Great Am. Ins. Co. v. Dover, 456 F.3d 909 (8th Cir. Ark. 2006)

AR: Underlying wrongful death

Student Contributor: Meghan Jean

Facts: Darren O’Quinn and David Couch represented Advocat Inc. in the wrongful death of Margaretha Sauer at Rich Mountain Nursing and Rehabilitation Center. Great American Insurance Company insured Advocat. Although O’Quinn and Couch had estimated a potential verdict of $400,000 and $600,000 in compensatory damages and $1.8 million in punitive damages, the trial court awarded the plaintiffs of the suit a total of $26 million in both compensatory. Great American sued the attorneys for inadequate representation.

Issue: Whether a third party, in the state of Arkansas, may bring a malpractice suit against an attorney with whom he or she does not share a privity relationship.

Ruling: No. Under Arkansas law §16-22-310, only those with direct privity with attorneys may file legal malpractice actions. However, there are two exceptions in which case a third party might bring a suit against an attorney:

1. If the attorney’s conduct is fraudulent and intentional; or
2. If the third party is a beneficiary of the attorney’s services.

In asserting the above exceptions, it is imperative that in order for the third-party to recover from a malpractice suit against an attorney with whom he does not have a privity relationship, the attorney must identify him or her either personally, to the client, or in writing, that the third party was entitled to rely on his or her professional services. There was no such intention shown in this case.
In addition, while “equitable subrogation works to prevent the unjust enrichment of parties, including cases such as these where one becomes liable for the debt of another,” it is inapplicable in this case. Because public policy shields attorneys from legal malpractice suits from third parties, the allowance of an equitable subrogation claim for one with whom the attorney owed no privity would undermine the law.

Lesson: Under Arkansas law, an attorney must make clear and certain to whom his or her privity relationship lies. The merging of the lines between a client and third-party and the duty owed to one over the other, may in fact lead to a heightened duty of care to those whom the attorney might not otherwise have a privity relationship. Here, the insurance carrier sued its designated defense counsel who allegedly defended the carrier’s insured inadequately.