THE STATE OF SOUTH CAROLINA

In The Supreme Court

Sentry Select Insurance Company, Plaintiff,

v.

Maybank Law Firm, LLC, and Roy P. Maybank, 

Defendants.

Appellate Case No. 2016-001351

CERTIFIED QUESTIONS 

ON CERTIFICATION FROM THE UNITED STATES 

DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA

J. Michelle Childs, United States District Court Judge

Opinion No. 27806

Heard December 13, 2018 – Filed March 6, 2019

Refiled March 11, 2019

FIRST QUESTION ANSWERED

Daryl G. Hawkins, Law Office of Daryl G. Hawkins, LLC, 

of Columbia, for Plaintiff. 

David W. Overstreet, Michael B. McCall, and Steven R. 

Kropski; Earhart Overstreet, LLC; all of Charleston; for 

Defendants.

JUSTICE FEW: Sentry Select Insurance Company brought a legal malpractice 

lawsuit in federal district court against the lawyer it hired to defend its insured in an 

automobile accident case. The district court requested we answer the following 

questions: 
(1) Whether an insurer may maintain a direct malpractice 

action against counsel hired to represent its insured where 

the insurance company has a duty to defend?

(2) Whether a legal malpractice claim may be assigned to a 

third-party who is responsible for payment of legal fees 

and any judgment incurred as a result of the litigation in 

which the alleged malpractice arose? 

The answer to question one is "yes," under the limitations we will describe below.1

 

We decline to answer question two. 

I. Background

Sentry Select hired Roy P. Maybank of the Maybank Law Firm to defend a trucking 

company Sentry Select insured in a personal injury lawsuit in state court. Maybank 

failed to timely answer requests to admit served by the plaintiff pursuant to Rule 

36(a) of the South Carolina Rules of Civil Procedure. Seven months later, Maybank 

filed a motion seeking additional time to answer the requests, which the circuit court 

held under advisement until the parties completed mediation. Sentry Select claims 

that because of Maybank's failure to timely answer the requests, and the likelihood 

the circuit court would deem them admitted,2 it settled the case for $900,000, and 

 

1 We originally decided this certified question in an opinion filed May 30, 2018. 

Sentry Select Ins. Co. v. Maybank Law Firm, LLC, Op. No. 27806 (S.C. Sup. Ct. 

filed May 30, 2018) (Shearouse Adv. Sh. No. 22 at 31). The defendants filed a 

petition for rehearing, which we granted, thereby vacating the May 30, 2018 opinion. 

We now substitute this opinion to answer the certified question. 

2 See Scott v. Greenville Housing Authority, 353 S.C. 639, 646, 579 S.E.2d 151, 154 

(Ct. App. 2003) (stating "our courts have repeatedly found that failure to respond to 

requests for admissions deems matters contained therein admitted for trial"); but 

see 353 S.C. at 652, 579 S.E.2d at 158 (finding the specific error to be the trial court 

abused its discretion "in failing to address the prejudice that would be suffered by" 

the party seeking relief from his failure to answer); 8B Charles Alan Wright, Arthur 

R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2257 (3d ed. 2010 

& Supp. 2018) ("The court has power to allow additional time for a response to a 

request for admissions even after the time fixed by the rule has expired. Thus the 

court can, in its discretion, permit what would otherwise be an untimely answer."). 
claims Maybank previously represented to Sentry Select it could settle in a range of 

$75,000 to $125,000. 

Sentry Select then filed this lawsuit in federal district court against Roy Maybank 

and Maybank Law Firm alleging a variety of theories, including negligence. The 

district court certified these two questions to us pursuant to Rule 244 of the South 

Carolina Appellate Court Rules.

II. Analysis—Question One

When an insurer hires an attorney to represent its insured, an attorney-client 

relationship arises between the attorney and the insured—his client. Pursuant to that 

relationship, the attorney owes the client—not the insurer—a fiduciary duty. See 

Spence v. Wingate, 395 S.C. 148, 158-59, 716 S.E.2d 920, 926 (2011) (stating "an 

attorney-client relationship is, by its very nature, a fiduciary relationship"). Nothing 

we say in this opinion should be construed as permitting even the slightest intrusion 

into the sanctity of the attorney-client relationship, nor to diminish to any degree the 

fiduciary responsibilities the attorney owes his client. 

However, an insurance company that hires an attorney to represent its insured is in 

a unique position in relation to the resulting attorney-client relationship. Pursuant 

to the insurance contract, the insurer has a duty to defend its insured, and must 

compensate the attorney for his time in defense of his client. If the insured settles or 

has judgment imposed against him, the insurance contract ordinarily requires the 

insurer to pay the settlement or judgment. Many insurance contracts provide the 

insurer has a right to investigate and settle claims as a representative of its insured. 

