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Bracewell & Patterson attorneys successfully defended Keck, Mahin & Cate, a former Chicago-based law firm, against a legal malpractice claim brought by an insurance company to recover money it paid to settle a suit against an insured. Jeremy Counseller, a Bracewell & Patterson associate who helped try the case, says the jury’s verdict for Keck Mahin is only the second defense verdict in an equitable subrogation case in Harris County — and possibly in Texas — since the Texas Supreme Court opened attorneys to malpractice claims by excess insurance carriers in a 1992 ruling. Judge Scott Link, of Houston’s 80th District Court, signed a take-nothing judgment on Jan. 22 in National Union Fire Insurance Co. of Pittsburgh v. Keck, Mahin & Cate, et al. Link signed the judgment after a jury found in November 2002 that Keck Mahin was not liable for malpractice in its defense of Granada Food Corp., a seafood-processing facility. National Union, the excess liability insurance carrier for Granada Food, sued Keck Mahin in 1993 under a theory of equitable subrogation. Insurance Company of North America (INA), Granada’s primary liability insurer, also was named as a defendant in the suit but settled with National Union prior to the trial. In its petition, National Union alleged that Keck Mahin attorneys — who were hired by INA to defend Granada — had “failed miserably” in their preparation for the 1992 trial in Wolf Point Shrimp Far, et al. v. Granada Food Corp., et al. in the 23rd District Court in Matagorda County, Texas. Counseller says Wolf Point sued Granada in 1991 for damages allegedly caused by Granada’s improper processing of approximately 350,000 pounds of shrimp. He says INA tendered its policy limit of $1 million to National Union, which settled the suit for $7 million in the middle of the trial. National Union alleged in its petition that it had to pay $6 million of the settlement to protect Granada and avoid a judgment that would have exceeded the $9 million Granada had in excess coverage. Among other things, National Union alleged in its petition that Keck Mahin failed to depose Wolf Point’s representative or experts, failed to retain a defense expert to explain that due care was used in processing the shrimp and failed to evaluate the case when it could have been settled for $1.75 million or less. A December 1992 ruling by the Texas Supreme Court enabled National Union to sue Keck Mahin. In American Centennial Insurance Co. v. Canal Insurance Co., the high court recognized an excess insurer’s right to assert a legal malpractice claim against its insured’s defense attorney through equitable subrogation. Although Texas law does not permit a nonclient to sue an attorney for malpractice, the court reasoned that permitting an excess carrier to stand in the shoes of its insured and assert the insured’s claims wouldn’t burden the existing attorney-client relationship with additional duties or create potential conflicts of interest for the attorney. “Subrogation permits the insurer only to enforce existing duties of defense counsel to the insured,” then-Justice Lloyd Doggett wrote for the court. SECOND-GUESSING STRATEGIES Tracie Renfroe, lead attorney for Keck Mahin, says American Centennial has been an unwelcome opinion in the legal community as attorneys who represent insured parties worry about having their legal strategies second-guessed by insurance companies. “Having Keck Mahin found not liable for malpractice is a significant ruling in protecting the work of attorneys on behalf of their clients,” says Renfroe, a partner in the Houston office of Bracewell & Patterson. National Union and INA appealed National Union to the 14th Court of Appeals after the trial court in Matagorda County granted a summary judgment to Keck Mahin on the subrogation claims for malpractice. The trial court also had granted partial summary judgment for National Union, rejecting INA’s and Keck Mahin’s affirmative defenses that National Union contributed to its loss. All the parties appealed to the Texas Supreme Court. In 2000, the supreme court held that a release signed by Granada and Keck Mahin about two weeks before the 1992 trial in Wolf Point didn’t foreclose legal malpractice claims arising from the firm’s alleged actions immediately prior and during the trial. In the release, Keck Mahin forgave Granada for unpaid legal fees for services provided between June 1, 1988, and April 1, 1992, and Granada released all claims it might have against the firm in connection with its legal services during the same period, the Texas Supreme Court’s opinion said. In the opinion, written by Chief Justice Tom Phillips, the Texas Supreme Court also affirmed the 14th Court of Appeals’ decision to limit the evidence that could be presented regarding National Union’s alleged conduct. Renfroe says the Texas Supreme Court’s ruling blocked her from presenting evidence that National Union’s alleged conduct led to the settlement. However, she was able to get a question regarding the release agreement between Granada and Keck Mahin included in the jury charge. The jury found that the release agreement was valid. Iris Robinson, an attorney for National Union, says that by law, an excess carrier has no duty to do anything until the primary insurer’s policy limits have been tendered or exhausted. After INA tendered the primary policy limits, National Union was faced with an extreme situation and “had to pay what they had to pay to get the case settled,” she says. Robinson also says she believes that consumers who sue lawyers almost always win, but when the plaintiff is a huge insurance company, it gets looked at “in a whole different way” and, in some instances, the lawyer can become the object of sympathy. The case was so complex that it probably would have been better to have it heard in a bench trial, Robinson says. “It was not a case that ever should have gone to a jury.” Legal malpractice expert Larry Doherty, who represented American Centennial in the 1992 Texas Supreme Court case, says the court affirmed the privity doctrine but carved an exception so that an excess carrier “doesn’t just get stuck out on a limb.” Doherty, a partner in Houston’s Doherty Long Wagner, says it’s one thing if the excess carrier steps in to “prevent a debacle,” such as a verdict for more than the insured’s policy limits. If the excess carrier “meddled in the underlying litigation,” Doherty says that he can see why the jury decided as it did. Mac Gann, who also represents National Union, says the insured in this case testified that Keck Mahin “did a bang-up job” in defending Granada. “That sort of makes it a tough fence to get over,” says Gann, a partner in Gann & Edwards in Houston. Robinson, a partner in Houston’s Robinson Waldrop, says National Union has not decided whether to appeal the judgment. National Union recouped some of its loss from INA. Austin attorney Curt Kurhajec, a Thornton, Summers, Biechlin, Dunham & Brown partner who represented INA, says the settlement is confidential, but it was “not a lot of money.”

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