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Posts Tagged ‘malpractice’

Cooperation: A Policyholder’s Duty…or Downfall?

Posted on: April 12th, 2019

By: Marc Finkel

A policyholder’s duty to cooperate with its insurer is one of the most significant commitments made in the relationship between an insurer and its insured. It goes without saying that the consequences can be dire for an insurer when this commitment is broken. However, a potential remedy is possible when insurers are caught in the predicament of facing surprise exposure due to a policyholder’s failure to cooperate and adequately updating the insurer as to claims in litigation. This is illustrated in the recent case Ironshore Specialty Insurance Co. v. Conemaugh Health System Inc. et al., 2019 U.S. Dist. LEXIS 45690, currently being litigated in the Western District of Pennsylvania.

In that case, Ironshore defeated Conemaugh’s attempt to dismiss an insurance coverage dispute that began when Conemaugh, a large regional health care provider in western Pennsylvania, was found liable for a $19,000,000.00 award in a medical malpractice action. Ironshore, an excess insurer for Conemaugh, routinely requested updates from Conemaugh and Conemaugh’s defense counsel concerning the status of the underlying malpractice action. Ironshore was informed that the underlying matter was potentially “problematic” for Conemaugh, but Ironshore was never informed of the potential for a verdict that would trigger excess coverage under the Ironshore policy. Furthermore, Ironshore was not informed of the trial date or that there had been ongoing pre-verdict settlement discussions which would have required participation from Ironshore.

The underlying medical malpractice action was ultimately settled with a contribution from Ironshore that was subject to a “continued reservation of rights, including its right to recoup.” In denying Conemaugh’s motion to dismiss, the Court found that the Ironshore policy’s Cooperation Clause unambiguously required Conemaugh to “cooperate” with Ironshore by “making available all such information and records as [Ironshore] would reasonably require” upon Ironshore’s election to associate in the “investigation, settlement, or defense” of the underlying claim against Conemaugh. The Court further found that Ironshore’s allegations of receiving inadequate information concerning the status of the underlying claim, despite having made repeated requests for such information from its insured, was enough to allege a breach of the Cooperation Clause, thereby preserving Ironshore’s right to seek a claw back of the share it paid to settle the malpractice action.

In the coverage dispute, Ironshore positioned itself to potentially recover part or all of its contribution to the settlement proceeds from Conemaugh by taking the following steps beginning during the pendency of the underlying litigation: (1) making a clear and express election of its rights to associate; (2) regularly requesting reasonable updates from its insured; and (3) reserving its rights to seek recoupment as part of the underlying settlement agreement. The court recognized these efforts as solid bases for limiting Ironshore’s exposure by virtue of questionable cooperation by its insured.

If you have any questions or would like more information, please contact Marc Finkel at [email protected].

Revisiting the Applicability of the Entire Controversy Doctrine to Legal Malpractice Claims

Posted on: April 2nd, 2019

By: Nicole Graham

The New Jersey Supreme Court recently revisited the applicability of the entire controversy doctrine as it relates to legal malpractice claims. In Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman and Stahl, P.C., 2019 N.J. LEXIS 272, 219 WL 1065049 (N.J. 2019), the client asserted a claim for legal malpractice against the law firm three years after a default judgment was entered against the client in a collection action the law firm had previously filed. The law firm moved to dismiss based on the entire controversy doctrine because the legal malpractice claim was not raised as a counterclaim in the collection action. The clients claimed they were not obligated to assert a malpractice claim in the collection action because (1) the statute of limitations on the malpractice claim had not run and (2) they did not know during the pendency of the collection action that the law firm had committed malpractice. The clients argued they were representing themselves in the collection and as pro se litigants could not identify a malpractice claim. They further claimed that requiring a pro se litigant to identify malpractice claim is contrary to public policy.  The law firm argued the client did know about their claim as evidenced by their answer to the collection action complaint in which they alleged there were billed for legal work that was unnecessary and contrary to their direction.

