State Legislature Enters the Unfamiliar Realm of Regulating Legal Practice and Passes Laws Prohibiting Assignability of Legal Malpractice Claims


By: Dana Maine and William Ezzell
Following last month’s unanimous opinion from the Georgia Supreme Court that legal malpractice claims were not per se unassignable, the State Bar of Georgia successfully implemented a counterstrike aimed at barring the assignment of all legal malpractice claims. The case, Villanueva v. First American Title Insurance Company, involved a legal practice claim against a closing attorney in a mortgage refinance transaction. [E-Alert: Stranger Danger: Georgia Joins Minority View and Allows Assignability of Legal Malpractice Claims]. The Georgia Supreme Court held, but for actions in personal injury, all claims, including those for legal malpractice, were assignable.
The aggressive, albeit quiet, lobbying efforts of the State Bar resulted in the passage of House Bills 160 and 359, relating to foreclosed property registries and the disposition of unclaimed property, respectively. In Georgia, lawmakers are permitted to add unrelated provisions to legislation so long as the provision applies to the same code section the legislation addresses. Thus, in an apparent attempt to maximize the chances of the provision’s passage, each Act included identical provisions amending O.C.G.A. § 44-12-24, governing the assignability of legal claims involving property.
House Bills 160 and 359 provide:
Except for those situations governed by Code Sections 11-20-210 and 11-9-406, a right of action is assignable if it involves, directly or indirectly, a right of property. A right of action for personal torts, for legal malpractice, or for injuries from fraud to the assignor may not be assigned.
The Georgia Legislature passed both measures almost unanimously, and the bills are currently awaiting Governor Deal’s signature. Georgia requires the Governor sign any legislation into law within 40 days from March 28, 2013, and while the Governor has yet to publicly comment on the bills, it is widely expected that the Governor – an attorney – will sign the legislation into law. Once signed, the legal malpractice provisions will become effective immediately. Copies of each bill are available here and here
Final passage of the laws should curb the concerns of insurers and Georgia lawyers alike. Most pressing are the malpractice policies currently necessitating implementation or renewal. Assignable legal malpractice claims would have required insurers to raise premiums significantly, perhaps as high as 25 percent. From a more strategic vantage point, insurance carriers’ fears of the creation of a secondary market for LPL claims should be assuaged. The Georgia Legislature recognized the danger for all interested parties from the holding in Villanueva – an increase in the pool of risk for insurers – and acted decisively without any ambiguity, due in no small part to the State Bar.
While this legislation solves the problem for Georgia lawyers, LPL carriers must recognize that there may be unwelcome impacts from Villanueva. The decision of the Georgia Supreme Court fell within a clearly defined minority of jurisdictions that concluded legal malpractice claims are assignable. In reaching the decision, the court provided a comprehensive survey and analysis of courts nationwide regarding the policy implications of majority and minority stances on assignability. Although the court explicitly refrained from incorporating any public policy in the holding, the case has already garnered national attention and will undoubtedly be used by claimants arguing for assignable LPL claims in future appellate litigation in other jurisdictions.