The V-8 Moment with Regard to Insurance

Posted on August 5, 2014 04:36 by Steve Crislip

Wow, I should have had professional liability coverage.  I remain amazed at how many lawyers forego such coverage. I do not understand that rationale since they would never risk their assets with an uninsured car or house.  Yet, they think this cost of doing business is too high or it somehow is not needed.

Even a totally bogus claim costs real money to defend.  It takes time and work to get these dismissed, with no return of the costs. Lawyers always seem surprised at the legal costs for such work when they send out similar bills each day.  Then if there is a meritorious claim or even a colorable claim, coverage is very much needed.

When I last looked only one state required legal malpractice coverage as a condition of licensing.  Many states annually require you to disclose whether or not you have such coverage for consumer knowledge. I wonder how many clients ever really check that, or if they even care.  If you err in their case, they will sue you regardless. Do not think they will not, just because you have no insurance.  You certainly do not want to explain to family members that they now need to take the bus, since your cars were attached to pay a malpractice judgment.  Just treat this like a business expense and get coverage, and get the right coverage.

You should shop for coverage with brokers and agents as well as Bar groups.  Be totally forthcoming in any applications so there is no reason for any carrier to later deny coverage. Price varies with the amount of risk you are willing to take by way of the deductible.  Sometimes that is just cost pricing with lower annual premiums for higher retention levels by you. Sometimes in order to get big policy limits for some specialty work, you are required to have a big deductible.  Bigger firms are used to that, but smaller firms must always be mindful of the amount of risk they can absorb and how much they can promptly pay for a defense.  Usually the deductibles are for both losses and for the defense of the claim.

At one time, professional liability policies were like your auto policy — occurrence based.  Were you insured when you had the wreck or act of malpractice, or not?  By the 1970’s, that type of coverage disappeared and all are usually claims-made, eliminating the open-ended coverage concerns.  So, now a lawyer needs to be covered when a claim is made and must therefore avoid any gaps in coverage.

Since claims can arise well after the act or occurrence, prior acts coverage was needed to cover such matters forward when changing carriers or policies.  A tail (extended reporting endorsement) or an endorsement for prior acts must be considered carefully when charging firms.  Someone either closing a firm or making a lateral move needs to consider this carefully.  See, “A Primer on Prior Acts Coverage,” Mark Bassingthwrighte, ALPS 411, May 27, 2014.

For example, working in a mid-size regional firm, it made no sense to take in a lateral lawyer and provide them with prior acts coverage under the firm’s policy.  There had been no quality control by the firm and there were totally unknown risks involved with the lateral’s prior work.  With a large deductible, it was just bad business to assume that liability.  Accordingly, all laterals were told to look to their prior carriers or firms for coverage up to the day that they just started at our new firm.  Going forward they were covered, even when they left, as long as our firm was viable and still covered.  A tail may be needed by them from their prior work, but if they were likewise leaving a viable ongoing firm with good coverage, maybe nothing was needed.

Complicated to some degree, but it is just a part of doing business as a lawyer.  You need certain things to practice and this certainly is one of them.  Just like paying the rent on the office, paying for the coverage in a timely manner, and getting the right coverage is kind of important.  Don’t be the person who thinks they will not be sued by their clients. 

Be advised that most are loss and claim deductibles for any expended fees and costs, as well as claims payouts.  Also, it is customary for you to have to pay your full deductible before any carrier pays anything.  So pick a deductible you can afford and then escrow the funds for it as soon as a claim surfaces.  By the way, give notice of claims promptly, again to avoid coverage issues.  See ALPS 411, Claims-Made Reporting Requirement, February 15, 2012.

This blog was originally posted on the Lawyering for Lawyers blog on August 5. Click here to read the original entry. 

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Two Nations Separated By a Common Language

Posted on November 18, 2013 03:21 by Ashley Parrish

A famous Englishman once said, “America and Britain are two nations separated by a common language.” Was it George Bernard Shaw? Or was it Oscar Wilde? English literature enthusiasts have not settled the issue of the identity of the person to whom the quote is attributable. However, truer words have not been spoken, especially when it comes to dealing with insurance terminology.

Perhaps you think a “prop” is something you would find on the set of the movie studio.  Maybe a "slip" is where you have your boat parked at the Marina.  The fact of the matter is the way we use insurance terms in the United States differs greatly from the way they are used in the United Kingdom. Anyone whose job involves procuring insurance from the London market (especially from underwriters at Lloyd’s), or defending those who do the same, must be familiar with various insurance terms as they are used in the United Kingdom.  Even skilled insurance professionals and attorneys may be confused by the wordings used in the London market. 

