Insurer May Sue Counsel For Malpractice

The Tennessee Court of Appeals revived a legal malpractice claim brought by an insurer as a subrogee against counsel in connection with a substantial settlement

Plaintiff insurance company is the insurance carrier for an insurance agency that was sued for negligence in five Tennessee lawsuits. After the underlying lawsuits were settled, the plaintiff, in its own name and on behalf of its insured, sued the law firm that represented the insured in the lawsuits. The plaintiff asserted a direct legal malpractice claim, a legal malpractice claim as subrogee of the insured, and a negligent misrepresentation claim. The trial court dismissed all claims. In particular, the trial court ruled that the plaintiff could not maintain a direct legal malpractice claim against the law firm due to the lack of attorney-client relationship and that the assignment of legal malpractice claims is prohibited in Tennessee. In the alternative, the trial court ruled that the plaintiff could not establish the damages element of its legal malpractice claims. The trial court further ruled that the plaintiff failed to establish a misrepresentation of existing or past fact. We affirm the trial court’s dismissal of the plaintiff’s direct legal malpractice action. As to the remainder of the trial court’s rulings, however, we reverse.

The underlying litigation

In late June 2015, Benjamin Brewer was driving a truck owned and operated by his employer Cool Runnings Express, Inc. (“Cool Runnings”). Mr. Brewer was traveling from Kentucky, where Cool Runnings is based, to Florida and back. On the return trip, Mr. Brewer had a collision in a construction zone near Chattanooga, Tennessee. The crash resulted in numerous injuries and six deaths.

The defendant in the underlying case

Brands maintained professional liability insurance through Plaintiff/Appellee Westport Insurance Corporation (“Westport”). The policy gave Westport the right and duty to defend, investigate, and settle all claims against Brands. Moreover, the policy stated that Brands was required to “cooperate with us in providing information and documentation requested by us regarding any CLAIM or POTENTIAL CLAIM reported under the POLICY[.]” The Westport policy also contained an express subrogation clause stating that if Westport “pay[s] any damages or claim expense, [Westport] shall be subrogated to the rights of the insured against any person or organization” and that Brands would do whatever was necessary to allow Westport to “bring SUIT in the name of the INSURED.”

Westport had retained the defendant law firm. 

The alleged malpractice involved the failure to raise a jurisdiction issue that Brands had as a defense

The complaint alleged that Howard Tate failed to properly investigate, identify, and raise a personal jurisdiction defense in the Underlying Lawsuits and that Westport was required to pay substantial sums due to Howard Tate’s negligence. Specifically, Westport alleged that had personal jurisdiction been timely raised in the Underlying Lawsuits, Brands would have been dismissed as a defendant and Westport would not have paid any damages. Westport also alleged that Howard Tate was guilty of negligent misrepresentation because it supplied Westport with faulty information meant to guide Westport’s litigation decisions.

Claims against Brands

In the course of the Underlying Lawsuits, some defendants identified Brands Insurance Agency (“Brands”) as a potential tortfeasor for having allegedly conducted a deficient driving history check on Mr. Brewer that led to his hiring as a truck driver with Cool Runnings. Brands was then added as a defendant in amended pleadings in the Underlying Lawsuits.

Insurer claim of legal malpractice

In this case, however, Westport does not dispute that it was never a client of Howard Tate in the Underlying Lawsuits. Indeed, Tennessee law makes abundantly clear that an insurance carrier providing counsel on behalf of the insured is not the client to whom any duties are owed.

But

While we do not minimize the concerns that led the Can Do court to prohibit, on public policy grounds, the commercialization of legal malpractice claims through assignment, we must conclude that those concerns, diminished as they are in the insurance subrogation context, do not outweigh the clear policy underpinning subrogation that damages be paid by wrongdoers. See also TIG Ins., 2001 WL 99832, at *3 (“In short, any danger that subrogation poses to the integrity of the attorney-client relationship seems far more theoretical than real.”). Rather, “[t]he only winner produced by an analysis precluding liability” based on an arbitrary prohibition divorced from the realities of the insurance subrogation context “would be the malpracticing attorney.” Great Am. E & S Ins. Co. v. Quintairos, Prieto, Wood & Boyer, P.A., 100 So. 3d 453, 467 (Miss. Ct. App.) (quoting Atlanta Int’l Ins. Co., 438 Mich. 512, 475 N.W.2d at 298) (finding that Mississippi law allows for both assignment and equitable subrogation of legal malpractice claims), aff’d in part, rev’d in part, 100 So. 3d 420 (Miss. 2012). We therefore conclude that public policy does not prohibit Westport from bringing a legal malpractice action against Howard Tate as subrogee of Brands.

Jurisdiction

the undisputed facts establish that Brands purposefully directed no actions to Tennessee as it relates to this particular case. The driving history check that gives rise to this claim was performed entirely outside of this State. This is the single act from which the claims at issue in the Underlying Lawsuits arise. Indeed, even the trial court acknowledged that there was no proof that any of Brands’ Tennessee customers were related to the accident that gave rise to the Underlying Lawsuits.

...the fact that Mr. Brewer ended up operating a vehicle in Tennessee following the driver history check is analogous to a company placing a product in the stream of commerce that makes its way to the forum state. Just as that action, “without more, is not an act of the defendant purposefully directed toward the forum state[,]” id. at 390, so too was Brands’ action in performing a driving history check entirely outside of the state of Tennessee, even with the possibility that the driver could eventually operate in the state. As a result, we must conclude, as a matter of law, that no reasonable judge could conclude that Tennessee had specific jurisdiction over Brands in the Underlying Lawsuits.

The defect in the underlying case

we conclude that based on the undisputed facts in the record, a reasonable judge would have granted motions to dismiss the Underlying Lawsuits based on its conclusion that Tennessee could exercise neither specific nor general personal jurisdiction over Brands. As such, Howard Tate failed to negate the essential element of damages as to the negligence claim against Howard Tate. Instead, summary judgment should have been granted to Westport on this issue.

The trial court further erred in granting summary judgment on the negligent misrepresentation claim.

Oral argument linked here.

Editor's note: I was in Chattanooga (AKA Civil War Heaven) when this horrific accident took place and well remember the coverage. (Mike Frisch)