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A RETROCESSIONAL INSURER WHICH PAID OUT A SETTLEMENT ON BEHALF OF THE INSURED IN THE UNDERLYING LABOR LAW 240(1) LADDER-FALL CASE, IS ENTITLED TO BRING A LEGAL MALPRACTICE ACTION AGAINST THE LAWYERS FOR THE INSURED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Kapnick, determined a retrocessional insurer (the reinsurer of a reinsurer) can maintain a legal malpractice claim against lawyers representing the insured in an underlying Labor Law 240(1) (ladder-fall) personal injury action. Plaintiff retrocessional insurer, having paid out on a settlement on behalf of the insured has standing to assert a claim for legal malpractice under a theory of equitable subrogation. (The opinion is too complex to fairly summarize here):

In New York, “[w]e recognize at once the fairness of the proposition that an insurer who has been compelled by his contract to pay to or in behalf of the insured claims for damages ought to be reimbursed by the party whose fault has caused such damages and the principle of subrogation ought to be liberally applied for the protection of those who are its natural beneficiaries” … . “As an equitable doctrine in the context of insurance, an insurance carrier, upon payment of a loss becomes subrogated to the rights and remedies of its assured to proceed against a party primarily liable without the necessity of any formal assignment or stipulation” … . Under the same equitable principles, “an insurer which has been compelled under its policy to pay a loss, ought in fairness to be reimbursed by the party which caused the loss” … . * * *

Where a reinsurer, or retrocessionaire, has paid a claim on behalf of an insured, equitable principles demand that the reinsurer be entitled to equitable subrogation on behalf of the insured. Having pleaded that it was contractually obligated to, and did, pay the majority of the [property owner/general contractor’s] settlement amount in the underlying personal injury action, and that it brings the instant action for legal malpractice as subrogee [of the property owner/general contractor], plaintiff can proceed with this action under the theory of equitable subrogation. Century Prop. & Cas. Ins. Corp. v McManus & Richter, 2024 NY Slip Op 00799, First Dept 2-15-24

Practice Point: Here the retrocessional insurer paid out a settlement on behalf of the insured in an underlying personal injury action. The retrocessional insurer was entitled to bring a legal malpractice action against the lawyers for the insured.

 

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