilman, and John W. Nisbett, all of Jackson, Miss.

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