Finally, the insurer's right to settle must be exercised in good faith, and that duty of

good faith requires the insurer to act reasonably in protecting the insured from 

liability in excess of the policy limits. Tiger River3 Pine Co. v. Maryland Cas. Co., 

163 S.C. 229, 234-35, 161 S.E. 491, 493-94 (1931). 

 

3 Three tributaries of the Tyger River flow from the feet of the mountains of 

Greenville and Spartanburg Counties before coming together in lower Spartanburg 

County east of Woodruff. From there the Tyger River flows through Union County, 

forming the border of Union and Newberry Counties for a short distance before 

entering the Broad River. In 1928, Erwin Chesser injured his arm at his job with 

Tyger River Pine Co. in Union County. A series of lawsuits arising from that injury 

and a jury verdict in Chesser's favor in excess of the limits of Tyger River Pine's 

liability policy with Maryland Casualty Co. made it to this Court three times, as a 
Because of the insurance company's unique position, we hold the answer to question 

one is yes, an insurer may bring a direct malpractice action against counsel hired to 

represent its insured. However, we will not place an attorney in a conflict between 

his client's interests and the interests of the insurer. Thus, the insurer may recover 

only for the attorney's breach of his duty to his client, when the insurer proves the 

breach is the proximate cause of damages to the insurer. If the interests of the client 

are the slightest bit inconsistent with the insurer's interests, there can be no liability

of the attorney to the insurer, for we will not permit the attorney's duty to the client 

to be affected by the interests of the insurance company. Whether there is any 

inconsistency between the client's and the insurer's interests in the circumstances of 

an individual case is a question of law to be answered by the trial court.

Our decision is consistent with established policy. In Fabian v. Lindsay, 410 S.C. 

475, 491, 765 S.E.2d 132, 141 (2014), analyzing the individual circumstances of that 

case, we held an attorney can be liable for breach of duty resulting in damages to a 

third party. We relied in part on our conclusion that not recognizing such liability

"would . . . improperly immunize this particular subset of attorneys from liability for 

their professional negligence." 410 S.C. at 490, 765 S.E.2d at 140; see also 410 S.C. 

at 493, 765 S.E.2d at 142 (Pleicones, J., concurring in part and dissenting in part) 

(relying on "public policy considerations" to support his concurrence in the 

imposition of liability). 

The deterrent purpose of tort law is also served by our decision. 

One reason for making a defendant liable in tort for 

injuries resulting from a breach of his duty is to prevent 

such injuries from occurring. Underlying this justification 

is the assumption that potential wrongdoers will avoid 

wrongful behavior if the benefits of that behavior are 

outweighed by the costs imposed by the payment of 

damages . . . . 

 

result of which there became the "Tyger River Doctrine." See, e.g., Williams v. 

Riedman, 339 S.C. 251, 269, 529 S.E.2d 28, 37 (Ct. App. 2000). Unfortunately, this 

Court spelled the name of the river incorrectly in the caption of one of those three—

the cited opinion. After all these years, we officially apologize for our error. 
F. Patrick Hubbard and Robert L. Felix, The South Carolina Law of Torts 7 (4th ed. 

2011); see also Rule 1.8 cmt. 14, RPC, Rule 407, SCACR, (stating the reason an 

attorney cannot prospectively limit his liability to a client is because doing so is 

"likely to undermine competent and diligent representation").

Our decision is also consistent with the rule adopted by the majority of states that 

have considered the issue. See generally Ronald E. Mallen, 4 Legal Malpractice § 

30.39 (2019 ed.) (listing twenty-four states in which such an action is allowed under 

appropriate circumstances, and two states in which it is not allowed); William H. 

Black Jr. & Sean O. Mahoney, Legal Bases for Claims by Liability Insurers Against 

Defense Counsel for Malpractice, 35 The Brief 33, 33 (Winter 2006) ("Although the 

issue is relatively new to American jurisprudence, the majority of states permit a 

liability insurer to sue defense counsel for negligent representation in an underlying 

action."); General Sec. Ins. Co. v. Jordan, Coyne & Savits, LLP, 357 F. Supp. 2d 

951, 955-56 (E.D. Va. 2005) (stating "courts of other jurisdictions generally 

recognize such a cause of action"); see also 7A C.J.S. Attorney & Client § 386 (2015)

("When, pursuant to insurance policy obligations, an insurer hires and compensates 

counsel to defend an insured, provided that the interests of the insurer and insured 

are not in conflict, the retained attorney owes a duty of care to the insurer[4] which 

will support its independent right to bring a legal malpractice action against the 

attorney for negligent acts committed in the representation of the insured."). 

Maybank argues our decision will destroy the sanctity and integrity of the attorneyclient relationship by: (1) dividing the loyalty of the attorney between the client and 

the insurer; (2) threatening the attorney-client privilege; (3) allowing the insurer to 

direct the litigation even though the insured is the client; and (4) opening the door to 

other non-clients to sue attorneys for legal malpractice. We have the additional 

concern of ensuring there can be no double-recovery against an attorney. 

In response to these concerns, we emphasize that the loyalties of the attorney may 

not be divided. See Fabian, 410 S.C. at 490, 765 S.E.2d at 140 ("It is the breach of 

the attorney's duty to the client that is the actionable conduct in these cases."). The 

duties an attorney owes his client are well-established according to law, and this 

opinion does nothing to change that. See generally Rule 407, SCACR (South 

Carolina Rules of Professional Conduct). The attorney owes no separate duty to the 

 

4 To be clear, the cause of action we recognize today is based on the attorney's duty 

to the client, not to the insurer. 
insurer. We do not recognize what the dissent calls the "dual attorney-client 

relationship." 