The trial court dismissed the legal malpractice claim finding it was precluded by the entire controversy doctrine. The appellate court affirmed. The New Jersey State Bar Association filed an amicus brief and argued that unless the entire controversy applied, no attorney’s collection judgment would be considered final because the client would be permitted to bring a malpractice claim at a later stage.

The New Jersey Supreme Court reiterated its holding in Olds v. Donnelly, 150 N.J. 424, 443, 696 A.2d 633 (1997), that the entire controversy doctrine does not compel a client to assert a legal malpractice claim against an attorney in the underlying litigation in which the attorney represents the client. The Court noted, however, a collection action brought by a law firm against its client for unpaid legal fees does not constitute “underlying litigation” because the lawyer and client are already adverse and, therefore, such litigation does not raise the privilege and loyalty concerns that warrant the exception to the entire controversy doctrine recognized in Olds. Therefore, a court may apply the entire controversy doctrine to preclude a later filed legal malpractice claim the client declined to assert in the attorney’s action to collect unpaid legal fees.

Such preclusion is not absolute. The entire controversy doctrine is an equitable doctrine whose application is left to judicial discretion based on the factual circumstances of individual cases. The client can avoid preclusion by demonstrating the prior forum did not afford a fair and reasonable opportunity to have fully litigated the malpractice claim. The court may consider such issues as the steps required to investigate, file and prosecute the malpractice claim in that forum, the status of the collection action when the malpractice claim accrued, the time constraints imposed by the rules of court, and the prospect of obtaining extensions of time to litigate the malpractice claim. A client may also avoid preclusion if he or she did not know, and should not have reasonably known, of the existence of the malpractice claim during the pendency of the collection action.

The New Jersey Supreme Court remanded the case to the trial court to determine when the legal malpractice claim accrued and whether the malpractice claimants would have had a fair and reasonable opportunity to have fully litigated their claim in the collection action.

When defending a legal malpractice claim where the defendant law firm previously litigated a collection action for unpaid fees, it is not enough to argue the entire controversy doctrine bars the claim. The defendant law firm must also prove the client knew or should have reasonably known of the existence of the claim during the pendency of the collection action, and that the forum in which the collection action was pending would have provided the client a fair and reasonable opportunity to fully litigate the malpractice claim.

If you have any questions or would like more information, please contact Nicole Graham at [email protected].

New Task Force Aims to Reform California’s Technological Ethical Rules

Posted on: January 15th, 2019

By: Paige Pembrook

On December 5, 2018, the California State Bar Task Force on Access Through Innovation in Legal Services held its first meeting and started a long process to modernize ethical rules that currently inhibit lawyers from fully using innovative technologies and services from non-lawyer businesses. Under the Current Rules of Professional Conduct for California lawyers, attorneys risk professional discipline and malpractice liability when using services and software offered by non-lawyer technology businesses, even though those services and software offer significant potential to improve access to and delivery of legal services.

Earlier this year, the State Bar charged the Task Force with recommending rule modifications to allow collaboration and technological innovation in legal services, including use of artificial intelligence and online legal service delivery models. The Task Force is specifically tasked with scrutinizing existing rules and regulations concerning the unauthorized practice of law, lawyer advertising and solicitation, partnerships with non-lawyers, fee splitting, and referral compensation. The Task Force must submit its recommendations to the State Bar Board of Trustees before December 31, 2019.

As any effective rule changes remain years away, lawyers must be aware of and comply with the current rules that restrict lawyers seeking to collaborate with and use technology from non-lawyer businesses. The Rules of Professional Conduct are often implicated when lawyers collaborate with non-lawyer businesses offering technology-driven legal services and software. These rules include those premised on harm to clients that flows from incompetent legal service (Rule 1.1), non-lawyer ownership of law offices and the unauthorized practice of law (Rules 5.4 and 5.5), and the dissemination of biased and/or misleading information (Rules 7.1-7.3).

