Business & Insurance Litigation Newsletter for Indiana

Excess Insurer Lacks Privity to Legal Malpractice Claims

In Querrey v. Harrow, Ltd. v. Transcontinental Ins. Co., 861 N.E.2d 719 (Ind. Ct. App. 2007), two defense firms were sued by Transcontinental Insurance ("CNA") for malpractice in defending a catastrophic personal injury case. CNA, the excess insurer, claimed that the defense lawyers failed to timely raise a non-party defense and this failure caused the defendants' insurers a greater amount than reasonably necessary to settle the claim. The law firms moved for summary judgment on the grounds that they were not in privity with CNA as an excess insurer.

The issue is one on which there is a split of authorities in other states. The Court of Appeals held that privity is required and cannot be circumvented by a claim of equitable subrogation. This holding follows from a lawyer's undivided duty of loyalty to the client and the doctrine that a claim for legal malpractice cannot be assigned.