Malpractice claims against personal-injury defense lawyers are

Long Island Business News, Mar 17, 2006 by Nora Lockwood Tooher

Here's the scenario: An insurance company hires an outside lawyer to defend it against a potentially rain-making ambulance chaser.

Here's the problem: The insurance company loses and owes some big money to the plaintiff.

It used to be the insurance company would lick its wounds and move on. In more egregious cases, it might never again hire the lawyer or the firm.

In increasing numbers, however, insurance companies are suing their defense attorneys for malpractice because states have spent the last decade making it easier to do so.

According to an American Bar Association study, 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 Benjamin H. Hill III, a Tampa attorney who chaired the ABA committee that produced the report.

Marian C. Rice, a partner with L'Abbate, Balkan, Colavita & Contini in Garden City, agreed that the number of personal-injury defense lawyers coming under malpractice fire isn't growing at an alarming rate. But it is growing, and New York defense attorneys would be wise to pay attention to a national trend, she said.

Anecdotally, there has been an uptick, said Rice, who specializes in defending attorneys and served on the ABA committee. But when I say 'uptick,' I mean I used to have one and now I have five. I still have 30 matrimonial cases and 30 trusts and estates.

But attorneys should recognize that this is a rising tide, Rice continued.

And this could come as a shock, since personal-injury defense lawyers traditionally had little concern about malpractice claims, said Mark Bassingthwaite, a risk management coordinator for ALPS, a Missoula, Mont., professional liability carrier.

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. 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.

Changing winds

Personal-injury defense is traditionally a client-based practice. The same firm or lawyer can handle dozens, if not hundreds, of cases for the same company.

If, at some point, clients became displeased with their legal representation, they fired their attorneys, Rice said.

They just stopped using them because it was a relationship- driven practice, she said. Now it's all driven by the bottom line.

And that means that instead of pink slips from insurers, lawyers are increasingly getting a summons.

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 in just such a case. The insurance company blamed its defense attorney for not protecting it against 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.

Princeton, N.J., plaintiffs' attorney Glenn Bergenfield, who represented the insurer, said the case was unusual but that he expects suits like it to become more and more common.

While claims against defense lawyers are unlikely to ever rival those lodged against plaintiffs' attorneys, he said, There's plenty of malpractice on the defense side.

'Doesn't seem fair'

The ABA survey did not detail the cause of malpractice claims in particular practice areas, and Hill and his colleagues said they're not sure what's driving the increase in malpractice claims against personal-injury defense lawyers.

Michael Glasser, a committee member and bankruptcy lawyer in Norfolk, Va., thinks he has an idea. I do know insurance companies are becoming much more vigilant over billing. They sometimes get their own accounting firms to go back and comb through bills.

It's ironic, Hill added, that cost-conscious insurance carriers restrict the amount of discovery work attorneys can do, then complain about the outcome.