Recently, the Florida Supreme Court overturned two lower court decisions and ruled in Arch Insurance Co. v. Kubicki Draper, LLP that insurance companies can bring malpractice suits against law firms that are hired to represent policyholders based upon subrogation rights in the policies.
This case can be traced back to August 2003 when Arch Insurance Company issued a professional liability policy to Spear Safer CPAs and Advisors, who worked as an independent auditor for Mutual Benefits Corporation. The policy contained a right of subrogation. After an $837 million insurance investment scam, Mutual Benefits was shut down by the U.S. Securities and Exchange Commission. Mutual Benefits brought a suit against Spear Safer, claiming that they had committed accounting malpractice, and so Arch Insurance hired Kubicki Draper to represent their policyholder. The case was then settled and Arch Insurance paid the $3.5 million settlement.
Arch then brought a legal malpractice suit against Kubicki Draper, claiming that they would not have had to pay the $3.5 million settlement had the firm not failed to present a statute of limitations argument. The firm countered that Arch Insurance could not sue them for legal malpractice because the law firm was hired to represent Arch Insurance’s policyholder and not Arch Insurance. They argued lack of privity between the carrier and the firm. The circuit court sided with Kubicki Draper on its motion for summary judgment, as did the Fourth District Court of Appeal.
The Supreme Court of Florida overturned the decision and allowed Arch to go forward against the firm. According to the Supreme Court of Florida, although Arch was not a party in the litigation, the subrogation provision in the policy between the carrier and Spear Safer effectively allowed the insurer to assume the rights of the insured.
StraightforWARD Legal Advice:
This decision came down based solely on the subrogation rights contained in the policy. Subrogation laws differ from state to state, as do rules on allowing a carrier to sue a law firm hired to represent an insured. Many states, for example, permit insurers to bring malpractice claims against a policyholder’s counsel, but for different reasons than allowed here. For help with subrogation law, contact Jeremy Rogers at 813-558-3387 or email@example.com.