Paradigm Ins. Co. v. Langerman Law Offices

Brief Fact Summary.

When Langerman (Defendant) was sued for legal malpractice by Paradigm Insurance Company (Plaintiff) which had hired him to defend one of its insureds, Defendant argued there was no express agreement that he also represented Plaintiff, and therefore, there was no attorney-client relationship existing between him and Plaintiff on which Plaintiff could base its suit.

Synopsis of Rule of Law.

An express agreement is not required for an attorney-client relationship to be formed.

Facts.

Paradigm Insurance Company (Plaintiff) issued an insurance policy covering a physician for medical malpractice liability.  The physician was sued for malpractice, and Paradigm (Plaintiff) hired an attorney, Langerman (Defendant), to defend the case.  Certain investigations regarding the case, and vital to a competent defense, Defendant failed to perform.  In addition, Plaintiff then learned that Defendant had undertaken representation of a claimant who was bringing an action against another Paradigm-insured physician.  The latter representation violated an agreement between Plaintiff and Defendant that the latter would not represent any claimants against Plaintiff’s insureds.  Plaintiff brought suit against Defendant for malpractice.  On summary judgment, the trial judge held that because there was no express agreement that Langerman (Defendant) could represent both Paradigm (Plaintiff) and the physician insured by Plaintiff, no attorney-client relationship existed between Defendant and Plaintiff, therefore Defendant owed no duty of care to Plaintiff and could not be held liable for negligence that injured only Plaintiff but not Defendant’s sole client, the insured physician.  The court of appeals reversed, holding that there was a dual attorney-client relationship in this case.  Defendant appealed

Issue.

Is an express agreement required for an attorney-client relationship to be formed?

Held.

(Feldman, J.)  No.  An express agreement is not required for an attorney-client relationship to be formed.  On the contrary, a relationship of client and attorney arises when a person manifests to a lawyer the person’s intent that the lawyer provides legal services for the person and the lawyer manifests to the person consent to do so.  Indeed, either intent or acquiescence may establish the relationship.  As a practical matter, an attorney is deemed to be dealing with a client, as in this case, when it may fairly be said that because of other transactions an ordinary person would look to the lawyer as a protector rather than as an adversary.  Therefore, a purported client’s belief that the lawyer was their attorney is crucial to the existence of an attorney-client relationship as long as that belief is objectively reasonable.  This case presents the typical situation found when defense is provided by a liability insurer as part of the insurer’s obligation to provide for the insured’s defense, which includes the power to select the lawyer that will defend the claim.  However, the fact the lawyer is chosen, assigned, and paid by the insurer for the purpose of representing the insured does not automatically create an attorney-client relationship between the insurer and lawyer.  In the absence of a conflict, as in this case, the attorney, Langerman (Defendant) has two clients, the insurer Paradigm Insurance co. (Plaintiff) and the insured.  Also, Plaintiff is in some ways dependent upon the attorney it hired on behalf of its insured.  For example, Plaintiff depended on the attorney to represent the insured zealously so as to honor its contractual agreement to provide the defense when liability allegations were leveled at the insured.  Also, Plaintiff depended on Defendant to thwart claims of liability and, in the event liability was found, to minimize its damages.  Therefore, Langerman’s (Defendant) duties to the insured were discharged for the full or partial benefit of the nonclient Paradigm Insurance Co. (Plaintiff).  Affirmed

Discussion.

As noted in the Paradigm decision, most jurisdictions that have addressed the issue permit the attorney to represent both the insurer and insured where no conflict of interest exists, and some jurisdictions regard both the insurer and the insured as clients of the lawyer even without an express agreement.  All jurisdictions recognize that the lawyers for the insured owe at least some obligations to the insurer.  Neither the Model Rules nor the Restatement takes a position on the question of whom the insurance defense lawyer represents