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Liability Insurers and Defense Costs- Seventh Circuit Affirms Dismissal of Insurer
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Liability Insurers and Defense Costs- Seventh Circuit Affirms Dismissal of Insurer
Posted by: Jason Reese
August 27, 2008
Topic: Legal Malpractice
"TIG Insurance Co. v. Giffin Winning Cohen & Bodewes, P.C., the Seventh Circuit blocked a liability insurer's attempt to re-coup some of its policyholder's defense costs by filing a legal malpractice suit against the law firm that initially represented the policyholder.
TIG court missed an opportunity to force liability insurers to rely on more efficient private cost-apportionment procedures, rather than foisting malpractice claims on the courts for costly ex post review.
Giffin Winning's failure to produce documents in an underlying lawsuit, Varner v. Illinois State University. Giffin Winning initially represented ISU for this case. TIG directed and paid for most of the litigation under the terms of coverage. In late 1996, this case was stayed. During that time, TIG replaced the small Central Illinois based Giffin Winning with the powerhouse national firm Latham & Watkins. The plaintiffs' attorney soon learned that Giffin Winning had failed to produce three gender equity studies that the university had commissioned.
Once the stay was lifted, the plaintiffs filed a motion for monetary sanctions against ISU and Giffin Winning. After a four-day hearing, the trial court found that no such database ever existed and denied the request for default judgment. However, it fined Giffin Winning $10,000 for discovery lapses which was later vacated. While this was being settled, TIG filed a tort-base malpractice claim to recover from Giffin Winning the $1.2 million that Latham had spent.
The district court excluded testimony from TIG's legal expert, finding that it was clear that he had simply parroted the information presented to him by TIG. The court then found that because Latham used clock billing (the bills show daily fees but did not disaggregate for individual activities) TIG's estimate of the portion of ISU's legal fees attributable to Giffin Winning was pure speculation.
The court barred the Latham attorney from testifying that apdefendants' negligence, dismissing this as an inadmissible speculation. The district court granted Giffin Winning's motion for summary judgment.
Judge Evans addressed neither the district court's holding that TIG had failed to present any admissible evidence of damages, nor Giffin Winning's broader claim that Seventh Circuit precedent precluded malpractice suits in which the only damages are legal fees.
It maintained that Giffin Winning could not have foreseen that its allegedly negligent document production would spawn a million-dollar bill for attorney fees" (TIG Insurance Co. v. Giffin Winning Cohen & Bodewes, P.C., 444 F.3d587 (7th Cir. 2006) pg. 1715-1717).