As to Maybank's second concern, we emphasize the insurer may not intrude upon 

the privilege between the attorney it hires and the attorney's client—the insured. We 

are confident the trial courts of this State are well-equipped to protect the attorneyclient privilege according to law if any dispute over it arises. 

As to Maybank's third concern, the attorney's control of litigation involving an 

insured client is also governed by established law. See, e.g., Rule 1.8(f), RPC, Rule 

407, SCACR ("A lawyer shall not accept compensation for representing a client 

from one other than the client unless: . . . (2) there is no interference with the lawyer's 

independence of professional judgment or with the client-lawyer relationship; 

. . . ."); Rule 5.4(c), RPC, Rule 407, SCACR ("A lawyer shall not permit a person 

who recommends, employs, or pays the lawyer to render legal services for another 

to direct or regulate the lawyer's professional judgment in rendering such legal 

services."). Our opinion does nothing to change these principles. 

As to Maybank's "opening the door" concern, we expressly limit the scope of this 

opinion so that it does nothing beyond what it expressly states. Next, there may be 

no double recovery. If a danger of double recovery arises, we are confident our trial 

courts can handle it. See Rule 17(a), SCRCP ("Every action shall be prosecuted in 

the name of the real party in interest.").

As a final limitation on an insurer's right to bring an action against the lawyer it hires 

to represent its insured, the insurer must prove its case by clear and convincing 

evidence. The clear and convincing standard is consistent with the result of Fabian. 

See 410 S.C. at 493, 765 S.E.2d at 142 (Kittredge, J., concurring) (stating "the burden 

of proof should be the clear and convincing standard"); 410 S.C. at 494, 765 S.E.2d 

at 142 (Pleicones, J., concurring in part and dissenting in part) (stating "I would 

require a beneficiary asserting such a legal malpractice claim to prove by clear and 

convincing evidence that the attorney breached the duty," joined by Toal, C.J.).

In this case, there appears to be no risk our decision will place the attorney in a 

conflict position or create any divided loyalty. The attorney's duty to his client 

includes the obligation to timely respond to requests to admit. The fact that an 

insurance company may suffer financial loss from an attorney's negligence in failing 

to timely respond to the requests, and our recognition that the insurer may sue the 

attorney to recover this loss after settling the underlying case to protect the interests 

of the insured, do not in any way affect the attorney's duty to his client. We stress, 
however, the district court should independently make this determination based on 

all the facts and circumstances of the case. As to the other concerns, we see no basis 

on the limited record before us to find that any of the limitations we impose will be 

violated in this factual scenario. If some other fact or circumstance in the record 

before the district court raises such a concern, the district court is fully capable of 

addressing it.

The dissent offers several points of criticism we feel we should address. First, the 

fact that we do not specifically identify a theory of recovery—such as third party 

beneficiary theory or equitable subrogation—is fair criticism. This is a deliberate 

choice, however, designed to preserve the attorney's fiduciary allegiance to his client 

with no interference from the insurer. If permitting liability against the attorney on 

the basis of a duty to the client—not a duty to the plaintiff insurer—appears

awkward, we accept that awkwardness as adequately counterbalanced by the benefit 

of preserving the sanctity of the attorney-client relationship. 

Second, the dissent argues we have ignored the Fabian "factors." However, we 

specifically rely on the fifth factor—the policy of preventing future harm—in our 

discussion of the deterrent purpose of tort law, and with our citation to the 

admonition in Fabian that we should not "improperly immunize [a] particular subset 

of attorneys from liability for their professional negligence." 410 S.C. at 490, 765 

S.E.2d at 140. We also specifically discuss the sixth factor—the need to avoid an 

undue burden on the profession—by putting so much emphasis on not creating 

divided loyalties. The third factor warrants no discussion because its applicability 

in this category of case is obvious. When an attorney's breach of his duty to his 

client proximately causes a larger settlement or judgment in a case in which the 

insurer must pay, the harm to the plaintiff insurer is not merely "foreseeable"; it is 

inevitable. 

The other Fabian factors are less applicable here, which brings up the reason we do 

not dwell on them as the dissent suggests we should. In Lucas v. Hamm, 364 P.2d 

685 (Cal. 1961), the decision we primarily relied on in Fabian for the use of the 

factors, the Supreme Court of California explained the purpose for their use. The 

court stated "the determination whether in a specific case the defendant will be held 

liable to a third person not in privity is a matter of policy and involves the balancing 

of various factors." 364 P.2d at 687 (emphasis added); see also Beacon Residential 

Cmty. Ass'n v. Skidmore, Owings & Merrill LLP, 327 P.3d 850, 857 (Cal. 2014) 

(stating "the application of these factors necessarily depends on the circumstances 

of each case," relying on Biakanja v. Irving, 320 P.2d 16, 19 (Cal. 1958), which we 

indicated in Fabian was the decision the California Supreme Court relied on in 
deciding Lucas, 410 S.C. at 484, 765 S.E.2d at 137). In Fickett v. Superior Court of 

Pima County, 558 P.2d 988 (Ariz. Ct. App. 1976), another case we relied on in 

Fabian, the court similarly recognized the factors are for use in a specific case-bycase analysis, 558 P.2d at 990, and in particular in cases in which a person's liability 

to the beneficiary of an estate is in question, 558 P.2d at 989-90. In fact, only one 

of the many cases cited by the dissent regarding the importance of the Fabian/Lucas

factors involves the liability of an attorney to an insurer. See supra notes 6 and 7. 

