RECENT DEVELOPMENTS IN LAW GOVERNING PROFESSIONALS', OFFICERS', AND DIRECTORS' LIABILITY

The U.S. District Court for the Southern District of California allowed an insurance company to sue its insured's attorney, holding that the attorney owed a duty of care to the insurance company as weU as to the insured.1 In American Modern Home Insurance Co. v. Gallagher,2 the plaintiff insurer retained the defendant to represent its insured on a personal injury claim arising from an accident in which the claimant was rendered a quadriplegic.3 Before suit was filed, the claimant's attorney demanded the policy limits, and the insured's attorney responded that he needed to conduct a complete investigation of the claim but did not specifically respond to the demand.4 The claimant then withdrew the pobcy limits demand and filed suit against the insured, which was eventually settled for $5.5 million.5 The insurer then sued the attorney it had assigned to represent the insured during the prebtigation period for legal malpractice and breach of fiduciary duty.6 The attorney moved for summary judgment on the grounds that he owed no duty to the insurance company with respect to settlement.7 The court rejected the attorney's argument that the receipt of the pobcy limits demand created a conflict of interest between the insurance company and the insured that nullified the attorney's duty to the insurance company in favor of the attorney's duty to the insured.8 The court also rejected the attorney's argument that he could not be held fiable for failing to act with respect to the settlement demand because the duty regarding settlement falls squarely on the insurance company, which owes a nondelegable duty to its insured to settle the underlying claim within its pobcy limits.9 Because the attorney faded to present any authority or evidence supporting a finding that an attorney retained by an insurance company on behalf of an insured has a duty of care to the insurance company to act with respect to all legal issues except settlement, the court denied the attorney's motion for summary judgment.10 In Querrey & Harrow, Ltd. v. Transcontinental Insurance Co., the Supreme Court of Indiana held that an excess insurer may bring an action for legal malpractice against the insured's attorneys under a theory of equitable subrogation.11 The excess insurer, which had paid more than $3.7 million as part of the settlement of a personal injury claim, sued the attorneys who represented its insured on a theory of equitable subrogation, contending that the attorneys were negbgent by not