Much of this confusion may stem from the developmental history of London insurance policies. Lloyd’s of London is known for its marine insurance policies, and the Lloyd's market can trace its origins back to Lloyd's Coffee House in the late 17th century. Many marine insurance policies still use terms that seem appropriate for covering the voyage of a schooner sailing from Portsmouth to Rotterdam. In other cases, it may just be that we use different terms to describe the same thing. For example, a backpack in the States becomes a rucksack in the UK. Additionally, the structure of Lloyd’s of London is different from any other insurance market in the world and the way insurance is regulated is also quite different.  

Lloyd's of London is the leading market for specialist insurance in the world. Insurance professionals who need to place complex and specialized risks must be familiar with London market practice and terminology. Further, those of us involved in defending these same insurance producers must be familiar with the vernacular and intricacies of the British insurance market.   On December 12th Kevin Ottley of 5Star Professional Programs and I will be presenting “Interaction Between United States and London Brokers” at the DRI Professional Liability Seminar, December 12–13 in New York.  We will address the differences one may encounter in the UK insurance market and provide practice pointers in the event you are confronted with providing a defense for an insurance professional involved in procuring a policy placed in London.  I hope you can join us. Click here to register. 

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Categories: Professional Liability | Seminar

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Limiting the Use of the Business Judgment Rule

Posted on September 23, 2013 04:00 by Ashley Parrish

On September 6, 2013, a Federal Court in Texas held that the business judgment rule did not apply to a corporate decision to hire a law firm.  You might be thinking, “I thought Texas was business friendly and conservative.” Are directors and officers in Texas facing newfound liability risks in the state?  Probably not.  In re: 320, LLC, 213 WL 480642 (Bkrtcy. S.D. Tex., September 6, 2013), the court held that the business judgment rule does not apply when a Chapter 7 Trustee in bankruptcy seeks to employ his own law firm to represent the estate.  Obviously, the business judgment rule was never intended to protect all corporate decisions and decision makers.  Where a conflict of interest is present, i.e., a bankruptcy trustee hiring his own law firm, the business judgment rule has no applicability.  To the contrary, self-dealing fiduciaries are held to the highest standard, with the burden falling on the fiduciary to demonstrate the fundamental fairness of any self-dealing transaction.  Int’l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 577 (Tex. 1963).  Accordingly, the decision in In re: 320, LLC is consistent with the fundamental principal that the business judgment rule generally applies to decisions made by disinterested and reasonably informed directors and officers who honestly believe their decisions are in the best interest of the company.  Courts outside of Texas, however, appear to be taking a more restrictive approach to the application of the business judgment rule.

In NECA-IBEW Pension Fund Ex Rel. Cincinnati Bell, Inc. v. Cox, 2011 WL 4383368 (S.D. Ohio Sept. 20, 2011), the Plaintiff brought a shareholder’s derivative suit against directors of Cincinnati Bell after the CEO was granted a significant bonus following a year in which net income, earnings per share, share price and shareholder return declined significantly.  The shareholders voted against the approval of the executive compensation decision and then brought a derivative suit against the board of directors.  The directors filed a motion to dismiss under Rule 12(b)(6).  The court denied the motion to dismiss, stating that the business judgment rule “imposes a burden of proof, not a burden of pleading”.  Id. at *2.  The court further stated that “these factual allegations raise a plausible claim that the multimillion dollar bonuses approved by the directors at a time of the company’s declining financial performance violated Cincinnati Bell’s “pay for performance” compensation policy and were not in the best interest of Cincinnati Bell shareholders and therefore constituted an abuse of discretion and/or bad faith”.  Id. at *3.  It must be noted that the court reached this conclusion without any facts having been pled by the Plaintiff suggesting an abuse of discretion or bad faith on the part of the directors.  The decision also seems to violate a fundamental tenet of the business judgment rule that courts should not substitute their inexperienced business decisions for the good faith decisions of independent and diligent business executives.  

The Cincinnati Bell decision has been roundly criticized and many courts have declined to follow its holding.  See, e.g., Plumbers Local No. 137 Pension Fund v. Davis, 2012 WL 104776 (D. Or. Jan. 11, 2012); Laborers’ Local v. Intersil, 868 F. Supp. 2d 838 (N.D. Cal. 2012).  In fact, the court in Plumbers Local, indicated that “it is unlikely that the case remains viable legal authority.” Plumbers Local, 2012 WL 104776 at *8. It should be further pointed out that plaintiff’s counsel in the Cincinnati Bell case was sanctioned by the court for failing to disclose negative authority related to the “say on pay” issue. Questions were also raised as to whether the court had appropriately conferred jurisdiction over the case.  Id.

