I went back and forth on whether to include the Florida Supreme Court’s decision, in Arch Ins. Co. v. Kubicki Draper, LLP, as a Top 10 coverage case of 2021. 

The court held that an insurer can maintain a malpractice action against defense counsel that it retained to represent an insured.  It is not at all a coverage case.  However, the issue is relevant to many readers of this annual review.  In addition, the case has across the board applicability, as insurers retain defense counsel for many kinds of liability policies and regardless of the facts at issue.

Also tipping the scales, while the issue is not devoid of case law nationally by any means, there is very little at the state supreme court level.  Kubicki Draper follows on the heels of the South Carolina Supreme Court’s 2019 decision, in Sentry Select Ins. Co. v. Maybank Law Firm, LLC, which reached the same conclusion (but without addressing its theory).  Thus, such recent decisions provide solid persuasive authority that the many jurisdictions, that have not addressed the issue, may look to and allow an insurer to maintain a malpractice action.   

The decision is not lengthy nor complicated. Spear Safer, an accounting firm, was sued for malpractice by the receiver for a client that became subject to an SEC investigation. A settlement was reached with the SEC.  Spear Safer was insured under a professional liability policy issued by Arch.  Arch retained Kubicki Draper to defend Spear Safer in the malpractice action.  Just before trial, the malpractice action against Spear Safer was settled for $3.5 million.  Arch then filed suit against Kubicki Draper, alleging that the case against Spear Safer should have been barred by the statute of limitations, but the law firm failed to raise it.  This, Arch maintained, significantly increased the settlement cost.  At issue before the Florida high court was whether Arch could maintain a malpractice action against Kubicki Draper, the law firm that it hired to represent its insured.             

The Florida high court held that, while the insurer was not in privity with the defense counsel (the insured was, as the client), the insurer could pursue a claim against the lawyer using a subrogation angle: “[C]onsistent with established principles of subrogation, because the insured is in privity with the law firm, contractual subrogation allows the insurer to step into the shoes of the insured. . . . Accordingly, contrary to the opinion’s conclusion below, Arch would have standing to pursue a legal malpractice claim against Kubicki.”