Legal malpractice claims aren’t assignable under Maryland law; bad faith claim against insurer-appointed attorneys dismissed


by Christopher Graham and Joseph Kelly

Cook v. Nationwide Insurance Company, Case No. PWG-13-882 (D. Md. Aug. 23, 2013)

This legal malpractice case results from an auto accident tort case.

Alvarez, while driving drunk and with a suspended license, crashed into plaintiff Cook’s car, injuring Cook. Cook filed suit against Alvarez. Nationwide, Alvarez’s auto insurer, appointed defendant attorneys to represent Alvarez. Cook offered to settle the case for $71,000 which was above the $50,000 policy limit. Nationwide refused. The case went to trial and Cook received a jury verdict in his favor in excess of $892,000. Alvarez subsequently assigned “any and all rights he has against [Nationwide and attorney Defendants,” of any and all claims that he has against them as a result of actions” alleged in the complaint in the tort case.

Cook then filed suit against Nationwide and the defendant attorneys for “bad faith/negligence” alleging that they should’ve settled. Defendant attorneys successfully moved to dismiss Cook’s complaint.

Legal malpractice

The court also dismissed Cook’s legal malpractice claim against defendant attorneys, citing to Maryland case law for the proposition that an attorney “is liable for his negligence … to his immediate employer only, and not to the latter’s assigns or any third person, between whom and the attorney there is no privity.”

The court noted that under Maryland law there must be strict privity between the parties for a legal malpractice claim. The rationale — according to the court — is that “[a]n attorney’s loyalty would be compromised … if she were at risk of an assigned malpractice claim brought be her former adversary.”

The court additionally noted if legal malpractice claims are assignable, then attorney defendants may be required to violate attorney-client privilege by disclosing confidential information to successfully defend such a claim.

Bad faith

The court dismissed Cook’s bad faith claim against defendant attorneys.

The court noted that:

  • “It is well-settled Maryland law that an insured has a cause of action against its insurance company for bad faith refusal to settle a claim within policy limits.” citation omitted

The court also noted the rationale behind bad faith claims against an insurer that controls the defense, stating:

  • “[i]t is when the insurer undertakes to provide a defense that it has “the exclusive control . . . of . . . settlement and defense of any claim or suit against the insured,”and it is at this stage that the “potential, if not actual, conflict of interest giving rise to a fiduciary duty” comes into being.” citation omitted

The parties didn’t present (and the court didn’t find) any Maryland cases permitting a bad faith claim against attorneys appointed to defend by an insurer.

Regardless, the court found that Cook had no bad faith claim against defendant attorneys because there were no allegations that defendant attorneys knew about Cook’s settlement offer or had authority to accept it. The defendant attorneys didn’t have control over the settlement.

Tags: Maryland, legal malpractice, assignability, bad faith

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