While the Cincinnati Bell holding has not gained traction with other courts, the business judgment rule is coming under assault with some success in various jurisdictions.  In California, for example, the business judgment rule is codified in California Corporation Code at § 3.09.  While the California statute specifically references corporate directors, it wholly fails to mention corporate officers. Courts in other jurisdictions have generally held that business judgment rule protection extends to corporate officers.  See e.g. Kelly v. Bell, 266 A.2d 878, 879 (D. Eo. 1970); Detwiler v. Offenbecher, 728 F.2d 103, 149 (S.D.N.Y. 1989); Amerifirst Bank v. Bomar, 757 F. Supp. 1365, 1376 (S.D. Fla. 1991).  However, in FDIC v. Perry, 2012 WL 589569 (C.D. Cal. Feb. 21, 2012), a U. S. District Court held that the business judgment rule does not provide protection for decisions made by officers of California corporations.  The court based its decision on both California common law and the state statute.  With respect to California common law, the Court found no prior decisions which applied the business judgment rule to officers.  Without elaboration, the court rejected the assertion that the general principal of deference to business decisions should apply to officers.

Plaintiff’s attorneys are also finding innovative ways around the business judgment rule.  A prime example of this has arisen in the litigation against British Petroleum (“BP”) as a result of the deep water horizon oil spill.  Directors and officers of BP were confronted with a securities class action suit, alleging that they had misrepresented and failed to disclose information regarding BP’s safety programs and concomitant risk exposure.  The directors and officers at BP attempted to argue to the court that the securities claims should be dismissed because the allegedly wrongful conduct was merely mismanagement. However, the court rejected this argument, referencing the fact that the plaintiff’s had alleged that BP launched an ongoing public relations campaign prior to the oil spill in an effort to improve BP’s safety image with investors.  See In re: BP, PLC Sec. Litig., 758 F.2d Supp. 428 (S.D. Tex., 2012).

Are other inroads being made to limit the application of the business judgment rule?  Are plaintiff’s attorneys using other arguments to circumvent the rule’s applicability?  On Friday, December 13, 2013, Dan A. Bailey, a nationally recognized author and expert regarding D&O responsibilities and insurance, will address this as he presents an update on the business judgment rule at the DRI Professional Liability Seminar.  Please join us at the seminar for informative presentation.

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The Zhang case is a dispute following a fire at the plaintiff’s commercial property wherein the uninsured Zhang accuses the defendant-insurer of misconduct. The first two actions in the plaintiff’s complaint consist of 88 paragraphs arguing common law allegations of misconduct by the insurance company. Then, in her third cause of action, the plaintiff incorporates these paragraphs and alleges that the defendant engaged in false advertising. That last allegation starts the case down its controversial path.

The Zhang trial court sustained the insurer’s demurrer on the grounds that an earlier Court of Appeal case, Trexton Financial Corp. v. National Union Fire Insurance Company of Pittsburgh, precluded suit under Insurance Code section 790.03 (a.k.a. Fair Claims Handling Act, FCHA). On review, the appellate court disapproved of the Textron holding and held that the allegations of false advertising permitted suit under the Business and Professions Code section 17200 et seq (a.k.a. Unfair Competition Law, UCL).

To address the appellate court’s ruling in Zhang and the difference between it and Textron, we need to understand the current law. The UCL is a set of statutory codes that allow private persons to sue businesses for five types of conduct: (1) an unlawful business practice; (2) an unfair business practice; (3) a fraudulent business act (4) unfair, deceptive, untrue or misleading advertising; or (5) other acts prohibited by later sections of the code. Insurance companies are businesses within this law. A UCL cause of action requires some “predicate” violation, meaning that the plaintiff must complain of some conduct by a business-defendant in order to bring the claim.

As for the FCHA, it too is a set of statutory codes and it too sets out to stop unfair business practices; acts such as disseminating false insurance statements, making false entries into insurance reports, improperly disclosing private financial information. Unlike the UCL, the Legislature wrote the FCHA to apply specifically to insurance companies—almost exhaustively. The  California Supreme Court previously ruled in Moradi-Shalal v. Fireman’s Fund Insurance Companies that private plaintiffs cannot bring actions under FCHA. The Supreme Court has not held the same when it comes to the UCL. And that is the issue at the heart of Zhang when it comes before the supreme court this year.

Like in Zhang, in Textron, the plaintiff also alleged that the insurer engaged in misconduct that violated the FCHA and brought a UCL claim. The Textron appellate court upheld the defendant’s demurrer dismissing the case and pointed out that the conduct the plaintiff complained of was similar to the conduct covered by the FCHA and therefore the plaintiff could not bring a private cause of action. The appellate court in Textron held that, because in Moradi-Shalal the Supreme Court held that FCHA does not allow a private cause of action, FCHA violations cannot be the predicate violation for a UCL claim.

