In two important decisions this past term, our Supreme Court set down limits to the protection that is available to victims of legal malpractice in New Jersey. In the area of awarding attorney fees to plaintiffs who prevailed in malpractice actions against their errant lawyers, the court decided that the exception to the “American Rule” announced in Saffer v. Willoughby, 143 N.J. 256 (1996), does not accrue to the benefit of non-clients. In the area of professional liability insurance, the court decided that the mandatory insurance coverage applicable to lawyers and law firms who practice in the form of entities—PCs, LLCs and LLPs—is not absolutely mandatory, after all.
Attorney Fees
Against a background of the intense lobbying efforts of the New Jersey State Bar Association seeking to legislatively abrogate our Supreme Court’s ruling in Saffer v. Willoughby, 143 N.J. 256 (1996), the decision in Innes v. Marzano-Lesnevich, 224 N.J. 584 (2016), seeks to clarify the boundaries of that landmark ruling and its progeny which has grown over the past two decades. Saffer held that negligent lawyers are responsible for compensatory damages equal to the attorney fees and litigation costs incurred by their former clients who prevail in their professional negligence actions against them. Innes clarifies Saffer’s principal holding by limiting those compensatory damages only to those prevailing plaintiffs who can demonstrate that there existed an unequivocal attorney-client relationship with the non-prevailing defendant-lawyer in the legal malpractice action. Third-party plaintiffs, who are not traditionally defined clients of the defendant lawyer, are not entitled to an award of compensatory damages from the negligent lawyer to cover their attorney fees and costs of prosecuting the malpractice action. In other words, the “American Rule,” which holds that litigants are responsible for their own attorney fees and costs in litigation continues to apply to non-clients even if they prevail in a legal malpractice action.
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