The Florida Supreme Court will decide on the future of a legal malpractice lawsuit against Florida law firm Kubicki Draper, after attorneys on either side disputed whether the plaintiff has standing to sue.

It's a case that asks what duties lawyers have to third parties after alleged malpractice, by questioning whether an insurance company is legally a client of the law firm it hired to represent a customer.

Arch Insurance Co. brought the legal malpractice lawsuit against Kubicki Draper in 2008 over the law firm's defense of a customer—South Florida accounting company Spear Safer CPAs and Advisors—against a multimillion-dollar accounting malpractice lawsuit.

That case resulted in a $3.5 million settlement—within a $5 million policy limit. But Arch Insurance claimed that amount would have been a lot lower if Kubicki Draper attorneys had used a statute-of-limitations defense earlier in the litigation.

Oral arguments before Florida's high court Wednesday followed a finding from the Fourth District Court of Appeal that Arch did not have legal standing. The lower court found the Arch couldn't sue, because the insurance company was never really the law firm's client.

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Related story: Kubicki Draper Beats Insurance Company's Malpractice Suit

The appellate ruling flagged the question of standing as one of great public importance.

But the insurer's attorney, Edward Guedes of Weiss Serota Helfman Cole & Bierman in Miami, asked the court to reverse that.

Guedes argued there was a contractual relationship between the insurance company and Kubicki Draper, and therefore an understanding that they were also representing Arch's interests, making the insurer "a co-client."

"The insurer should have the same access to the courts to remedy its injury as any other client," Guedes said.

Guedes highlighted that an intake form for the firm referred to Arch Insurance as the "carrier client." He pointed to documents that he said showed lawyers providing advice only to the insurer, leaving the insured out of the equation, including one occasion where an attorney advised Arch Insurance on its exposure to a potential bad-faith claim. The insured wasn't copied on that correspondence, according to Guedes.

"What we have here at every instance, on every occasion in the interaction of these parties, is that everyone understood that retained counsel was representing the interests of both entities," Guedes said.

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Duty?

The case could result in a statewide rule change, creating a duty for law firms toward nonclients in certain circumstances, if the justices side with Arch Insurance.

Chief Justice Charles Canady pressed Kubicki Draper's lawyer Christopher Carlyle on whether the insurer had legally contracted with the law firm.

"The reality here is if the insurer had stiffed the law firm on the fees, there would have been a suit based on a contractual relationship with the insurer," Canady said.

But Carlyle argued that whatever connection there was didn't rise to a dual client relationship and didn't mean their legal interests were aligned. Instead, as Florida law currently dictates, Carlyle said the parties themselves should be left to define what their relationship is.

"If you create this situation where they [lawyers] are adequately representing the rights of the insured and this case settles within policy limits, what goes through the lawyers' minds during those negotiations, during the course of that lawsuit? Knowing that, 'Perhaps I'll be second-guessed later on down the road by the insurance company if you create this ability to do so,'" Carlyle said.

He argued that to side with the insurer would be to "ignore all the nuances, ignore the fact that the parties can control their relationship and allow a malpractice suit without any distinctions, despite the fact they've made some distinctions today."

The insurer's policy did include a subrogation clause, meaning one party could have the right to step into another's shoes in certain scenarios. When Justice Ricky Polston asked why the insurer shouldn't be able to use the clause in this instance, Carlyle said the company couldn't show harm. The attorney argued the insurer's customer had received the benefit of its bargain with Arch, which had in turn seen the claim settle within policy limits.

"What harm am I subrogating?" Carlyle asked. "How is that harm being transferred to the insurance company? … What harm has it suffered?"

The high court has yet to rule.

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