The differences between Textron and the appellate decision in Zhang is FCHA violations can serve as the predicate for a UCL cause of action. Textron unequivocally disfavored such a practice, holding that a plaintiff cannot use the UCL to avoid the Moradi holding. Zhang is holding otherwise. In Zhang, the UCL claim remained even though it was an FCHA violation. Now that we have two courts of equal standing handing down opposite rulings, the California Supreme Court must make a ruling to determine which way the law goes.

There is no evidence to suggest that the California Supreme Court will alter Moradi as to the holding denying a private right of action for violations of the FCHA. However, good public policy indicates that the Zhang approach—allowing UCL claims for FCHA violations—is the right approach. As a general matter, the UCL acts to empower private citizens to enforce fair business practices when the attorney general cannot or chooses not to do so. By extending the right to cover citizens aggrieved by insurance companies, the system can better protect those that are wronged. Moreover, because a successful plaintiff recovers restitution and not damages, the results will be equitable. Essentially, private citizens will be able to file claims to force an insurer to comply with the FCHA and then recover any money or property wrongfully taken.

Posted on January 21, 2013 by jampolzimetlaw
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As reported by InsideCounsel, the American Bar Association House of Delegates (“ABAHD”) recently approved an amended model rule stating that it is ethical for lawyers to disclose client information when trying to move from one firm to another.

Specifically, the rule states that it is ethical for an attorney in negotiations for a different job, as well as attorneys in merging firms, to disclose the identities of clients and the amount of business they generate because the information can help point out any conflicts of interest that might exist.  However, the model rule states that lawyers still should not reveal clients' financial information.

Although the model rule has been approved by the ABAHD, the rule is simply an advisory rule.  In addition, the rule provides little guidance for attorneys faced with the question of how much client information can be ethically revealed in states whose bar associations do not have rules covering this topic.  Thus, prior to revealing any information, lawyers should carefully consider and weigh this model rule against Model Rules of Professional Conduct 1.6 and 1.9.

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It is simply too easy for lawyers to quickly lose credibility within the bar and before the judiciary. It seems we've already lost this battle with much of the public, but within the profession I like to think we begin our careers with an undeserved presumption that most of us (at least those without the last name "Madoff") are straight shooters. This presumption should be nurtured and guarded for the gift it truly is.

A lawyer's individual reputation for honesty is as important, if not more important, than his or her intelligence or skill set.  Why? Most of us quickly learn that if we're out of our comfort zone skill-wise, we have choices.  We can involve another, more experienced practitioner.  Or we can double up on our research until we completely understand an issue or area.  Skills can be improved.  The same is not true for reputation.  Once our reputation for honesty is placed at risk, it is nearly impossible to fix.

The easiest way to lose credibility is almost too obvious to mention: to be untruthful, even about the most trivial detail. It's not necessary to falsify documents or manufacture evidence; a lawyer's reputation for honesty can be ruined simply by stretching the truth when "memorializing" a telephone conversation. We hang up, I read your letter, realize you've mischaracterized our discussion and from that point forward I don't trust a word you say. Worse, when my law partner mentions ten years from now that he's got a case against you, the first thought that comes to mind, which I surely share, is that you're not to be trusted. And just like that, you're no longer trusted.

Being untruthful with the court is even more dangerous.  Setting aside the risks of sanctions, contempt, complaints to the state bar, etc., judges have institutional memory which can follow you your entire career. Just as I'll tell my law partner that you can't be trusted, judges do talk, and have lunch together and, I am informed, discuss their cases and the lawyers appearing before them.  Let just one judge conclude that you are a lawyer capable of lying to the bench and that alone could devalue any statement you ever make in the same courthouse or even jurisdiction.

Many lawyers believe we only have our time and intelligence to sell on the open market.  I would add that neither time nor intelligence have any value at all without a reputation for honesty. Once we lose the trust of our colleagues and judges, everything about the practice of law becomes more difficult, especially winning cases and getting referrals.  Don't risk it.

as originally published at
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On June 25, 2012, the California Supreme Court set forth new rules regarding the discoverability of witness statements in Coito v. Superior Court of Stanislaus County, No. S181712 (Cal. 2012).  The issue before the court was what work product protection, if any, should be accorded two items: (1) recordings of witness interviews conducted by investigators employed by defendant’s counsel, and (2) information concerning the identity of witnesses from whom the defendant’s counsel obtained statements.        

