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Analysis

Examining subrogation and malpractice

What rights does an excess insurer have when it comes to legal malpractice?

By Dawn N. Cohen, Esq. and Matthew B. Malamud, Esq. | Updated on November 29, 2018
Subrogation and legal malpractice. If hired counsel improperly or inadequately defends the insured, a legal malpractice claim may arise against the attorneys or firm hired by the primary insurer. (Photo: Shutterstock)

In a typical third-party claim, an insurer hires counsel to defend its insured in a separate, underlying lawsuit. Sometimes, in a less common scenario, the insured’s counsel is ineffective, perhaps even negligent, and a considerable verdict is entered against the insured. Assuming the insured’s policy provides coverage, the insured is generally not responsible for paying this verdict. Rather, this responsibility falls on the insurer.

An interesting situation arises when the insured has both primary and excess coverage. The primary insurer hires the insured’s counsel, and that insurer pays its share of the verdict. The excess insurer is also responsible for the verdict, and often pays significantly more than the primary insurer. In situations in which the verdict is a result of the negligence of the insurer’s counsel, what recourse does the excess insurer have to recoup its payments? Can the excess insurer sue the insured’s counsel, hired by the primary insured, for legal malpractice?

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