Opinion ID: 2602135
Heading Depth: 1
Heading Rank: 4

Heading: Whether Home, Musser's Insurer, May Be Subrogated to Her Indemnity Claim Against Provencher

Text: The trial court ruled against Home on the ground that legal malpractice claims are not assignable (1 Mallen & Smith, Legal Malpractice (5th ed. 2000) Insurance Counsel, § 7.12, pp. 720-721, and cases cited at fn. 12) and that subrogation is an implied assignment ( Fifield Manor v. Finston (1960) 54 Cal.2d 632, 640, 7 Cal.Rptr. 377, 354 P.2d 1073). While conceding that legal malpractice claims are generally not assignable in this state, the Court of Appeal found this case distinguishable on the ground that the insurer is not seeking to succeed to the rights of the client against counsel, but to its insured attorney's right to seek indemnity from counsel for the proportional fault of the latter. The rule against assignability and subrogation of legal malpractice actions, the Court of Appeal concluded, should be contained by the context in which the rule arosethat of a third party (including the client's insurer) attempting to succeed to the client's legal malpractice action against the client's former attorney. We agree. As the Court of Appeal pointed out, Goodley v. Wank & Wank, Inc. (1976) 62 Cal.App.3d 389, 133 Cal. Rptr. 83 ( Goodley ) is the seminal case which articulates the policy considerations underlying the rule [against the assignment of legal malpractice actions], which relate to the uniquely personal nature of the attorney-client relationship. In Goodley, the defendant attorneys allegedly committed malpractice in a divorce case, their client assigned her malpractice claim to the plaintiff, and [t]he crux of the issue before the Court of Appeal was whether a cause of action for legal malpractice is assignable. ( Goodley, supra, 62 Cal.App.3d at p. 393, 133 Cal.Rptr. 83, fn. omitted.) Important policy reasons, the Goodley court held, dictated against assignment of the client's malpractice claim. 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 not be subject to assignment. ( Id. at p. 397, 133 Cal.Rptr. 83.) `Goodley noted the attorney owes a duty of undivided loyalty and diligence in representing the client. Such duty is personally owed by the attorney and may not be delegated to others, and is owed solely to the client, [the attorney's] one intended beneficiary. Assignability would encourage commercialization of claims, and would force attorneys to defend themselves against persons to whom no duty was ever owed. Moreover, the legal profession is debased by such commercialization, because it could (1) encourage unjustified lawsuits; (2) generate increased malpractice lawsuits, burdening the profession, the court system and (to the extent malpractice premiums would inevitably rise and be passed to the consumers) the public; and (3) promote champerty. [Citation.] Assignability could conceivably reduce the public's access to legal services, since the ever present threat of assignment by irresponsible clients (seeking quick financial gain) could cause lawyers to evaluate more selectively the desirability of representing a particular client. [Citation.]' ( Kracht v. Perrin, Gartland & Doyle [(1990)] 219 Cal.App.3d [1019,] 1023-1024, [268 Cal. Rptr. 637].) ( Fireman's Fund Ins. Co. v. McDonald, Hecht & Solberg (1994) 30 Cal. App.4th 1373, 1379, 36 Cal.Rptr.2d 424 ( Fireman's Fund) . ) The policy considerations underlying the Goodley decision usually have been persuasive for the courts that have considered the issue. (1 Mallen & Smith, supra, Insurance Counsel, § 7.12, p. 720, fn. omitted.) As the Court of Appeal here observed, The foregoing policy concerns underpin the rule prohibiting a third party from succeeding to the client's cause of action for legal malpractice against his or her former attorney. They have no application here, where the insurer is not seeking to succeed to the rights of the client against counsel, but to its insured attorney's right to seek indemnity from [concurrent counsel] for the proportionate fault of the latter. Provencher relies upon Fireman's Fund, supra, 30 Cal.App.4th 1373, 36 Cal. Rptr.2d 424, in support of his argument that the rule against subrogation of legal malpractice claims applies here. In Fireman's Fund, insurers paid more than $10 million to settle a lawsuit against their developer insureds by homeowners alleging misrepresentations in the sales of residential units. The developer insureds then filed a legal malpractice case against their attorneys for causing those representations to be made. Later, the insurers joined the malpractice lawsuit as plaintiffs under a theory of subrogation. ( Id. at p. 1376, 36 Cal.Rptr.2d 424.) The Court of Appeal affirmed the dismissal of the insurers as plaintiffs, holding that legal malpractice claims are not assignable or subject to subrogation absent express statutory authorization. ( Id. at p. 1384, 36 Cal.Rptr.2d 424.) The insurer subrogee argued that its interests were `aligned' or `virtually identical' with (and indeed `derivative' of) the [insured client's] interests against the attorney. ( Fireman's Fund, supra, 30 Cal.App.4th at p. 1380, 36 Cal.Rptr.2d 424.) Acknowledging that the insurer's policy arguments have substance, the Fireman's Fund court nevertheless pointed out that the prohibition on assignment was `Veil settled' ( id. at p. 1381, 36 Cal.Rptr.2d 424) and explained that we are not the proper tribunal to depart from established law ( id. at p. 1380, 36 Cal. Rptr.2d 424). California courts have consistently held legal malpractice claims are nonassignable to protect the integrity of the uniquely personal and confidential attorney-client relationship. [Citations.] Further, under principles of stare decisis we are bound to follow the Supreme Court's holding in Fifield Manor v. Finston, supra, 54 Cal.2d 632, 7 Cal.Rptr. 377, 354 P.2d 1073, that absent express statutory authorization nonassignable claims are not subject to subrogation. ( Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455, 20 Cal.Rptr. 321, 369 P.2d 937.) ( Fireman's Fund, at p. 1383, 36 Cal.Rptr.2d 424, fn. omitted.) As the Court of Appeal here observed, however, the critical distinction from Fireman's Fund is that Musser (the party to whose rights Home is subrogating) is not the client. In summary, the policy considerations underlying the rule against assignment and subrogation of legal malpractice claims do not obtain in this case, where the subrogor is not the client, but the defendant attorney held liable to the client for negligence at least partially attributable to concurrent counsel.