That case, Atlanta International Insurance Co. v. Bell, 475 N.W.2d 294 (Mich. 

1991), does not even mention the Fabian/Lucas factors, but does impose liability 

against retained counsel—as we do—when the "case does not present a conflict 

between the interests of the insurer and the public policy of ensuring undiluted 

loyalty by counsel to the insured." 475 N.W.2d at 297.

III. Question Two

As to question two—whether a legal malpractice claim may be assigned to a third 

party—we decline to answer the question. We are satisfied that our answer to

question one renders the second question not "determinative of the cause then 

pending in the certifying court," Rule 244(a), SCACR, and thus it is not necessary 

for us to answer question two, see Rule 244(f), SCACR (providing we "may rescind 

[our] agreement to answer a certified question"); see also Thomas v. Grayson, 318 

S.C. 82, 89, 456 S.E.2d 377, 381 (1995) (declining to answer a certified question 

because the Court's analysis of the other certified questions was dispositive).

KITTREDGE and JAMES, JJ., concur. BEATTY, C.J., dissenting in a 

separate opinion in which HEARN, J., concurs.
CHIEF JUSTICE BEATTY: I respectfully dissent. I would answer both 

questions in the negative and hold that an insurer may not maintain a direct legal 

malpractice claim against an insured's hired counsel and that a legal malpractice 

claim may not be assigned to a third party responsible for any judgment and legal 

fees. In deciding otherwise, the majority provides the insurer a windfall at the cost 

of preserving the attorney-client relationship, which is a decision I cannot support. 

I. May an insurer maintain a direct malpractice action against counsel 

hired to represent its insured where the insurance company has a duty to 

defend?

Over a century ago, the United States Supreme Court held that, absent fraud, 

collusion, or similar circumstances, only those in privity with an attorney may pursue 

a legal malpractice claim. Nat'l Sav. Bank v. Ward, 100 U.S. 195, 205-07 (1879). 

South Carolina followed suit and required the plaintiff to prove the existence of an 

attorney-client relationship in order to establish privity. Fabian v. Lindsay, 410 S.C. 

475, 483, 765 S.E.2d 132, 136 (2014) ("Privity for legal malpractice has traditionally 

been established by the existence of an attorney-client relationship."); Am. Fed. 

Bank, FSB v. No. One Main Joint Venture, 321 S.C. 169, 174, 467 S.E.2d 439, 442 

(1996) ("Before a claim for malpractice may be asserted, there must exist an 

attorney-client relationship."). 

The purpose of the attorney-client relationship requirement is "to ensure the 

inviolability of the attorney's duty of loyalty to the client." Atlanta Int'l Ins. Co. v. 

Bell, 475 N.W.2d 294, 296 (Mich. 1991); see McIntosh Cnty. Bank v. Dorsey & 

Whitney, LLP, 745 N.W.2d 538, 545 (Minn. 2008) ("If an attorney were to owe a 

duty to a nonclient, it could result in potential ethical conflicts for the attorney and 

compromise the attorney-client relationship, with its attendant duties of 

confidentiality, loyalty, and care."); Bovee v. Gravel, 811 A.2d 137, 140 (Vt. 2002)

("The requirement of attorney-client privity to maintain a malpractice action 

'ensure[s] that attorneys may in all cases zealously represent their clients without the 

threat of suit from third parties compromising that representation.'" (quoting Barcelo 

v. Elliot, 923 S.W.2d 575, 578-79 (Tex. 1996))). Thus, by limiting the potential 

plaintiffs in a legal malpractice action to the attorney's clients, courts have, in effect, 

determined the concerns surrounding the preservation of the attorney-client 

relationship outweigh the collateral or peripheral interest of third parties. 

In Fabian v. Lindsay, 410 S.C. 475, 765 S.E.2d 132 (2014), however, we

created an exception to this longstanding requirement when we recognized causes 

of action in tort and contract for third-party beneficiaries of an existing estate 
planning document against an attorney whose drafting error defeats or diminishes 

the client's intent. In doing so, we explained:

Recognizing a cause of action is not a radical departure from the 

existing law of legal malpractice that requires a lawyer-client 

relationship, which is equated with privity and standing. Where a client 

hires an attorney to carry out his intent for estate planning and to 

provide for his beneficiaries, there is an attorney-client relationship that 

forms the basis for the attorney's duty to carry out the client's intent. 

This intent in estate planning is directly and inescapably for the benefit 

of the third-party beneficiaries. Thus, imposing an avenue for recourse 

in the beneficiary, where the client is deceased, is effectively enforcing 

the client's intent, and the third party is in privity with the attorney. 

Id. at 490, 765 S.E.2d at 140. The Court also acknowledged that "[i]n these 

circumstances, retaining strict privity in a legal malpractice action for negligence 

committed in preparing will or estate documents would serve to improperly 

immunize this particular subset of attorneys from liability for their professional 

negligence." Id. 

