Articles Posted in Privity Requirement

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May an insurance company sue the defense firm that it hired where it alleges that the defense firm did not meet the standard of care? In Florida, according to Arch Insurance Company v. Kubicki Draper, 4-D17-2889, the insurance company may not file suit because it lacks privity with the law firm.  The insurance company alleged that it hired the firm to defend a case for one of its insureds. The law firm allegedly failed to raise the statute of limitations defense, which caused the insurance company to incur a loss.

The privity defense holds that a plaintiff cannot sue a defendant unless he was “in privity” with that defendant. Here, even though the insurance company hired the law firm to defend its insured, there was no privity because the law firm was responsible only to its client, the insured. The court rejected the insurance company’s public policy arguments:

The insurer nevertheless argues public policy and common sense dictate that an insurer should be able to pursue legal malpractice claims against defense counsel retained to represent its insureds. According to the insurer:

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Workforce Solutions v. Sara L. Pettinger and Scopelitis, Garvin, Light, Hanson & Feary, P.C., 2105 IL (1st) 121265-U.

In 2006, Workforce sued Urban Services of America, Inc., for breach of contract when Urban allegedly failed to pay for $573,000 in services. In 2008, Workforce obtained a default judgment against Urban. The judgment could not be collected because Urban was insolvent. Workforce alleged in the current case that “Pettinger and the Firm fraudulently conspired with Urban to delay the proceedings in order to prevent Workforce from obtaining recovery of its 2008 judgment.”  Workforce also alleged that the defendants concealed a key document during discovery in the underlying case.

Workforce alleged that Pettinger unreasonably protracted and delayed the discovery process in the underlying case  “According to plaintiff, after ‘delaying the progress of the case and delaying discovery for over two years’ and after Urban transferred its assets to insiders, in May 2008, upon motion, Pettinger and the Firm withdrew their representation of Urban.” Shortly thereafter, Workforce obtained a default judgment against Urban for $1,305,668.56.

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VISSING v. CLARK COUNTY BOARD OF AVIATION COMMISSIONERS, Ind: Court of Appeals 2014 – Google Scholar.

The malpractice lawsuit arose out of an effort to claim, by eminent domain, certain property, which was to be used to an airport. In 2009, the Clark County Aviation Board attempted to purchase land to expand the Clark County Airport.

The alleged error was the failure to object to the landowner’s attempt to file exceptions to an appraiser’s report in the applicable statutory period.

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Scott v. Burgin, DC: Court of Appeals 2014 – Google Scholar.

The issue of privity frequently arises in legal malpractice litigation. A party lacks privity when the party did not have an attorney-client relationship with the lawyer. Recently, the privity rule has been relaxed by courts to allow lawsuits for legal malpractice by some persons who did not have an attorney-client relationship, such as the beneficiaries of an estate plan. Thus, a lawyer who breaches the duty of care in drafting an estate plan can sometimes be subject to suit by the beneficiaries who lost their inheritance.

Here, the plaintiff was the girlfriend of the decedent. She alleged that the lawyers for Kenneth Woodruff were negligent in failing to prosecute his divorce action against his wife. Burgin alleged that, had the divorce been obtained, she would have been eligible to receive certain retirement benefits upon Woodruff’s death.