Great Amer. E&S Ins. Co. v. Quintairos, Prieto, Wood & Boyer, P.A.
| Docket Number: | 2009-CA-01063-COA Linked Case(s): 2009-CA-01063-COA ; 2009-CT-01063-SCT ; 2009-CT-01063-SCT ; 2009-CT-01063-SCT |
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| Court of Appeals: |
Opinion Link Opinion Date: 01-31-2012 Opinion Author: Griffis, P.J. Holding: Reversed and Remanded |
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| Additional Case Information: |
Topic: Legal malpractice - Negligent misrepresentation - M.R.C.P. 12(b)(6) - M.R.E. 502(a)(1) - Privity of contract - Negligent supervision - Equitable subrogation Judge(s) Concurring: Lee, C.J., Irving, P.J., Barnes, Ishee, Roberts and Maxwell, JJ. Non Participating Judge(s): Fair, J. Dissenting Author : Carlton, J. Dissent Joined By : Russell, J. Procedural History: Dismissal Nature of the Case: CIVIL - LEGAL MALPRACTICE |
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| Trial Court: |
Date of Trial Judgment: 05-29-2009 Appealed from: Warren County Circuit Court Judge: Frank G. Vollor Disposition: GRANTED MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM Case Number: 06-0231-CI |
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| Note: | The motion for rehearing is denied. The Court's original opinion is withdrawn, and this opinion is substituted in lieu thereof. The judgment of the Warren County Circuit Court is reversed, and this case is remanded for further proceedings consistent with this opinion. On 10/18/2012, the Supreme Court held that the doctrine of equitable subrogation applies, and the excess carrier may, to the extent of its losses, pursue a claim against the lawyers to the same extent as the insured, and if further held that the excess carrier failed to allege a sufficient factual basis for a direct claim of professional negligence against the law firm. The Supreme Court opinion can be found at http://courts.ms.gov/Images/Opinions/CO80898.pdf | |
| Party Name: | Attorney Name: | Brief(s) Available: | ||
| Appellant: | Great American E&S Insurance Company |
MICHAEL A. HEILMAN
CHRISTOPHER THOMAS GRAHAM
JOHN WILLIAM NISBETT |
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| Appellee: | Quintairos, Prieto, Wood & Boyer, P.A. | DAVID A. BARFIELD STEVEN LLOYD LACEY |
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Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Legal malpractice - Negligent misrepresentation - M.R.C.P. 12(b)(6) - M.R.E. 502(a)(1) - Privity of contract - Negligent supervision - Equitable subrogation |
| Summary of the Facts: | The motion for rehearing is denied, and this opinion is substituted for the original opinion. Shady Lawn Nursing Home and Vicksburg Convalescent Home purchased a Commercial General Liability policy and a Resident Health Care Facility Professional Policy from Royal Indemnity Company. The primary policy limited coverage to $1,000,000 per occurrence and $3,000,000 in the aggregate. Shady Lawn also purchased an Umbrella Liability Policy from Great American E&S Insurance Services Inc. The excess policy provided coverage of $8,000,000 per occurrence and $16,000,000 in the aggregate. The excess policy provided that it would not be implicated until the primary policy was exhausted for each claim. On August 29, 2002, a lawsuit styled, The Estate of Huldah Chase, et al. v. International Healthcare Properties, et al., Civil Action No. 02-0133CI, was filed in the Circuit Court of Warren County. The Chase lawsuit alleged that Huldah Chase, a patient at Shady Lawn, received inadequate and negligent care while a resident at Shady Lawn and sought to recover damages. The Chase lawsuit implicated coverage under both policies. Royal, as the primary insurance carrier, hired defense counsel to defend Shady Lawn, its insured. Great American was notified of the lawsuit, but it did not have a contractual duty to defend Shady Lawn until the Royal policy limits were exhausted. Great American was to be informed of the status of the case until it was resolved. In November 2003, Royal reassigned the defense of the Chase lawsuit to the law firm of Quintairos, Prieto, Wood & Boyer P.A. At that time, a scheduling order was in place that set the deadline for designation of the defendant’s experts for December 15, 2003. In November, the plaintiff designated two expert witnesses; one expert was a physician. The designation included an expert report on how the negligent care of Chase had caused her injuries and death. Quintairos did not designate experts prior to the deadline for the defendant to designate an expert witness. Shady Lawn began to write Royal to express its concern with Quintairos and Quintairos’s defense of the case. Shady Lawn noted its concern that none of Quintairos’s partners or trial attorneys were licensed to practice law in Mississippi. Royal determined that Quintairos was its choice of defense counsel, and Quintairos would appropriately defend the Chase lawsuit. In February 2004, Quintairos attempted to designate a physician as an expert witness. The plaintiff filed a motion to strike the late designation of an expert witness. On March 18, 2004, the trial court granted the motion and struck the designation of Shady Lawn’s expert witness. As a result, Shady Lawn would not be able to offer expert witness testimony at the trial of the Chase lawsuit. The next day, on March 19, 2004, Quintairos sent an “updated lawsuit evaluation” and increased the settlement value of the case from a maximum of $500,000 to a range of $3,000,000 to $4,000,000. This was the first indication Great American received that its excess policy may be necessary to satisfy the claims alleged in the Chase lawsuit. Great American immediately retained counsel to protect its interests and the interests of the insureds. Just two days earlier, on March 17, 2004, Great American had learned that Quintairos had not retained local counsel and that none of the Quintairos partners or trial attorneys had been admitted to practice law in Mississippi. Upon receipt of the March 19th evaluation, Royal immediately tendered the limits of its policy. Great American’s excess policy became responsible for any verdict returned. Thereafter, Great American settled the Chase lawsuit for a significant sum, which was not disclosed in the amended complaint. In addition to the Chase lawsuit, there were three other cases where Royal hired Quintairos to defend Shady Lawn. Great American filed its complaint and commenced this litigation. The complaint was amended, and the proper parties were substituted. In the amended complaint, Great American asserted claims against Royal and Quintairos. The claims against Quintairos are for equitable subrogation, legal malpractice, negligence, gross negligence, negligent misrepresentation, and negligent supervision. Quintairos filed a motion to dismiss. The trial court granted Quintairos’s motion and certified the judgment as final under M.R.C.P. 54(b). Great American appeals. |