The California Supreme Court concluded that witness statements procured by an attorney are entitled, as a matter of law, to at least qualified work product protection.  Regarding the level of work product protection, the court held that the witness statements may be entitled to absolute protection if the attorney resisting discovery of the statements makes a preliminary showing that disclosure would reveal his or her impressions, conclusions, opinions, or legal research or theories.  The opposing party can overcome this privilege only by demonstrating that denying discovery will unfairly prejudice her in preparing her claim or will result in an injustice. 

As to the identity of witnesses from whom defendant’s counsel obtained statements, the court held that such information is not automatically entitled to absolute or qualified work product protection.  To invoke the privilege, the party resisting discovery must persuade the trial court that disclosure would reveal the attorney’s tactics, impressions, or evaluation of the case.  If defendant could do so, such information should be afforded absolute protection.  If, on the other hand, the defendant persuades the trial court that disclosure would result in opposing counsel taking undue advantage of the attorney’s industry or efforts, the information should be afforded qualified protection. 


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In the upcoming Annual Meeting of the ABA, the Commission of Ethics 20/20 will consider amending Model Rule 5.5, which addresses unauthorized practice of law issues.  Of particular concern is the issue of whether the Rule needs to be amended to address whether the proliferation of lawyers' use of technology allows them to maintain a "virtual practice" in a jurisdiction in which they are otherwise not licensed to practice.  The key issue centers around the question of how much "virtual practice" is sufficiently "systematic and continuous" to require an attorney to become licensed in a particular jurisdiction.

If you have seen the draft proposal to amend Model Rule 5.5, which was circulated in September 2011, but sent back to the drawing board because of feedback suggesting that it did more to cloud the issues than to clarify the issues, you probably felt the same way. 

In my humble opinion, at least for the time being, it may be much ado about nothing.  The rule as it stands appears to address most issues, and there probably needs to be considerably more in-depth analysis and study before any tweeking to the Rule occurs.  We've all dealt with pro hac vice issue, serving as and locating "local" counsel when necessary, and electronic filing hasn't really changed the process of being admitted, even if just temporarily, to a particular jurisdiction. Nonetheless, we have all seen how the practice of law has changed over the past ten to fifteen years, particularly as our dependence on electronic communication has multiplied exponentially, and this opinion could change as that dependence grows more and more.


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In addition to their work for their own clients in their own areas of expertise, some professionals also serve as expert witnesses in litigation.  They employ their knowledge and experience in their chosen field to analyze issues and render opinions for one or more parties to a lawsuit.  Like in any other aspect of their work, a professional serving as an expert can act negligently and make mistakes.  Sometimes these mistakes cause litigation problems for the party the professional has been retained to assist.  What happens when the professional is sued for his or her work as an expert?  What are the public policy implications of holding an expert witness liable for mistakes made in the litigation or conversely rendering the witness immune from suit?

A professional generally owes his or her client a duty of care to use the same amount of care, skill and proficiency commonly used by ordinarily skillful, careful and prudent professionals in the professional's community. See, e.g., Michaels v. CH2M Hill, Inc., 257 P.3d 532, 542 (Wash. 2011); Murphy v. A.A. Mathews, a Division of CRS Group Engineers, Inc., 841 S.W.2d 671, 674 (Mo. 1992).  Clearly, a professional retained to perform work as an expert witness in litigation owes his or her client a duty of care – a duty that can certainly be breached.

Some jurisdictions, however, have held that an expert witness's actions and testimony performed during the course of litigation are privileged.  In those jurisdictions, that privilege derives from the doctrine of witness immunity.

The Doctrine of Witness Immunity

As the Missouri Supreme Court has noted: "An immunity is a freedom from suit or liability.  The underlying premise of all immunities is that 'though the defendant might be a wrongdoer, social values of great importance require[d] that the defendant escape liability.'" Id. (quoting Prosser and Keeton on Torts 1032 (5th ed. 1984)).  The immunity for witnesses in judicial proceedings from liability for damages related to their testimony originated in English common law.See Briscoe v. LaHue, 460 U.S. 325, 332 (U.S. 1983)(citation omitted).  The basis for the immunity was the concern that, if subject to subsequent liability, a witness may self-censor his or her testimony – either by altering their testimony for fear or liability or failing to appear to testify at all. Id.  This is not to say courts have not considered the potential for harm resulting from false testimony.  Rather, courts have noted that the reliability of a witness's testimony "is ensured by his oath, the hazard of cross-examination and the threat of prosecution for perjury." Bruce v. Byrne-Stevens & Associates Engineers, Inc., 776 P.2d 666, 667 (Wash. 1989) (citing Briscoe, 460 U.S. at 332).

The immunity first arose in the context of defamation actions based on statements made by witnesses or other parties in the context of a court proceedings. Murphy, 841 S.W.2d at 675.  Different jurisdictions, however, extended the immunity in varying degrees based on the circumstances of the defamatory statement. Id. at 675-76.

