Nat. Union Ins. Co. v. Dowd & Dowd, P.C., 97 C 6200.

• Decision Date: 20 April 1998
• Docket Number: No. 97 C 6200.,97 C 6200.
• Citation: 2 F.Supp.2d 1013
• Parties: NATIONAL UNION INSURANCE COMPANY, individually, and National Union Insurance Company, as Subrogee of Schneider National Carriers, Inc., Plaintiffs, v. DOWD & DOWD, P.C., an Illinois Professional Corporation, and Patrick C. Dowd, Robert J. Golden, Jeffrey E. Kehl, and Patrick J. Ruberry, individually, Defendants.
• Court: U.S. District Court — Northern District of Illinois

2 F.Supp.2d 1013

NATIONAL UNION INSURANCE COMPANY, individually, and National Union Insurance Company, as Subrogee of Schneider National Carriers, Inc., Plaintiffs, v. DOWD & DOWD, P.C., an Illinois Professional Corporation, and Patrick C. Dowd, Robert J. Golden, Jeffrey E. Kehl, and Patrick J. Ruberry, individually, Defendants.

No. 97 C 6200.

United States District Court, N.D. Illinois, Eastern Division.

April 20, 1998.

COPYRIGHT MATERIAL OMITTED

William G. Stone, Erica M. Lewis, Bullaro, Carton & Stone, Chicago, IL, for National Union Insurance Company, Individually and as Subrogee of—Schneider National Carriers, Inc., plaintiffs.

Gary A. Grasso, Shawn Valukas, Johnson & Bell, Ltd., Chicago, IL, for Dowd & Dowd, P.C., an Illinois Professional Corporation, Patrick C. Dowd, individually, Robert J. Golden, individually, Jeffrey E. Kehl, individually, Patrick J. Ruberry, individually, defendants.

OPINION AND ORDER

NORGLE, District Judge.

Before the court is Defendants' Motion to Dismiss. For the following reasons, the motion is granted in part, and denied in part.

I. BACKGROUND

On September 2, 1997, Plaintiffs, National Union Insurance Company, individually, and National Union Insurance Company, as subrogee of Schneider National Carriers, Inc. ("National Union"), filed a two-count complaint against Defendants, Dowd & Dowd, P.C., an Illinois professional corporation, and Patrick C. Dowd, Robert J. Golden, Jeffrey E. Kehl, and Patrick J. Ruberry, individually (collectively "Dowd & Dowd"), for legal malpractice. This case arises out of Dowd & Dowd's representation of Schneider National Carriers, Inc. ("Schneider"), and its driver, Henry Howard ("Howard"), in a personal injury case.

On June 29, 1992, Howard, while operating a Schneider semi-tractor trailer, collided with a stationary lift truck. Immediately before the collision, John Miksis ("Miksis") was standing on a mechanical lift platform suspended over the intersection of Indiana State Highway 6 and Highway 35, changing a lightbulb in the traffic control signal. As a result of the collision, Miksis was thrown from the lift platform to the street, and sustained severe injuries, including brain damage and the loss of control of his legs.

Miksis filed a lawsuit against Schneider and Howard in the United States District Court of the Northern District of Indiana. Schneider had a self-insured retention¹ for $3 million and excess insurance² for $5 million with National Union. Schneider retained Dowd & Dowd to represent and defend Schneider and Howard. After trial, a jury awarded Miksis $10 million in damages, but also found Miksis 20 percent at fault for the accident. The trial court thus entered a verdict against Schneider and Howard for $8 million. The verdict was upheld on appeal. Consequently, Schneider paid the first $3 million and National Union paid the remaining $5 million.

National Union then brought the instant legal malpractice claim against Dowd & Dowd. Dowd & Dowd moves to dismiss, and argues that an excess insurer cannot maintain a legal malpractice action against the insured's defense attorney.

II. DISCUSSION³

The court will deny a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) unless "it is impossible [for the plaintiff] to prevail `under any set of facts that could be proved consistent with [his] allegations.'" See Albiero v. City of Kankakee, 122 F.3d 417, 419 (7th Cir.1997) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984)). In reviewing the plaintiff's complaint, the court must accept all well-pleaded factual allegations in the complaint as true, and draw all reasonable inferences therefrom in the light most favorable to the plaintiff. See Gutierrez v. Peters, 111 F.3d 1364, 1368-69 (7th Cir.1997).

In Illinois, to state a cause of action for legal malpractice, the plaintiff must plead: (1) that the attorney owed the plaintiff a duty of care arising from an attorney-client relationship; (2) that the defendant breached that duty; and (3) that as a proximate cause, the plaintiff suffered actual damages. See Kling v. Landry, 292 Ill.App.3d 329, 226 Ill.Dec. 684, 688, 686 N.E.2d 33, 37 (1997). Dowd & Dowd argue that National Union cannot state a cause of action for legal malpractice because it cannot establish the first prerequisite, an attorney-client relationship.

In response, National Union argues that an attorney-client relationship existed, and advances two theories in support of its position.⁴ First, National Union argues that Dowd & Dowd had two clients, the self-insured (Schneider) and the excess insurer (National Union). Second, National Union argues that Dowd & Dowd owed it a duty of care because Schneider retained Dowd & Dowd for the direct and/or primary benefit of National Union. Alternatively, National Union argues that it, as the excess insurer, is equitably subrogated⁵ to Schneider's legal malpractice action against Dowd & Dowd.

