Skipper v. ACE Property and Cas. Ins. Co., No. 2014—001979, 2015 WL 4269817 (S.C. July 15, 2015)
A husband and wife filed suit against a logging company stemming from an automobile accident between the husband and the driver of a logging truck owned by the logging company. The logging truck was insured under a commercial automobile insurance policy issued to the logging company. The attorneys retained by the insurer to represent the logging company were unable to reach a settlement with husband and wife. Husband and wife, without the knowledge of insurer or the attorneys, settled with the logging company and driver and executed a Confession of Judgment in an amount more than three times the policy limits, admitting liability for husband and wife’s damages. The logging company and driver agreed to pursue a legal malpractice claim against the insurer and its attorneys, assigning the majority of the interest in the claim to husband and wife in exchange for not executing the judgment against logging company and driver.
The question of whether a legal malpractice claim can be assigned between adversaries in the underlying litigation that resulted in the legal malpractice was a matter of first impression in South Carolina. The South Carolina Supreme Court accepted the certified question from the United States District Court for the District of South Carolina.
The South Carolina Supreme Court answered “no” to the certified question, adopting the majority rule, prohibiting assignments of legal malpractice claims between adverse parties in the underlying litigation giving rise to the alleged malpractice.
The South Carolina Supreme Court examined the holdings of other jurisdictions and found that the majority of states have prohibited assignments of legal malpractice claims to “avoid the risk of collusion between the parties.” The Court reasoned that to allow such assignments would promote collusion against the defendant’s attorney. This collusion would remove the incentive for consent judgments to accurately reflect the damages, resulting in an undermined jury system.
The South Carolina Supreme Court also examined the likelihood of a “disreputable” role reversal between the parties in the underlying litigation. The Court, citing the Texas Court of Appeals, believed that the plaintiff-assignee would argue in the underlying litigation that they would have prevailed even if the defendant-assignor’s attorney provided competent representation, yet would reverse course in the legal malpractice case and be inclined to argue that the defendant-assignor would have prevailed but for the incompetent representation. According to the Court, such a role reversal would be an unacceptable side-effect.
The South Carolina Supreme Court’s decision adopts the majority rule in South Carolina, preventing assignments of legal malpractice claims between adversaries in the litigation in which the alleged claim arose.