Does the Doctrine Apply to Expert Witnesses?

The Seventh Circuit Court of Appeals has noted that witness immunity is particularly designed to protect and encourage disinterested lay witnesses. MacGregor v. Rutberg, 478 F.3d 790, 792 (7th Cir. 2007).   The court noted that because "they have no stake in the case and cannot be paid more than a nominal fee for testifying, [lay witnesses] would be highly reluctant to testify if the threat of a defamation suit hung over their heads." Id.  But what about an expert witness hired specifically to provide opinion testimony in a judicial proceeding?  Are they entitled to the same protection?

The Majority View Is No Immunity

The majority of courts to consider the issue in that context have held that so-called "friendly experts" are not entitled to blanket immunity for their work in preparing and communicating their opinions in litigation.  See, e.g., Marrogi v. Howard, 805 So. 2d 1118, 1128-29 (La. 2002).  InMarrogi, the Supreme Court of Louisiana analyzed whether the policy arguments used to justify the witness immunity doctrine apply in the context of a claim against an expert hired by the plaintiff in the underlying matter. It noted that the objective of encouraging forthright testimony in court "is not advanced by immunizing the incompetence of a party's retained expert witness simply because he or she provides expert services, including testimony, in relation to a judicial proceeding." Id. at 1131.

Some of the courts that have held that hired experts are not immune from suit by their client have based their reasoning on the distinction between the expert's testimony and the work leading up to that testimony.  In Pollock v. Panjabi, 781 A.2d 518 (Conn. Super. 2000), the court held that an expert witness was not entitled to such immunity, noting that the plaintiffs were not complaining about what the expert said; rather, the plaintiffs asserted that their hired expert failed to "perform work as agreed upon, according to scientific principles as to which there are no competing schools of thought." Id. at 525-26; see also Murphy, 841 S.W.2d at 680-81("These experts do not usually act solely as witnesses, but perform substantial pretrial work.").  The court held that there must be a nexus between the claimed immunity, the fact-finding function of the court and the interest in having the expert speak freely. Id. at 526.

California also recognizes the exception of friendly experts from the protection of witness immunity.  In Mattco Forge, Inc. v. Arthur Young & Co., 5 Cal. App. 4th 392 (1992), the court held in favor of the plaintiff company which had sued experts it hired to perform litigation support accounting work. The plaintiff's underlying suit was dismissed allegedly based on negligent work performed by the experts. Id. at 395-96.  In its opinion, the court raised the issue of access to the courts as a policy reason in favor of the exception. 403-04.  Citing the facts of the case before it, the court reasoned that if an expert's negligence caused dismissal of the client's suit before trial, granting immunity to that expert would not expand access to the courts. Id. at 404.

The Minority Viewpoint: Immunity For Friendly Experts

While the majority of jurisdictions to consider the issue have found that expert witnesses should not be immune from suit by their client for negligence, some courts have reasoned that the immunity should attach in such situations.  The most prevalently cited opinion on this side of the issue is Bruce v. Byrne-Stevens & Associates Engineers, Inc., 776 P.2d 666 (Wash. 1989).  In that case, the Supreme Court of Washington held in favor an engineer sued by a client for negligently rendering opinions on damages issues in prior litigation.  In addressing many of the same policy issues discussed in the cases listed above, the Bruce court found that immunity of experts would encourage them to be more careful in their work and result in more reliable testimony. Id. at 670.  It stated:

Civil liability is too blunt an instrument to achieve much of a gain in reliability in the arcane and complex calculations and judgments which expert witnesses are called upon to make.  The threat of liability seems more likely to result in experts offering opinions motivated by litigants' interests rather than professional standards and in driving all but

the full-time expert out of the courtroom.

Id.  The court also discussed the alleged distinction between the expert's testimony and the work leading up to the testimony. It held that to grant immunity solely to the expert's testimony but not to the basis for that testimony would undermine the policies underlying the immunity in the first place. Id. at 672; see also Panitz v. Behrend, 632 A.2d 562, 565 (Pa. Super Ct. 1993).

Some courts have held in favor of an expert witness who has failed to provide helpful testimony to his or her client at trial, though not based on the doctrine of witness immunity.See Griffith v. Harris, 116 N.W.2d 133, 135 (Wis. 1962)(noting that "a contract [between a party and a witness] creating an obligation not only to appear but also to testify in a certain manner on behalf of a party to a lawsuit, is against public policy");Shaffer v. Donegan, 585 N.E.2d 854, 860 (Ohio Ct. App. 1990)(same); Curtis v. Wolfe, 513 N.E.2d 1139, 1141-42 (Ill. App. 1987)(same).

