Washington Court of Appeals: Consent Judgment And Assignment Of Attorney Malpractice Proceeds Different From Assignment Of Claims Against Insurers

The Washington Court of Appeals, Division One, shot down a defendant’s assignment to his adversary of potential proceeds from malpractice claims against his insurer-appointed counsel in a liquor liability action.  The case is Kim v. O’Sullivan, 2006 WL 1669652 (June 19, 2006). 

The defendant, Kim, was unhappy with his lawyer, O’Sullivan, and claimed, among other things, that the attorney’s bad advice and faulty evaluation of the case kept one of Kim’s insurers from furnishing the money to settle the case cheaply and early.  Kim also said the lawyer had an unacceptable conflict in having both the insurer and insured as clients, as is common in most states.  Kim signed a consent judgment with the plaintiff in the underlying case and then tried to assign his legal malpractice claims.  However, the defendant faced a big obstacle: three years ago the  Washington Supreme Court held, in Kommavongsa v. Haskell, that assignments of legal malpractice claims to an adversary in the same litigation do not serve the public interest and are invalid. ( Kommavongsa allows an actual judgment on a legal malpractice claim to be assigned to an adversary, but not unrealized potential claims). So the defendant re-did the assignment. Instead of assigning his claims against his lawyer, he assigned only the proceeds of the lawsuit, which was brought in his name by his former adversary’s lawyer. The former plaintiff, who received the proceeds through the assignment and was the real party in interest, was not a party to the malpractice lawsuit.

The Court of Appeals didn’t buy it, and said the assignment of proceeds is the same as assignment of claims.  It also said there was no evidence of damage, because a stipulated judgment in this context doesn’t constitute evidence of damage caused by an attorney, because the defendant doesn’t really have to pay it.  The reasoning is contrast to the way Washington courts, and most other courts, see stipulated judgments when an insurer is the target: these judgments are usually found to be enforceable to the extent they are reasonable and coverage exists, and in some states, even if coverage doesn’t exist but the insurer committed bad faith.  Not that I have a problem with any of this: I’m just sayin’.

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