Opinion ID: 1426902
Heading Depth: 1
Heading Rank: 4

Heading: Actual Injury and Brobeck's Alleged Negligence

Text: The Court of Appeal suggested that actual injury requires an established causal nexus between the attorney's negligent acts and an invasion of the client's legally protected interests. The court also suggested that establishing this nexus often will turn on the outcome of related litigation, and, therefore, actual injury does not occur until related litigation concludes. However, this approach departs from Budd and Adams. Actual injury refers only to the legally cognizable damage necessary to assert the cause of action. There is no requirement that an adjudication or settlement must first confirm a causal nexus between the attorney's error and the asserted injury. The determination of actual injury requires only a factual analysis of the claimed error and its consequences. The inquiry necessarily is more qualitative than quantitative because the fact of damage, rather than the amount, is the critical factor. ( Adams, supra, 11 Cal.4th at p. 589, 46 Cal. Rptr.2d 594, 904 P.2d 1205 (lead opn. of Arabian, J.); id. at p. 595, 46 Cal.Rptr.2d 594, 904 P.2d 1205 (cone. opn. of Kennard, J.); Laird, supra, 2 Cal.4th at pp. 612, 613, 7 Cal.Rptr.2d 550, 828 P.2d 691; Budd, supra, 6 Cal.3d at pp. 200-201, 98 Cal.Rptr. 849,491 P.2d 433.) Of course, nominal damages will not end the tolling of section 340.6's limitations period. Thus, there is no basis for Jordache's expressed concern that the statutory period will run once the plaintiff sustains the first dollar of injury. Instead, the inquiry concerns whether events have developed to a point where plaintiff is entitled to a legal remedy, not merely a symbolic judgment such as an award of nominal damages. ( Davies v. Krasna, supra, 14 Cal.3d at p. 513, 121 Cal.Rptr. 705, 535 P.2d 1161.) However, once the plaintiff suffers actual harm, neither difficulty in proving damages nor uncertainty as to their amount tolls the limitations period. ( Id. at p. 514, 121 Cal.Rptr. 705, 535 P.2d 1161.) Here, the undisputed facts established that Jordache sustained actual injury as a result of Brobeck's alleged neglect no later than December 1987. By then, Jordache had lost millions of dollarsboth in unpaid insurance benefits for defense costs in the Marciano action and in lost profits from diversion of investment funds to pay these defense costs. As Brobeck asserts, these damages were sufficiently manifest, nonspeculative, and mature that Jordache tried to recover them as damages in its insurance coverage suits. Brobeck also asserts that the years of delay in tendering defense of the Marciano action to the insurers gave them a defense to payment they would not have had if the tender had been made as Jordache's insurance policies required. Consequently, Brobeck's alleged neglect diminished Jordache's insurance contract rights. Because the insurers could and National Union did assert an objectively viable late notice defense to Jordache's claims, Jordache necessarily incurred additional litigation costs to meet that defense, and the settlement value of its claims decreased. (Cf. Laird, supra, 2 Cal.4th at p. 615, 7 Cal.Rptr.2d 550, 828 P.2d 691.) Ultimately, however, Jordache's insurance coverage litigation could not determine the existence or effect of Brobeck's alleged negligence. As Brobeck notes, the alleged failure to advise Jordache on insurance matters was not at issue in the coverage lawsuits. Thus, the resolution of that litigation would not determine whether Brobeck breached its duty to Jordache. For the same reason, the coverage litigation could not determine the consequences resulting from Brobeck's alleged breach of duty. The coverage litigation's resolution was relevant to Brobeck's alleged negligence only insofar as it potentially affected the amount of damages Jordache might recover from Brobeck. The Court of Appeal nonetheless stated that any injury Jordache sustained was only speculative until settlement of the coverage actions. The court reasoned that if Jordache had prevailed on its claim that notice to Advocate Brokerage was timely notice to the insurers, then Brobeck's omissions would have caused no injury. Similarly, the court said that if Jordache's policies were found to provide no potential coverage for the Marciano action, then Brobeck's failure to advise Jordache to tender the defense would not have affected Jordache's policy rights. However, the result of Jordache's coverage litigation could only confirm, but not create, Jordache's actual injuries from the late tender of the Marciano action's defense. Jordache's right to an insurer-funded defense existed or not when that action first embroiled Jordache. The right to that insurance benefit, the impairment of that right, and Jordache's expenditures while that right was unavailable, did not arise for the first time when Jordache settled with the insurers. As Brobeck suggests, a finding in Jordache's coverage litigation that its policies provided no coverage could have given Brobeck at best a defense to some of Jordache's damage claims. Similarly, a determination that Jordache's contacts with Advocate Brokerage satisfied the policies' notice requirements would not preclude Brobeck's potential liability for not advising a more direct, certain, and timely method of obtaining an insurer-funded defense of the Marciano action. To paraphrase an observation from Laird: Although the outcome of the coverage litigation may have reduced Jordache's