Today, the majority creates another exception to the attorney-client 

relationship requirement to allow an insurer to pursue a cause of action against 

counsel hired to represent the insured. In doing so, the majority asserts its decision 

is "consistent with the rule adopted by the majority of states that have considered the 

issue." This is somewhat misleading. While a majority of jurisdictions may permit 

an insurer to pursue a legal malpractice action against hired counsel, it is important 

to note that most of those jurisdictions appear to do so on the belief that a dual 

attorney-client relationship exists between the insurer, insured, and counsel, which 

is a belief the majority does not share.5

 

 

5

 Under the "dual attorney-client relationship," the attorney has two clients, in this 

context, the insured and the insurer. Consequently, in those jurisdictions that 

recognize this type of relationship, no exception to the privity requirement need be 

created for an insurer to bring a direct legal malpractice claim against hired counsel 

under certain circumstances because the insurer, as a client, is already in privity with 

the attorney. However, that is not the rule in this state. Moreover, as at least one 

commentator has recognized, some states that have initially recognized such a rule 

have moved away from doing so in light of the conflicts it poses to the insured. See

Amber Czarnecki, Ethical Considerations Within the Tripartite Relationship of 

Insurance Law - Who Is the Real Client?, 74 Def. Couns. J. 172, 176 (2007) 
Those jurisdictions that allow an insurer to pursue a claim against hired 

counsel under a premise other than the dual attorney-client relationship have done 

so using a number of approaches grounded in contract, equity, and tort law. See, 

e.g., Paradigm Ins. Co. v. Lagerman Law Offices, P.A., 24 P.3d 593, 601-02 (Ariz. 

2001) (holding an insurer may pursue a legal malpractice claim against hired counsel 

because counsel "has a duty to the insurer arising from the understanding that [his] 

services are ordinarily intended to benefit both insurer and insured when their 

interests coincide"); Hartford Ins. Co. v. Koeppel, 629 F.Supp.2d 1293 (M.D. Fla. 

2009) (granting insurer standing to sue under a third-party beneficiary theory); 

Atlanta Int'l Ins. Co. v. Bell, 475 N.W.2d 294 (Mich. 1991) (declining to recognize 

the insurer as a client, but nevertheless allowing the insurer to pursue an action 

against hired counsel under the doctrine of equitable subrogation). 

The majority opinion is devoid of any reference to these approaches. It simply 

holds that, because of the insurer's "unique position," the insurer "may recover . . . 

for the attorney's breach of his duty to [the insured]." I take issue with the majority's 

holding. First, I do not agree with the majority that being contractually obligated to 

pay litigation costs places the insurer in a position sufficient to waive the privity 

requirement. Second, I am concerned about the manner in which an insurer can 

pursue a legal malpractice action against hired counsel after today's decision. 

According to the majority, an insurer's cause of action against hired counsel 

is predicated on a breach of the duty owed to the insured, not on a breach of a duty 

owed to the insurer. At first blush, the cause of action available to the insurer sounds 

in tort. However, unlike other jurisdictions that have recognized a cause of action 

in tort for insurers against hired counsel, the majority declines to recognize a separate 

duty of care owed to the insurer. Thus, by limiting the insurer's recovery to the 

extent hired counsel breached its duty to the insured and prohibiting double 

recovery, the action is more akin to equitable subrogation or an assignment of an 

insured's legal malpractice claim. As will be discussed, I would find such an action, 

under either theory, contrary to the public policy of this state. 

I turn now to address Sentry's specific arguments in support of recognizing a 

direct action against hired counsel. 

 

(recognizing that "the judicial trend" is moving toward recognizing the insured as 

the sole client out of concern that recognizing the insurer as a client would weaken 

the attorney's loyalty to the insured). 
1. Third-Party Beneficiary of Contract Theory 

First, Sentry argues this Court should allow insurers to bring claims against 

hired counsel under a third-party beneficiary of contract theory.6

 I disagree. 

The contract at issue here is the contract of representation between the insured 

and hired counsel. Therefore, to pursue a third-party beneficiary claim, an insurer 

must show the insured and hired counsel intended, by virtue of the contract, "to 

create a direct, rather than an incidental or consequential, benefit to" the insurer. Bob 

Hammond Constr. Co. v. Banks Constr. Co., 312 S.C. 422, 424, 440 S.E.2d 890, 891 

(Ct. App. 1994). That, however, is not the case. 

There is no question that when an insured purchases an insurance policy that 

gives rise to the contract of representation, the insured is doing so with the 

understanding that his interests, not those of the insurer, will be represented should 

an issue arise requiring legal representation. Although the insurer pays for the legal 

representation and may share similar interests with the insured, any benefit to the 

insurer derived therefrom is incidental to the contract of representation. In sum, the 

insurer is merely performing its contractual duty to the insured. Consequently, I 

would find that an insurer cannot bring a breach of contract action as a third-party 

beneficiary because it is not the intended beneficiary of the contract of representation 

between the insured and hired counsel. 

