Indiana Injury Blog

Last February, in a matter of first impression, the Indiana Court of Appeals handed down an opinion holding that an excess insurer of a client being sued in a product’s liability case was not allowed to bring a legal malpractice claim against the client’s attorneys and the law firms of those attorneys who negotiated a settlement for $6,300,000. See Querrey & Harrow, Ltd. v. Transcontinental Ins. Co., 861 N.E.2d 719 (Ind. Ct. App. 2007), reh’g denied, trans. granted, opinion vacated.

The attorneys had negotiated a $6,300,000 settlement stemming from a product’s liability claim that had been brought against the client regarding an injury that was produced from a trampoline the client manufactured. Id. at 720. The client’s primary liability insurer paid around $3,000,000 of the settlement before its coverage eroded. Id. The client’s excess insurer paid the remaining $3,740,000 of the settlement. Id. Arguing the settlement could have been substantially less had the client’s attorneys raised a timely non-party defense, the excess insurer filed suit against the client’s attorneys and their law firms. Id. The client’s attorneys appealed the denial of their motion for summary judgment by the trial court and the trial court’s determination that, as a matter of law, the excess insurer could bring a legal malpractice suit against them. Id. at 721.

On appeal, the Indiana Court of Appeals did not accept the excess insurer’s argument that they should be allowed to bring a legal malpractice claim against the client’s attorneys under the doctrine of equitable subrogation. The Indiana Court of Appeals found no material issue of fact in finding that limited correspondence between the excess insurer and the client’s attorneys fell significantly short of constituting an attorney/client relationship. Id. at 724. Furthermore, the Indiana Court of Appeals held that allowing the legal malpractice suit under the doctrine of equitable subrogation would essentially be the same as allowing an assignment of the cause of action from one party to another, which it will not do. Id. at 723. In support of the holding, the Indiana Court of Appeals explained it will not allow legal malpractice actions in these situations for the reason that allowing them would divide the loyalty of the attorneys. If allowed, attorneys will be tempted in not vigorously representing their clients in order to protect themselves against third parties such as the excess insurer in this case. Id.

The Indiana Supreme Court granted a petition to transfer and the Indiana Court of Appeals opinion has been vacated.