Adversaries In Litigation Prohibited From Assigning Legal Malpractice Claim Arising From Same Litigation

The South Carolina Supreme Court, applying South Carolina law, has held that a legal malpractice claim may not be assigned between two adversaries in litigation where the alleged malpractice arises out of the same litigation. Skipper v. ACE Prop. & Cas. Ins. Co., 2015 WL 4269817 (S.C. July 15, 2015).

An individual was in a car accident with the driver of a truck owned by an insured logging company. The insurer retained counsel for the insured company and its driver in an underlying personal injury action against the driver and the company. Without informing the insurer, the underlying plaintiff and the insured company and its driver entered into a settlement and consent judgment whereby the insureds admitted liability, agreed to pursue a legal malpractice claim against the attorneys retained for the insureds by the insurer, and assigned a large interest in the legal malpractice claim to the underlying plaintiff.

In answering a certified question addressing this matter, the South Carolina Supreme Court adopted the “majority rule in other jurisdictions . . . to prohibit the assignment of legal malpractice claims between adversaries in the litigation in which the alleged malpractice arose.” In so doing, the court stressed the “potential for collusion and inflated consent judgments” if the assignment of such malpractice actions was permitted. The court also stated that “permitting the assignment of legal malpractice claims between adversaries threatens the integrity of the attorney-client relationship” by creating a conflict of interest between the defense attorney and his client. The court further explained that permitting such an assignment of a legal malpractice claim “would lead to disreputable role reversals in which the plaintiff-assignee would be required to take a position ‘diametrically opposed’ to its position in the underlying litigation” by forcing the plaintiff-assignee to argue that the underlying defendant would have won his case but for the actions of the defense attorneys in order to be successful in the legal malpractice action.

For these reasons, the court held that, “in South Carolina, the assignment of a legal malpractice claim between adversaries in litigation in which the alleged malpractice arose is prohibited.”

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