2. Negligence

Next, Sentry asserts an insurer should be able to proceed against hired counsel 

under a theory of negligence. I disagree. 

In Fabian, this Court explained the determination of whether an attorney may 

be liable in tort to a plaintiff not in privity "is a matter of policy and involves the 

balancing of" the following factors: (1) the extent to which the transaction was 

intended to affect the plaintiff; (2) the foreseeability of harm to the plaintiff; (3) the 

degree of certainty that the plaintiff suffered injury; (4) the closeness of the 

connection between the defendant's conduct and the injury; (5) the policy of 

preventing future harm; and (6) whether the recognition of liability would impose 

 

6

 A third-party beneficiary is someone "who is not a party to a contract but who 

would benefit from its performance." Melvin Aron Eisenberg, Third-Party 

Beneficiaries, 92 Colum. L. Rev. 1358, 1359 (1992). 
an undue burden on the profession.7

 Id. at 485, 765 S.E.2d at 137-38 (citing Lucas 

v. Hamm, 364 P.2d 685, 687-88 (Cal. 1961) (en banc)). After careful consideration, 

I find none of these factors weigh in the insurer's favor. 

Given the significance of the purpose of the representation, I believe the first 

factor, the extent to which the transaction was intended to affect, or benefit,8 the 

plaintiff, should be weighed more heavily than the others.9

 As discussed, the 

 

7

 Interestingly, although the majority recognizes a cause of action in tort, the 

majority makes no reference to these factors in doing so.

8

 I interpret this factor as requiring the representation do more than simply affect 

the plaintiff. Similar to other states that have adopted the Lucas test or something 

similar, I believe this factor weighs in favor of the plaintiff only if the client intended 

for the lawyer's services to benefit that plaintiff. See Blair v. Ing, 21 P.3d 452, 466 

(Haw. 2001) (interpreting the first Lucas factor as requiring the principal purpose of 

the representation to be for the benefit of the plaintiff); Donahue v. Shughart, 

Thomson & Kilroy, P.C., 900 S.W.2d 624, 628 (Mo. 1995) (en banc) (determining 

the first factor "weighs in favor of a legal duty by an attorney where the client 

specifically intended to benefit the plaintiffs"). It has also been observed that, since 

deciding Lucas, California has imposed a duty on an attorney to a plaintiff only 

where, inter alia, the attorney and client intended the representation directly benefit 

the plaintiff. Templeton v. Catlin Specialty Ins. Co., 612 F. App'x 940, 967-68 (10th 

Cir. 2015). Thus, with respect to the first factor, the question is not whether the 

plaintiff was affected by the representation, but whether the client intended for the 

representation to be for the plaintiff's benefit. 

9

 Indeed, some states have gone so far as to make this factor a threshold requirement 

for a plaintiff pursing a claim against counsel in tort. See McIntosh Cnty. Bank v. 

Dorsey & Whitney, LLP, 745 N.W.2d 538, 547 (Minn. 2008) (finding "that in order 

for a third party to proceed in a legal malpractice action, that party must be a direct 

and intended beneficiary of the attorney's services"); Trask v. Butler, 872 P.2d 1080, 

1084 (Wash. 1994) (en banc) (holding "under the modified multi-factor balancing 

test, the threshold question is whether the plaintiff is an intended beneficiary of the 

transaction to which the advice pertained"). Additionally, at least one state, which 

has not adopted the Lucastest, has nevertheless made this a requirement for allowing 

a third party to pursue a legal malpractice claim in tort. See Pelham v. Griesheimer, 

440 N.E.2d 96, 100 (Ill. 1982) (concluding "for a nonclient to succeed in a 

negligence action against an attorney, he must prove that the primary purpose and 
purpose of the representation between counsel and the insured is not intended to 

benefit the insurer. 

Moreover, to be applicable, factors two, three, and four each necessitate the 

plaintiff suffer some type of harm or injury. However, I am unable to identify any 

harm suffered by an insurer when the case settles within the agreed-upon policy 

limits. In those cases, the insurer is merely fulfilling an agreed-upon promise 

between it and the insured. The insurer established a price to cover the risk and the 

insured paid it. Understandably, the insurer is unhappy when it pays more than it 

wanted to, but that is the risk that it took and it is the nature of the business. 

As to the fifth factor, the policy concerns in preventing future harm are not as 

great as they are in the will-drafting context. In Fabian, we acknowledged that but 

for an exception to the privity requirement, an attorney would not be held 

accountable for the negligence in the preparation of a will or estate planning 

document. Fabian, 410 S.C. at 490, 765 S.E.2d at 140. However, here, the insured

maintains the option of bringing a malpractice claim, which upholds the policy goals 

of preventing future harm by maintaining accountability and deterring further 

negligence. 

Regarding the final factor, recognizing a cause of action in tort for an insurer 

against the insured's hired counsel may pose an undue burden to the profession by 

allowing multiple parties to pursue legal malpractice claims against hired counsel. 

More significantly, for reasons that will be discussed, such a cause of action could 

pose an undue burden to the attorney-client relationship by negatively affecting the 

duty of loyalty owed to the client, which is precisely what the privity requirement 

was intended to prevent. See Atlanta Int'l Ins. Co., 475 N.W.2d at 296 ("The 

essential purpose of the general rule against malpractice liability from third-parties 

is . . . to prevent conflicts from derailing the attorney's unswerving duty of loyalty 

of representation to the client."). 