damages, that action could neither necessarily exonerate Brobeck, nor extinguish Jordache's action against Brobeck for failure to render timely advice on insurance issues. ( Laird, supra, 2 Cal.4th at p. 614, 7 Cal. Rptr.2d 550,828 P.2d 691.) Jordache's injuries were not speculative or contingent until the trial court ruled the insurers had a duty to defend Jordache and Jordache settled its coverage claims. As Adams reiterated, speculative and contingent injuries are those that do not yet exist, as when an attorney's error creates only a potential for harm in the future. ( Adams, supra, 11 Cal.4th at pp. 589-590, 46 Cal.Rptr.2d 594, 904 P.2d 1205 (lead opn. of Arabian, J.); id. at pp. 597-598, 46 Cal. Rptr.2d 594, 904 P.2d 1205 (cone. opn. of Kennard, J.).) An existing injury is not contingent or speculative simply because future events may affect its permanency or the amount of monetary damages eventually incurred. ( Foxborough v. Van Atta, supra, 26 Cal.App.4th at p. 227, 31 Cal.Rptr.2d 525; see Safine v. Sinnott (1993) 15 Cal.App.4th 614, 617-618, 19 Cal.Rptr 52; cf. Laird, supra, 2 Cal.4th at pp. 614-615, 7 Cal. Rptr.2d 550, 828 P.2d 691.) Thus, we must distinguish between an actual, existing injury that might be remedied or reduced in the future, and a speculative or contingent injury that might or might not arise in the future. Here, Jordache alleged it expended millions of dollars to defend the Marciano action and lost millions of dollars from profitable investments forgone to pay defense costs. These actual, existing injuries, and the diminution of Jordache's insurance policy rights the late tender occasioned, did not first arise when the coverage litigation was settled. The circumstances of this case highlight the problems, and ultimate futility, of attempting to formulate categorical rules to determine actual injury for broad classes of legal malpractice claims. The Court of Appeal believed the resolution of Jordache's coverage litigation was necessary to determine the effect of Brobeck's alleged malpractice and to establish a causal connection between its omissions and Jordache's damages. However, the settlement terminated the coverage litigation without determining issues pertinent to the malpractice claims. In any event, the coverage litigation could not have determined the cause of Jordache's long delay in formally tendering defense of the Marciano action directly to its insurers. Therefore, that litigation could not establish either the existence of Brobeck's alleged negligence or any causal connection between that neglect and Jordache's damages. Two obstacles preclude any attempt to create a general rule that tolls the limitations period until a related lawsuit establishes a causal connection between attorney error and resulting injury. First, such a rule would have no basis in the language of the statute involved or the legislative intent. Second, such a rule often would be frustrated by the exigencies of litigation. Most civil lawsuits for damages settle, [8] determining only the allocation of money necessary to end the litigation. Many different factors can influence the decision to settle a suit; a related malpractice claim may or may not be decisive. Given the prevalence of settlements, litigation related to a legal malpractice claim is unlikely to conclude with a judicial determination establishing either the attorney's error or a causal nexus between damages and the error. Moreover, there is no guarantee a settlement will determine any issue connected with attorney error, except perhaps the extent to which damages have been mitigated. In any event, a settlement that purports to do more could not determine the issues in a legal malpractice action against attorneys the settlement does not bind. As Adams established, the determination of actual injury does not necessarily require some form of adjudication, judgment, or settlement. ( Adams, supra, 11 Cal.4th at p. 591, 46 Cal.Rptr.2d 594, 904 P.2d 1205 (lead opn. of Arabian, J.); id. at p. 595, 46 Cal.Rptr.2d 594, 904 P.2d 1205 (cone. opn. of Kennard, J.).) The allegations of attorney error in a particular case's factual setting may lead to a finding that actionable injury occurred only when a related action was adjudicated. (See, e.g., Baltins v. James, supra, 36 Cal.App.4th at p. 1208, 42 Cal.Rptr.2d 896.) In other instances, a collateral suit itself may be a consequence of the alleged malpractice or simply an alternative means of obtaining relief. (See, e.g., Sindell v. Gibson, Dunn& Crutcher (1997) 54 Cal.App.4th 1457, 1470, 63 Cal.Rptr.2d 594; Foxborough v. Van Atta, supra, 26 Cal.App.4th at p. 226, 31 Cal.Rptr.2d 525.) As a party to related litigation, however, a prospective malpractice plaintiff could influence the course of the collateral suit and the timing of its conclusion. A rule that invariably tolls the limitations period if collateral litigation might affect damages conflicts with section 340.6's terms and is inimical to its purposes. Laird's comments about tolling the limitations statute pending appeal apply as well to the Court of Appeal's tolling rule in this case. (See Laird, supra, 2 Cal.4th at p. 618, 7 Cal.Rptr.2d 550,828 P.2d 691.) Delaying recognition of actual injury until related litigation concludes would give a client who has sustained actionable damages and who is aware of the attorney's error unilateral control over the limitations period. This result would undermine the Legislature's purpose in enacting a statute of limitations. ( Ibid. )