Title: Querrey & Harrow, LTD, James N. Kosmond, et al v. Transcontinental Insurance Co.
Citation: N/A
Docket Number: 45S03-0708-CV-307
State: Indiana
Issuer: Indiana Supreme Court
Date: May 13, 2008

ATTORNEYS FOR APPELLANTS 
 
ATTORNEY FOR APPELLANTS 
ATTORNEYS FOR APPELLEE 
QUERREY & HARROW, LTD., 
 
SANDERS PIANOWSKI, LLP AND 
TRANSCONTINENTAL INS. CO. 
JAMES N. KOSMOND, AND   
 
ROBERT A. SANDERS 
 
 
GRETCHEN CEPEK 
 
 
 
 
 
 
Andrew A. Crosmer 
 
 
 
 
 
Edward W. Hearn 
 
Rubino, Ruman, Crosmer, Smith, 
Robert D. Brown  
 
 
Johnson & Bell, LTD 
 
     Sersic & Polen 
Spangler, Jennings & Dougherty, P.C. 
Highland, Indiana 
 
Dyer, Indiana  
Merrillville, Indiana 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gary A. Grasso 
James J. Stamos/George M. Hoffman 
 
 
 
 
Grasso, Bass & Williams, P.C. 
Stamos & Trucco, LLP 
 
 
 
 
 
 
Burr Ridge, Illinois 
Chicago, Illinois  
 
 
 
 
 
______________________________________________________________________________ 
 
In the 
Indiana Supreme Court  
_________________________________ 
 
No. 45S03-0708-CV-307 
 
QUERREY & HARROW, LTD.,  
JAMES N. KOSMOND, GRETCHEN CEPEK, SANDERS PIANOWSKI, LLP., AND  
ROBERT A. SANDERS, INDIVIDUALLY,  
 
 
 
 
 
 
 
 
Appellants (Defendants below), 
 
v. 
 
TRANSCONTINENTAL INSURANCE COMPANY, 
 
 
 
 
 
 
 
 
Appellee (Plaintiff below). 
_________________________________ 
 
Appeal from the Lake Superior Court, No. 45D05-0401-CT-264 
The Honorable Robert A. Pete, Judge 
_________________________________ 
 
On Transfer from the Indiana Court of Appeals, No. 45A03-0601-CV-36 
_________________________________ 
 
May 13, 2008 
 
Dickson, Justice. 
 
 
Addressing an issue of first impression in Indiana, the Court of Appeals holds that an ex-
cess insurer may not bring an action for legal malpractice against the insured's attorneys.  Querry 
FILED
CLERK
of the supreme court,
court of appeals and
tax court
May 13 2008, 3:30 pm
& Harrow v. Transcontinental Ins. Co., 861 N.E.2d 719 (Ind. Ct. App. 2007).  We agree and now 
adopt this opinion as to all issues addressed.  Ind. Appellate Rule 58(A)(1).   
 
 
The principal argument addressed by the Court of Appeals is whether or not to extend the 
availability of equitable subrogation to excess insurance policy carriers to enable them to sue the 
attorneys of its insured for legal malpractice.  Emphasizing the paramount importance of a law-
yer's duties of client loyalty and maintaining client confidentiality, the court considers Indiana 
decisions concerning the doctrine of equitable subrogation and the prohibition against assign-
ments of legal malpractice actions.  It also explores the decisions of various other jurisdictions 
that have considered the same or related issues.  We find that the analysis and conclusion of the 
Court of Appeals are sound and proper.   
 
 
In a secondary issue, the Court of Appeals finds no material issue of fact existed indicat-
ing an attorney-client relationship between the insured's attorneys and the excess insurer.  The 
court finds that communications between the insured's attorneys and the excess insurer fell "far 
short" of implying that the attorneys consented to represent their client, the insured, and the in-
sured's excess insurer.  We agree. 
 
 
We adopt the opinion of the Court of Appeals.  This cause is remanded for the entry of 
summary judgment in favor of the appellants-defendants.         
 
Shepard, C.J., and Rucker, J., concur.  Boehm, J., concurs in result.  Sullivan, J., dissents with 
separate opinion.    
 
2
Sullivan, Justice, dissenting. 
 
In this case, an insurance company that had paid $3,740,000 as part of a settlement of a 
personal injury claim sued the law firms and lawyers for its insured on a theory of equitable sub-
rogation, contending that the law firms and lawyers had committed professional negligence by 
not timely raising a non-party defense to the claim.  The trial court denied the defendant law 
firms’ and attorneys’ motions for summary judgment, but the Court of Appeals reversed.  This 
Court has decided to adopt the opinion of the Court of Appeals.   
 