What About Immunity From Disciplinary Actions?

Even in jurisdictions that afford professionals witness immunity, the risk of a disciplinary action – as opposed to civil liability – may still exist.  In Kentucky State Bd. of Licensure for Professional Engineers and Land Surveyors v. Curd, -- S.W.3d --, 2012 WL 512403 (Ky. App. Feb. 17, 2012), the Court addressed the argument made by an engineer who had appealed a suspension handed down by his state's licensure board for giving dishonest testimony as an expert witness in a quiet title action.  Id. at *9-*10.  The engineer argued that subjecting experts to disciplinary action based on their testimony would affect experts' opinion and have a consequent chilling effect on the administration of justice. Id. at *9.  The Court rejected this argument, distinguishing between an expert being sued civilly and one being subjected to professional discipline pursuant to a state statute in administrative proceeding. *10.


While the majority of jurisdictions who have considered the argument have found no immunity for friendly experts, there is a valid position – outlined in the Bruce opinion – that immunity should apply if this issue arises in a jurisdiction that has been silent on the issue.  Because many courts have never expressed an opinion on the matter, the arguments raised in Bruce should be available to many attorneys defending professionals in this context.

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Suppose your client, a lawyer, has been sued for malpractice. Could the alleged malpractice be a basis for discipline? Alternatively, is a disciplinary complaint likely to give rise to a malpractice suit? This article will attempt to shed some light on the distinction between attorney malpractice on one hand and professional misconduct on the other, as well as the types of conduct that may constitute both.

1. What is attorney malpractice?

Simply stated, attorney malpractice is a failure to exercise ordinary skill and knowledge, where that failure damages a client. “To state a cause of action to recover damages for legal malpractice, a plaintiff must allege: (1) that the attorney ‘failed to exercise the ordinarily reasonable skill and knowledge commonly possessed by a member of the legal profession’; and (2) that the attorney's breach of the duty proximately caused the plaintiff actual and ascertainable damages.” Schurz v. Bodian, 2012 WL 502680, *1 (N.Y. App. Div. 2012) (internal citations omitted). See also Legacy Healthcare, Inc. v. Barnes & Thornburg, 837 N.E.2d 619, 624 (Ind. Ct. App. 2006). (attorney malpractice claim involves “failure of the attorney to exercise ordinary skill and knowledge (the breach of the duty).”).

2. What is attorney misconduct?

By contrast, attorney misconduct is the failure to comply with the rules of conduct adopted by a court to which an attorney has been admitted to practice. Because all states except California have adopted some version of the American Bar Association’s Model Rules of Professional Conduct (the “Rules of Professional Conduct”), they will be the focus of this article. A failure to abide by the rules subjects the attorney to discipline by the highest court of that jurisdiction. “Failure to comply with an obligation or prohibition imposed by a Rule is a basis for invoking the disciplinary process.” Rules of Professional Conduct, Preamble, ¶ 19. See also Rule 9, American Bar Association’s Model Rules for Disciplinary Enforcement (“Enforcement Rules”) (“It shall be a ground for discipline for a lawyer to: (1) violate or attempt to violate the [State Rules of Professional Conduct], or any other rules of this jurisdiction regarding professional conduct of lawyers…”). The Enforcement Rules also provide for discipline for refusal to cooperate in the disciplinary process itself. See Enforcement Rule 9 (3), providing for discipline for disobeying a subpoena or order from a bar disciplinary authority.

Of course, the potential consequences of an attorney discipline case are very different from those of an attorney malpractice case. In the worst outcome of an attorney malpractice case, the attorney must pay monetary damages to the plaintiff. By contrast, attorney discipline actions place the attorney’s law license in jeopardy. An attorney who has been found to have violated the Rules of Professional Conduct faces a range of sanctions from a private reprimand up to disbarment, depending on the severity of the violation. See Enforcement Rule 10.

3. Does malpractice equal misconduct, or vice versa?

As noted above, attorney malpractice occurs where an attorney fails to exercise ordinary skill and care, and thereby causes damage to a client. Rule of Professional Conduct 1.1 provides "A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation."

Furthermore, Rule of Professional Conduct 1.3 provides "A lawyer shall act with reasonable diligence and promptness in representing a client."

Thus, it would seem that Rule 1.1 and Rule 1.3 may codify the requirement that an attorney exercise ordinary skill and care, and that failure to do so may constitute misconduct as well as malpractice. It is difficult to imagine a failure to exercise ordinary skill and care that is not also a failure to employ the “legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.”