The Illinois Supreme Court has not had occasion to address the issues presented here, nor have the Illinois Appellate Courts. In this case of first impression, National Union asks the court to expand Illinois law and predict that the Illinois Supreme Court would recognize an excess insurer's direct or derivative right to maintain a legal malpractice action against the insured's defense attorney. Given that the court has little guidance from the Illinois courts, it would be far more preferable to certify the issue to the Illinois Supreme Court. However, District Courts do not have that luxury in Illinois.⁶ See Ill. Comp. Stat. S.Ct. Rule 20. Hence, it is incumbent upon the court to predict how the Illinois Supreme Court would decide these novel issues. See Allen v. Transamerica Ins. Co., 128 F.3d 462, 466 (7th Cir.1997). In so doing, the court will extrapolate from existing statements of Illinois law and will consider law from other jurisdictions only insofar as they are consistent with the principles of Illinois law. See Zenith Ins. Co. v. Employers Ins. of Wausau, 141 F.3d 300, 303-04 (7th Cir.1998).

A. Direct Claim

A legal malpractice claim is primarily a tort claim for negligence based upon an attorney's failure to exercise the requisite degree of skill and care in representing his client. See Christison v. Jones, 83 Ill.App.3d 334, 39 Ill.Dec. 560, 561, 405 N.E.2d 8, 9 (1980). However, the duty allegedly breached arises by a contract for legal services. Id."The attorney-client relationship is a voluntary, contractual relationship that requires the consent of both the attorney and client." In re Chicago Flood Litig., 289 Ill.App.3d 937, 224 Ill.Dec. 860, 864, 682 N.E.2d 421 425 (1997). Once the attorney-client relationship is formed, "the attorney owes his client the utmost degree of fidelity, honesty, and good faith." Christison, 39 Ill.Dec. at 562, 405 N.E.2d at 10.

The fiduciary relationship between an attorney and his client is personal and confidential. See id. at 562-63, 405 N.E.2d at 10-11. "In recognition of the personal character of the relationship, it has always been jealously guarded and restricted to the parties involved." Id. Thus, it is well established in Illinois that only a client can assert a legal malpractice claim. See Kleinwort Benson North Am., Inc. v. Quantum Fin. Serv. Inc., 181 Ill.2d 214, 229 Ill.Dec. 496, 501, 692 N.E.2d 269, 274 (1998) (citing Christison, 39 Ill.Dec. at 560, 405 N.E.2d at 8). Here, National Union advances two theories to show that an attorney-client relationship was formed between itself and Dowd & Dowd. The court will address each theory in turn.

1. Tripartite Relationship

First, National Union maintains that Dowd & Dowd, by representing National Union's insured, Schneider, also represented Schneider's excess insurer, National Union. In order to support this position, National Union argues that the Illinois Supreme Court would expand what is sometimes referred to as the "tripartite relationship" among an attorney, an insured and a primary insurer⁷, to recognize that the attorney also owes a fiduciary duty to the excess carrier.

In Illinois, it has long been recognized that an attorney retained by a primary insurer to represent its insured has a fiduciary duty to two clients: (1) the insured and (2) the primary insurer. See Maryland Cas. Co. v. Peppers, 64 Ill.2d 187, 355 N.E.2d 24, 30-31 (1976); Mobil Oil Corp. v. Maryland Cas. Co., 288 Ill.App.3d 743, 224 Ill.Dec. 237, 246, 681 N.E.2d 552, 561 (1997); Cincinnati Co. v. West Am. Ins. Co., 287 Ill.App.3d 505, 223 Ill.Dec. 147, 152, 679 N.E.2d 91, 96 (1997). Consequently, either the insured or the primary insurer can sue the retained attorney for legal malpractice. See Smiley v. Manchester Ins. & Indemnity Co. of St. Louis, 71 Ill.2d 306, 16 Ill.Dec. 487, 375 N.E.2d 118 (1978) (insurer sued the retained attorney); Rogers v. Robson, Masters, Ryan, Brumund and Belom, 74 Ill.App.3d 467, 30 Ill.Dec. 320, 392 N.E.2d 1365 (1979) (insured sued the retained attorney).

National Union argues that the Illinois Supreme Court would likewise recognize an excess insurer's right to bring a legal malpractice claim since "there is no logical reason to distinguish between a primary insurer and an excess carrier in determining when an insurer may sue for malpractice." (National Union's Resp. at 6.) This argument, however, completely ignores the fact that primary insurers actually contract with the attorney for his legal services.

"In Illinois an insurer is obligated to defend an action against an insured when the complaint in that action sets forth allegations which bring the claim potentially within the coverage of the insurance policy." Nandorf, Inc. v. CNA Ins. Co., 134 Ill.App.3d 134, 88 Ill.Dec. 968, 971, 479 N.E.2d 988, 991 (1985) (citing Peppers, 64 Ill.2d 187, 355 N.E.2d 24). A primary insurer's duty to defend its insured generally includes the right to select the attorney and to control the litigation. Id. Since the primary insurer...