| Summary of Opinion Analysis: | Issue 1: Negligent misrepresentation To support its claim for negligent misrepresentation, Great American asserted that: Quintairos made misrepresentations or material omissions to Great American about the Chase lawsuit and the other lawsuits; the misrepresentations and omissions were material and significant; Quintairos failed to exercise reasonable care in making the misrepresentations or omissions; Quintairos intended for Great American to rely and act upon the misrepresentations or omissions; Great American was justified in relying upon the statements and did in fact reasonably rely upon Quintarios’s statements; and Great American incurred damages as a proximate result thereof. The facts alleged in the amended complaint establish, for the purpose of an M.R.C.P. 12(b)(6) motion, that Great American had requested and was provided status reports on the litigation. The status reports, provided to Great American, indicated the settlement value of the Chase lawsuit as between $150,000 to $500,000. However, after the trial court struck the expert witness designation in March 2004, Quintairos increased the settlement value of the case from a maximum of $500,000 to a range of $3,000,000 to $4,000,000. Accordingly, there is a set of a set of facts that would entitle Great American to relief. Issue 2: Legal malpractice Great American asserted a claim for legal malpractice. Great American alleged that Quintairos failed to exercise the degree of care, skill, knowledge, and ability ordinarily possessed by members of the legal profession in its performance of work in the Chase lawsuit and the other lawsuits. The elements of a legal-malpractice claim require: an attorney-client relationship, negligence on the part of the lawyer in handling his client’s affairs entrusted to him, and proximate cause of the injury. Quintairos argues that it was hired by Royal to defend Shady Lawn. There was no direct contractual relationship between Quintairos and Great American. Great American argues that it may pursue a claim of malpractice despite the absence of a direct attorney client relationship because it had detrimentally relied on Quintairos’s representation of Shady Lawn. If the evidence at trial establishes that defense counsel, hired by Royal to represent a mutual insured, gave information to Great American that was confidential information and was protected from disclosure by the attorney-client privilege or the statute, then such may be considered to be legally sufficient evidence to establish an attorney-client relationship, at least to pass Rule 12(b)(6) muster. Pursuant to M.R.E. 502(a)(1), such information would appear to be considered the rendition of professional legal services by a lawyer. Great American also argues that privity of contract is not a necessary element of a legal-malpractice claim. If Shady Lawn, the insured, did not have the good business sense to purchase the excess policy, then Shady Lawn would have been responsible for paying the amounts necessary to settle the Chase lawsuit once the Royal policy was exhausted. Great American did not come to be involved in this litigation out of the goodness of its corporate heart. Great American is involved only because Shady Lawn purchased an excess policy with Great American. The existence of the excess policy is simply an extension of the insured. Quintairos claims that denying Great American the right to file a claim would not leave it without a remedy in this case because it had the option of protecting its interests by hiring its own attorney. However, allowing or expecting excess carriers to enter an appearance in defense of an insured, and have their own interests in mind, would not lead to the orderly and efficient resolution of each case with the required focus on the insured’s interest. Negligent defense attorneys should not be able to escape malpractice liability simply because an insured prudently purchased excess insurance. Nor should an excess or umbrella carrier bear responsibility for a loss that it did not cause or to which it did not contribute. Mississippi is not a strict privity state. Therefore, based on the facts alleged in the amended complaint and because this is a Rule 12(b)(6) motion, there is a set of facts that would entitle Great American to relief. Issue 3: Negligent supervision Great American’s claim of negligent supervision is based on the following facts alleged in the amended complaint: Quintarios was a Florida based law firm that opened an office in Mississippi, relied on inexperienced lawyers, and did not have partners or adequate trial counsel to handle the cases assigned. There is a set of facts that would entitle Great American to relief. The Rule 12(b)(6) motion should have been denied with regard to Great American’s claims for negligence, gross negligence, and negligent supervision. Issue 4: Equitable subrogation Subrogation has been defined as the substitution of one person in the place of another, whether as a creditor or as the possessor of any rightful claim, so that he who is substituted succeeds to the rights of the other in relation to the debt or claim, and to its rights, remedies, or securities. Great American argues that a claim for equitable subrogation exists in Mississippi and that the claim was adequately pleaded in the amended complaint. Quintarios counters that Mississippi has not considered whether an excess insurer can pursue claims for legal malpractice against the attorney who represented the insured under an equitable-subrogation theory. Although the Mississippi Supreme Court has recognized the claim of equitable subrogation, this is an issue of first impression. Based on existing Mississippi case authority on equitable subrogation, Great American should be allowed to go forward with its claim in the insured’s place. Shady Lawn had no incentive to pursue a claim against Quintairos even if it believed Quintairos to be negligent because it had insurance in place to pay the settlement. Also, Royal had no incentive to pursue a claim if it believed the settlement value to be at or near the policy limits of the primary coverage regardless of the alleged malpractice. The only winner produced by an analysis precluding liability would be the malpracticing attorney. Accordingly, there is a set of facts that would entitle Great American to relief. |
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