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Privity of contract principle spotlighted in legal malpractice case

Clients retaining attorneys to promote their rights in legal matters justifiably assume that their legal counsel will always act competently.

That so-called “standard of care” does not mean that a lawyer must be a paragon of perfection. Rather, it mandates that legal counsel proceed in a manner similar to that engaged in by other attorneys acting in a prudent way.

Alleged legal malpractice can cover a lot of ground, ranging from accusations of a lawyer’s incompetency to conflicts of interest and more.

As a threshold matter, and before a malpractice claim can even proceed, an aggrieved party must first establish not only that there are grounds to proceed in court, but that “standing” exists to bring a claim.

That is a legal term of art that can be discussed at length. In a nutshell, it means that a would-be plaintiff has a personal stake in a matter sufficient for it to be ruled upon in court. As a threshold matter, there must be an injury claim reasonably tied to a defendant’s conduct.

An insurance company seeking to sue a law firm for incompetent representation found in one recent case that it also requires what the law calls privity of contract between a sued attorney and a party seeking damages.

In that case, multiple court levels in one state ruled that the insurance company could not proceed against the law firm because the insurer lacked a relationship close enough to file a claim. The insurer was not the actual plaintiff in an underlying case at issue, having been involved in the matter only as a third party defending an insured policyholder.

Justices ruled that privity existed only between the law firm and the plaintiff insured. Although the case ended up with the insurer being required to pay a settlement, the company’s claim for a recovery based on the law firm’s negligence could not proceed owing to lack of privity.

That is of course a technical issue, with it being necessary to note that contractual privity requirements differ materially among the states. The case is mentioned here to illustrate the complexity that can quickly attach to any malpractice action. That potential highlights the need for an injured party to timely confer with a proven pro-plaintiffs’ malpractice attorney prior to commencing litigation.