There are a number of aspects of this case that suggest to me that the plaintiff insurance 
company would be unlikely to prevail — the size of the settlement compared to the estimated 
value of the claim, the likelihood of sound strategic reasons for not raising a non-party defense, 
etc.  But I do not agree with my colleagues that equitable subrogation is never available to enable 
an insurer to recover for losses it incurs that are caused by the malpractice of its insured’s attor-
ney. 
 
“‘One who asserts a right of subrogation must step into the shoes of, or be substituted for, 
the one whose claim or debt he has paid and can only enforce those rights which the latter could 
enforce.’ . . . Consequently, in order for the insurer to assert a right of subrogation, (1) the in-
sured must have a cause of action against the purported tortfeasor, and (2) it must be equitable to 
allow the insurer to enforce a right of subrogation.”  Nat’l Union Ins. Co. v. Dowd & Dowd, 
P.C., 2 F. Supp. 2d 1013, 1021 (N.D. Ill. 1998) (quoting and citing Dix Mut. Ins. Co. v. LaFram-
boise, 597 N.E.2d 622, 624-25 (Ill. 1992)).  The plaintiff insurance company’s relationship to the 
defendant law firms and lawyers tracks these elements.  Its insured would clearly be entitled to 
assert a claim that these defendants committed malpractice.  The question, then, is not whether 
the elements of an equitable subrogation claim are present here but whether, as a matter of pol-
icy, this State should recognize equitable subrogation under these circumstances. 
 
While I acknowledge that the majority of states that have looked at this question have 
reached the same result as the Court does today, some have not.  In the National Union Insurance 
Co. case quoted above, National Union was the excess insurance carrier for Schneider National 
Carriers, Inc.  2 F. Supp. 2d at 1015.  A Schneider driver was in a collision that resulted in a law-
suit against Schneider and the driver.  Schneider retained Dowd & Dowd for the defense.  A jury 
awarded the plaintiff a judgment that exceeded Schneider’s self-insurance, and National Union 
paid the remainder of the judgment.  National Union then brought a legal malpractice claim 
against Dowd & Dowd.  Id.  The United States District Court for the Northern District of Illinois 
held that under Illinois law, National Union could pursue its legal malpractice claim against 
Dowd & Dowd under a theory of equitable subrogation.  Id. at 1022.  In so holding, the court 
considered general equitable principles and broader policy concerns as to the proper allocation of 
the cost of attorney malpractice, see id. at 1023-24 (“Malpracticing attorneys should not enjoy a 
windfall merely because the insured contracted for excess insurance coverage.”). 
 
The Michigan Supreme Court has also applied equitable subrogation to similar facts.  In 
Atlanta International Insurance Co. v. Bell, Atlanta International Insurance filed a legal malprac-
tice action against Bell & Hertler.  475 N.W.2d 294, 296 (Mich. 1991).  Bell & Hertler had been 
hired by Atlanta International to defend Security Services, Inc., for whom Atlanta International 
was the primary insurer, against a lawsuit.  A judgment was entered against Security Services 
that Atlanta International was required to pay.  Id.  Attorney Bell later admitted that Bell & Hert-
ler should have raised comparative negligence as a defense.  Id. at n.2.  After holding that no at-
torney-client relationship existed between Atlanta International and Bell & Hertler, the court 
held that Atlanta International could pursue a claim under an equitable subrogation theory, which 
the court saw as a more flexible solution.  Id. at 297-98.  Of equitable subrogation, the majority 
wrote: 
 
The doctrine is eminently applicable under the facts of this case.  A rule of law 
expanding the parameters of the attorney-client relationship in the defense coun-
sel-insurer context might well detract from the attorney’s duty of loyalty to the 
client in a potentially conflict-ridden setting.  Yet to completely absolve a negli-
gent defense counsel from malpractice liability would not rationally advance the 
attorney-client relationship.  Moreover, defense counsel’s immunity from suit by 
the insurer would place the loss for the attorney’s misconduct on the insurer.  The 
only winner produced by an analysis precluding liability would be the malpractic-
ing attorney.  Equity cries out for application under such circumstances. 
 
Id. at 298. 
2 
3 
For the reasons discussed in these cases, I would allow an insurer to bring an action under 
equitable subrogation.  (In a similar vein, I note that Judge Tinder predicted that our Court would 
allow an excess insurer to bring an action against a primary insurer under equitable subrogation 
for negligent defense of a claim against the insured.  Phico Ins. Co. v. Aetna Cas. and Sur. Co. of 
Am., 93 F. Supp. 2d 982, 990 (S.D. Ind. 2000).) 
 
Any claim that an insurance company would bring against its insured’s attorney would 
have to be prosecuted without access to any confidential client information of any kind whatso-
ever.  But I would not close the courthouse door to an insurance company that is willing and able 
to do so.