The principal concern in allowing third parties to pursue legal malpractice 

claims against an attorney is that, when a conflict arises between the client and third 

party, the attorney may carry out the representation in a manner inconsistent with 

the best interests of the client. See id. ("Allowing third-party liability generally 

would detract from the attorney's duty to represent the client diligently and without 

reservation."); Restatement (Third) of the Law Governing Lawyers § 51 cmt. b 

 

intent of the attorney-client relationship itself was to benefit or influence the third 

party").
(2000) ("Making lawyers liable to nonclients . . . could tend to discourage lawyers 

from vigorous representation."). This is of special concern in the context here given 

the heightened risk of conflict due to the often diverging interests between the 

insured and insurer and the employment relationship between insurer and hired 

counsel. 

Unlike the situation in Fabian, the purpose of the representation here is not 

for the benefit of the third party pursuing the legal malpractice claim. Here, the third 

party's purpose and interests routinely diverge from those of the client. As one court 

stated: 

[t]here can be no doubt that actual conflicts between insured and insurer 

are quite common and that the potential for conflict is present in every 

case. Conflicts may arise over the existence of coverage, the manner 

in which the case is to be defended, the information to be shared, the 

desirability of settling at a particular figure or the need to settle at all, 

and an array of other factors applicable to the circumstances of a 

particular case.

Paradigm Ins. Co. v. Langerman Law Offices, P.A., 24 P.3d 593, 597 (Ariz. 2001)

(en banc). 

In addition to the increased risk of conflict, the employment relationship 

between the insurer and insured's hired counsel heightens the concern that the 

attorney may make decisions in a manner more preferable to the third party than the 

client. See Atlanta Int'l Ins. Co., 475 N.W.2d at 298 (acknowledging "[t]he 

possibility of conflict unquestionably runs against the insured, considering that 

defense counsel and the insurer frequently have a longstanding, if not collegial, 

relationship"); 4 Ronald E. Mallen, Legal Malpractice § 30:53, at 333 (2017 ed.) 

("A risk is that the attorney may not recognize [a] conflict or may favor the interests 

of the insurer. The lawyer may be tempted to help the [insurer], who pays the bills, 

who will send further business, and with whom long-standing personal relationships 

have developed."); Mallen, supra, § 30:57, at 346-47 ("During litigation, issues may 

arise that could influence the attorney to choose sides. When abuses have occurred, 

most reported decisions have involved an attorney, who has favored . . . the 

insurer."); Robert M. Wilcox & Nathan M. Crystal, Annotated South Carolina Rules 

of Professional Conduct, at 136 (2013 ed.) ("Whenever a person other than the client 

pays the lawyer, there exists a risk that the interests of the person paying the fees 

may interfere with the lawyer's duty to exercise independent professional judgment 

on behalf of the client.").
Sentry contends these concerns are not present in this case because it 

undoubtedly shared a mutual interest with the insured in counsel timely filing 

answers to the requests to admit. Although that may be true, certified questions are 

not based on the narrow facts of the case from which the questions arise. While 

there may be no conflict in allowing Sentry to bring a legal malpractice action in this 

case, the same may not be true in later cases involving challenges to other decisions 

made in an attorney-client relationship of which the insurer was not in privity. See

1 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 7:8, at 802-03 (2014 

ed.) (noting "even if an implied duty does not interfere with fiduciary obligations in 

a given case, it may do so in other cases under different facts. For that reason, policy 

considerations are not developed on an ad hoc basis, but from a broader perspective 

concerning the potential adverse effects on future relationships"). 

Therefore, for the reasons stated, I would find the Fabian balancing test 

weighs against allowing an insurer to bring a cause of action in tort for legal 

malpractice against counsel hired to represent its insured.10 

Based on the foregoing, I would answer the first certified question in the 

negative and hold an insurer may not maintain a direct claim against an insured's 

hired counsel. I acknowledge that, under this approach, the insurer would have to 

assume the risk concomitant with the attorney it hires to represent its insured. I also 

recognize that, in those cases in which a negligent attorney resolves a claim within 

the policy limits, it is unlikely the insured will bring a legal malpractice action. As 

a result, the attorney may avoid liability for his negligence. Although troubling, I 

believe my concerns in expanding the privity exception to permit an insurer to pursue 

an action against hired counsel outweigh a holding to the contrary.11 Moreover, 

 

10 Sentry also asks this Court to find hired counsel owes a duty of care to the insurer. 

However, such a duty of care would necessarily sound in negligence. As discussed, 

I would hold Sentry and other similarly situated entities do not meet Fabian's 

balancing test. Nevertheless, even if the recognition of such a duty of care could 

exist harmoniously with Fabian's balancing test, I believe the previously discussed 

concerns in allowing an insurer to bring a direct legal malpractice claim would 

prohibit this Court from recognizing a duty. 