To the extent that lawyers violate any of the aforementioned rules by using technology-driven legal services and software offered by non-lawyer businesses, they may be subject to State Bar discipline.

If you have any questions or would like more information, please contact Paige Pembrook at [email protected].

Court Rules No Coverage For Pa. Law Firm’s Malpractice Suit

Posted on: November 26th, 2018

By: Barry Brownstein

An insurer does not have to cover a Pennsylvania law firm in a professional malpractice suit that a client filed after the firm allegedly used privileged information to benefit its attorneys’ side business in a real estate development.

The United States District Court for the Western District of Pennsylvania granted Westport Insurance Corp.’s motion for summary judgment in its case against Hippo Fleming & Pertile Law Offices (“HFP”) and attorney Charles Wayne Hippo Jr., agreeing with the insurer that the dispute over a shopping center development was exempted from coverage by the outside businesses exclusion in the firm’s professional liability policy.

Gregory Morris and Morris Development, one of HFP’s longtime clients, alleged that HFP had used information disclosed to the firm under attorney-client privilege to benefit a project by its side businesses, Templar Development and Templar Elmerton. Westport’s insurance policy contained a clear and unambiguous exclusion for lawsuits stemming from any of the policyholders’ outside businesses, and Hippo had not disclosed his involvement in the Templar companies when applying for the policy.

HFP argued that since the underlying lawsuit’s first two allegations of legal malpractice and breach of contract stemmed from the firm’s attorney-client relationship to Morris, Westport had a duty to defend them under the professional liability policy. The court, however, said it was Hippo’s dual role that gave rise to the claims against him.

The court emphasized that the plain language of the complaint in the underlying suit entirely discredits defendants’ argument that counts I and II are based solely on HFP’s role as Morris’s attorney. Counts I and II of the complaint allege that Hippo committed legal malpractice and breach of contract by simultaneously acting as Morris’s attorney and a competing real-estate developer. Therefore, the court held that Westport has no duty to defend because each claim in the underlying suit falls unambiguously within the policy’s outside business exclusion.

If you have any questions or would like more information, please contact Barry Brownstein at [email protected].

Pa. Supreme Court To Reconsider If Settlement Can Trigger Malpractice Suit

Posted on: November 9th, 2017

By: Barry S. Brownstein

The Pennsylvania Supreme Court has agreed to reexamine the extent to which a settlement agreement can serve as the basis for a legal malpractice case. The case stems from Eileen McGuire’s efforts to sue a hospital after she was fired in July 2011 in what she claims was retaliation for her refusal to engage in multiple illegal or unethical acts. McGuire also claimed she was illegally targeted for termination on the basis of her age. The case concluded with a $7,000 settlement.

McGuire then proceeded to file a malpractice suit accusing her former attorneys for failing to include a claim for age discrimination and for failing to exhaust administrative remedies before the EEOC, claiming that such failures left her in a weakened position that forced her to accept a deficient settlement.

The case was dismissed on preliminary objections based on the Supreme Court’s 1991 decision in Muhammad v. Strassburger, McKenna, Messer, Shilobod & Gutnick, in which the justices declared they would “not permit a suit to be filed by a dissatisfied plaintiff against his attorney following a settlement to which that plaintiff agreed.” The decision, however, did leave open the door for claims in which a plaintiff can prove that he or she was fraudulently induced to settle.

The Superior Court upheld the dismissal of McGuire’s case, rejecting arguments from McGuire that the negligence of her former attorneys had not been in negotiating the settlement but, rather, in failing to properly pursue her case against the hospital.

The continued viability of the Muhammad case that bars legal malpractice suits following the settlement of a lawsuit absent a showing of fraud on the part of the attorney will be analyzed by the Pennsylvania Supreme Court.

If you have any questions or would like more information, please contact Barry S. Brownstein at [email protected].