Recently, the Florida Supreme Court accepted jurisdiction and set for oral argument the matter of Arch Insurance Company v. Kubicki Draper, LLP. Arch asked the Fourth District Court of Appeal to certify the following question to the Florida Supreme Court:
WHETHER AN INSURER HAS STANDING TO MAINTAIN A MALPRACTICE ACTION AGAINST COUNSEL HIRED TO REPRESENT THE INSURED WHERE THE INSURER HAS A DUTY TO DEFEND.
In the underlying case, Arch alleged that Kubicki Draper, LLP, a sizeable state-wide Florida law firm whom it hired to defend an insured, did not timely assert a viable statute of limitations defense, which in turn, caused Arch to have to pay a large settlement (within the policy limits) that may have otherwise been avoided. Kubicki won summary judgment by asserting that Florida law limits standing on suits for attorney malpractice to only the client-insured, with whom the firm has privity of contract.
On appeal, Arch conceded that there was no Florida case on point that extended the privity from insured to insurer, nor cast the insurer as an intended third-party beneficiary of the attorneys’ advice and counsel (the lone exception recognized in Florida law). Still, Arch asked the Fourth DCA to consider relevant federal case law that “guessed” how Florida courts might rule on such a question, and put forth a public policy argument that lawyers are insulated from malpractice suits if the insurer is unable to sue on behalf of its insured for a lawyer’s negligence.
The Fourth DCA ultimately incorporated the trial court’s reasoning for granting Kubicki’s underlying motion for summary judgment, holding that there was no legal basis for extending the law to incorporate Arch’s public policy rationale, despite alluding that it may have some merit.
On Arch’s motion for certification, the Fourth DCA agreed that this was an important question for the Florida Supreme Court to weigh, and certified the above-quoted question. The Supreme Court has set the oral argument for March.
If the Supreme Court reverses and rules in Arch’s favor, it would have wide-reaching implications for insurance defense firms across the state. If Arch is victorious, the holding could create a new avenue for insurance carriers to potentially second guess each strategic decision made by defense counsel if it ultimately does not like the result—even if that result is a settlement within the policy limits.
Regardless of the forthcoming opinion, insurance defense counsel would always be wise to err on the side of over-inclusiveness of the client and claims adjuster in formulating specific strategy for defending each file, and following up in writing. Timely communication and documenting strategy decisions are steps 1A and 1B for defeating a legal malpractice claim before it even begins.
You can read the Fourth DCA’s full opinion here: Arch Insurance Co. v. Kubicki Draper, LLP