11 Other courts also favor the preservation of the sanctity of the attorney-client 

relationship over the economic interests of the insurer. See, e.g., State Farm Fire & 

Cas. Co. v. Weiss, 194 P.3d 1063, 1069 (Colo. App. 2008) (precluding an insurer 

from pursuing an equitable subrogation claim against counsel, recognizing that 
while an attorney may not be held liable for his negligence in some circumstances, 

the attorney could still be held accountable for his conduct in a disciplinary 

proceeding before this Court.

II. May a legal malpractice claim be assigned to a third party who is 

responsible for payment of legal fees and any judgments incurred as a 

result of the litigation in which the alleged malpractice arose?

Sentry contends this Court should answer the second certified question "yes" 

and hold a legal malpractice claim may be assigned to a third party responsible for 

the payment of legal fees and any judgment incurred. I disagree.

In Skipper v. ACE Property and Casualty Insurance Company, 413 S.C. 33, 

38, 775 S.E.2d 37, 39 (2015), this Court held a legal malpractice claim could not be

assigned between adversaries in litigation in which the alleged legal malpractice 

arose. The Court based its holding, in part, on the potential threat to the attorneyclient relationship. Id. at 37, 775 S.E.2d at 38-39. The relationship in Skipper is 

different than that here because the insurer and insured are presumably not 

adversaries. However, as discussed in the previous section, the threat to the attorneyclient relationship still remains in allowing a third party responsible for the payment 

of legal fees to pursue a cause of action challenging the decisions made in an 

attorney-client relationship to which he was not in privity. 

To be sure, in denying the assignment of legal malpractice claims outright, 

the majority of courts base their holding on the same policy considerations that form 

the basis of my position to deny an insurer the right to bring a direct legal malpractice 

claim. See, e.g., Goodley v. Wank & Wank, Inc., 133 Cal. Rptr. 83, 87 (Cal. Ct. App. 

1976) ("It is the unique quality of legal services, the personal nature of the attorney's 

duty to the client and the confidentiality of the attorney-client relationship that 

invoke public policy considerations in our conclusion that malpractice claims should 

 

while "insurance companies and ultimately the public will pay the cost, or the bulk 

of the cost, of this burden, protecting every attorney-client relationship must take 

precedence over allowing lawsuits against attorneys whose clients do not want to 

sue but their subrogees do"); Querrey & Harrow, Ltd. v. Transcon. Ins. Co., 861 

N.E.2d 719, 724 (Ind. Ct. App. 2007) (declining to allow an insurer to bring a legal 

malpractice claim against hired counsel and dismissing those jurisdictions holding 

to the contrary; stating, "we do not agree with those jurisdictions that hold the 

possibility of the attorney garnering a windfall by not having to defend against his 

or her malpractice outweighs the sanctity of the attorney-client relationship").
not be subject to assignment."); Christison v. Jones, 405 N.E.2d 8, 11 (Ill. App. Ct. 

1980) (prohibiting the assignment of legal malpractice claims, holding "the decision 

as to whether a malpractice action should be instituted should be a decision 

peculiarly for the client to make" given, in part, "the personal nature of the duty 

owed by an attorney to his client"); Picadilly, Inc. v. Raikos, 582 N.E.2d 338, 342 

(Ind. 1991) (concluding legal malpractice claims cannot be assigned based on, inter 

alia, the need to preserve the sanctity of the attorney-client relationship, including 

the duty of loyalty and the duty of confidentiality, which would be weakened under 

the policy of assigning legal malpractice claims). See generally Tom W. Bell, Limits 

on the Privity and Assignment of Legal Malpractice Claims, 59 U. Chi. L. Rev. 1533, 

1544-45 (1992) (recognizing that "relaxing the privity requirement and allowing 

assignability stand or fall by the same arguments" because the policy concerns 

underlying the decision to prohibit a third party from asserting a direct malpractice 

claim also underlie the decision to prohibit the assignment of a legal malpractice 

claim to a third party).12 

Consequently, I would also answer the second question in the negative and 

hold a legal malpractice claim may not be assigned to a third party responsible for 

any judgment and legal fees. 

HEARN, J., concurs.

 

12 Sentry further submits this Court should allow insurers to pursue a claim against 

hired counsel under the doctrine of equitable subrogation. I disagree. "In the context 

of the insured-insurer relationship, the doctrine of equitable subrogation provides 

that an insurer who pays a loss is thereby placed by operation of law in the position 

of its insured so that the insurer may recover from a third-party tortfeasor whose 

negligence or wrongful act caused the loss." Dale Joseph Gilsinger, Annotation, 

Right of Insurer to Assert Equitable Subrogation Claim Against Attorney for Insured 

on Grounds of Professional Malpractice, 50 A.L.R. 6th 53, 63 (2009). The concerns 

surrounding equitable subrogation in this context are similar to the concerns 

surrounding the assignment of legal malpractice claims. See Nat'l Union Fire Ins. 

Co. v. Salter, 717 So. 2d 141, 142 (Fla. Dist. Ct. App. 1998) (recognizing the same 

public policy reasons advanced for prohibiting the assignment of legal malpractice 

claims "apply and prohibit the subrogation of a legal malpractice claim"). Therefore, 

for the abovementioned reasons, I would also conclude that an insurer may not bring 

a claim against hired counsel under equitable subrogation.