Personal injury defense lawyers face rise in malpractice claims

Daily Record and the Kansas City Daily News-Press, Mar 16, 2006 by Nora Lockwood Tooher

(This article was originally published in Lawyers Weekly USA, Boston, MA, another Dolan Media publication.)

Several years ago, Benjamin H. Hill III defended a malpractice claim lodged against a Florida personal injury defense lawyer by the insurance company that had hired him.

Hill, an attorney in Tampa, Fla., successfully argued that there was no direct attorney-client relationship between the defense lawyer and the insurance carrier, and the claim was dismissed.

Today, however, Hill might have a harder time getting the same result.

In a dramatic change over the past decade, many states now allow insurance companies to sue the lawyers they hire to protect them from payouts in personal injury suits.

And increasingly, insurers unhappy with the legal work done by defense lawyers are suing their own outside counsels for malpractice.

According to an ABA study released last summer, malpractice claims against personal injury defense lawyers increased 6 percent from 1999 to 2003 - the largest increase in any practice area. Nearly 10 percent of all malpractice claims in 2003 were filed against personal injury defense lawyers

Personal injury-defense now ranks third in malpractice claims, behind top-ranked personal injury-plaintiff and real estate. Family law and trusts and estates rank fourth and fifth, respectively.

It's not a staggering number, but it's about the only [practice] area in which we saw an increase, said Hill, who chaired the ABA committee that produced the report.

Everyone has known in the past that being a personal injury plaintiff's attorney was fertile ground for [malpractice] claims, commented Michael Glasser, a committee member and bankruptcy lawyer in Norfolk, Va. Now it appears that it doesn't matter what side of the fence you're on.

Mark Bassingthwaite, a risk management coordinator for ALPS, a Missoula, Mont. professional liability carrier, said personal injury defense lawyers traditionally had little concern about malpractice claims.

The defense bar has historically been a very, very safe haven, he said.

Several decades ago, defense lawyers in most states could not be sued by carriers, on the grounds that there was not a direct attorney-client relationship.

However, courts seem to be relaxing the prohibition that historically has been followed, Hill noted, and allowing insurance carriers to sue lawyers.

A U.S. District Court in Virginia last year ruled that an insurer could sue a law firm for legal malpractice as a non-client beneficiary of legal services. (General Security Insurance Co. v. Jordan, Coyne & Savits, 357 F.Supp.2d 951 (E.D. Va. 2005).)

The malpractice action was filed by an insurer against a firm it hired to defend an insured in a personal injury suit arising out of an automobile accident.

The court noted that, [D]espite sharp doctrinal differences regarding the relationship between the insurer and the firm it retains, nearly all jurisdictions in the United States permit some form of legal malpractice action by an insurer against the firm it retains to defend an insured.

Furthermore, the court held, permitting an insurer to sue the firm it retains can 'promote ... enforcement of [the firm's] obligations to the insured. ... [D]espite the fact that 'the tripartite relationship between insured, insurer and defense counsel contains rife possibility of conflict' ... nearly all courts have concluded that the harms-benefit calculus weighs in favor of recognizing an insurer's legal malpractice claim against the lawyer or law firm it retains to represent an insured.

New Jersey Verdict

Jeffrey Bigman, a defense attorney in Daytona, Fla., and co-chair of the Florida Defense Lawyers' Professional Liability Committee, said he was unaware of the increasing number of malpractice claims filed against personal injury defense lawyers.

It does come as a surprise, he said. Usually, in those situations a lawyer would just get dismissed.I've never heard of an outside counsel being sued by the individual or by the insurance company.

Insurance carriers had longstanding relationships with lawyers, Hill agreed. You're talking anywhere from dozens to hundreds of cases handled by one law firm or lawyer. Historically, if the carriers experienced some dissatisfaction, they either did not pay or they found another lawyer.

But that's changing.

We're starting to see more and more lawsuits, Hill said. Insurance companies are suing defense attorneys when they aren't getting the results they're looking for.

In February, a New Jersey jury awarded $362,000 to an insurance company that claimed an outside attorney caused a loss in the defense of a worker's claim that he fell from a defective ladder.

Safestep Reinsurance claimed that Israel Eisenberg, a partner in Post & Schell's Philadelphia office, failed to properly prepare for the trial, failed to call critical witnesses and didn't attack the plaintiff's credibility.

The firm argued that the insurance carrier itself was responsible for the outcome, since a claims manager who was present throughout the trial refused to accept the judge's suggestion of a settlement amount.