Some courts have indeed treated isolated mistakes as misconduct and punished it accordingly. For instance, in Board of Professional Responsibility, Wyoming State Bar v. Vreeland, 2012 WL 662236 (Wyo. 2012), an attorney represented a client in a criminal trial. Id. at *1. The jury returned a conviction on February 4, 2010. Wyoming Rule of Criminal Procedure 29(c) required that a motion for judgment of acquittal be made within 10 days of the jury’s verdict, and Rule 33(b) required a motion for new trial to be filed within 15 days of the verdict. However, Vreeland did not file the motions for judgment of acquittal and for a new trial until March 3, 2010; hence, the motions were untimely. Id. The Wyoming Supreme Court found that Vreeland violated Rules 1.1 and 1.3 of the Wyoming Rules of Professional Conduct (based on the Model Rules) and imposed a sanction of public censure. Id. at *2. See also Board of Professional Responsibility, Wyoming State Bar v. Dunn, 262 P.3d 1268 (Wyo. 2011) (attorney received public reprimand for failing to file timely governmental claims notice and complaint); In the Matter of Brown-Williams, 2012 WL 366587 (Ga. 2012) (attorney received public reprimand for missing statute of limitations in workers' compensation case).

By contrast, some courts have explicitly held that an isolated mistake is not a proper basis for discipline. For instance, in In the Matter of the Application for Disciplinary Action Against William E. McKechnie, 656 N.W.2d 661 (N.D. 2003), the Supreme Court of North Dakota addressed a mistake similar to the mistake made by Vreeland, but found that the mistake did not constitute misconduct. "In this case, McKechnie gave Follman incorrect legal advice about the statute of limitations and Follman's case was dismissed for failure to file within the limitations period. This evidence shows nothing more than an isolated instance of ordinary negligence, or error of judgment. We conclude there is no clear and convincing evidence that McKechnie violated N.D.R. Prof. Conduct 1.1." Id. at 669.

Even in jurisdictions whose highest courts have not specifically stated that isolated attorney mistakes should not give rise to discipline, attorneys are not typically sanctioned under Rule 1.1 or 1.3 for simple negligence. More commonly, it appears that attorneys are disciplined for violations of Rule 1.1 or 1.3 in addition to numerous other violations of the Rules of Professional Conduct that involve intentional misconduct, dishonesty, ongoing failure to communicate with clients, or chronic neglect of clients’ interests. For instance, in In Re Adinolfi, 934 N.Y.S.2d 94 (N.Y. App. Div. 2011), an attorney was sanctioned for violating New York Rule of Professional Conduct 1.3 where at least 26 of the attorney’s 103 cases before the Second Circuit Court of Appeals had been dismissed for failure to file a brief. 95.

Finally, the Preamble to the Rules themselves suggest that isolated mistakes should not subject a lawyer to discipline: “Moreover, the Rules presuppose that whether or not discipline should be imposed for a violation, and the severity of a sanction, depend on all the circumstances, such as the willfulness and seriousness of the violation, extenuating factors and whether there have been previous violations.” Rules of Professional Conduct, Preamble, ¶ 19. Thus, those courts that have either explicitly stated that an isolated mistake is not a basis for discipline, or at least typically decline to sanction lawyers for such mistakes, appear to employ an approach more in keeping with the spirit of the Rules.

What about the reverse question: can an act or omission that constitutes attorney misconduct give rise to a malpractice action? The Preamble to the Rules of Professional Conduct provides that violation of a Rule should not in itself give rise to a cause of action. “Violation of a Rule should not itself give rise to a cause of action against a lawyer nor should it create any presumption in such a case that a legal duty has been breached.” However, violation of a Rule can be evidence of the breach of the standard of ordinary care. The Preamble provides that though “[the Rules] are not designed to be a basis for civil liability,…[n]evertheless, since the Rules do establish standards of conduct by lawyers, a lawyer's violation of a Rule may be evidence of breach of the applicable standard of conduct.” Furthermore, some kinds of attorney misconduct have nothing to do with attorney malpractice. For instance, a felony conviction for operating a vehicle while intoxicated will certainly result in discipline, but would provide no basis for a malpractice claim.

Dina M. Cox is a partner with Lewis Wagner, LLP in Indianapolis, who focuses her practice on the defense of complex litigation, including legal malpractice, drug and medical device, product liability, consumer class actions, and insurance coverage and bad faith lawsuits.

Neal Bowling, attorney with Lewis Wagner, LLP, focuses his practice on complex business litigation as well as defense of lawyers in malpractice and disciplinary matters. He has extensive experience advising and representing clients in complex and challenging litigation including: securities matters; employment litigation involving breach of noncompete and wrongful termination claims; and representation of lawyers in malpractice actions and disciplinary investigations and proceedings. 



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