A Texas federal judge has allowed an Irish insurance company to sue Schiff Hardin for negligent representation after the Chicago-based law firm allegedly failed to tell the insurer about a $3.25 million settlement offer. Instead, the company was hit by a $34 million jury verdict.

While the decision by U.S. District Judge Rodney Gilstrap allows a nonclient to sue the law firm, it does prevent the plaintiff insurance company from pursuing claims against Schiff Hardin for the predictions it made about the litigation, or for the opinions the law firm made. That includes an assessment that the trial was going “fine” or “pretty well.”

Schiff Hardin was representing Dorel Juvenile Group, a company that held an excess insurance policy issued by Ironshore Europe DAC. Dorel, which makes car seats, was sued for products liability by the parents of a child injured in a car accident involving one of its products.

Schiff Hardin regularly communicated with Ironshore while representing Dorel. Specifically, Ironshore was concerned it would be required to pay out on the policy if the case resulted in an award or settlement in excess of $6 million.

Ironshore claimed Schiff Hardin mislead it into believing it was unlikely the case would result in any exposure, and that a settlement offer within policy limits was unwarranted.

Ironshore also claimed the law firm withheld critical information about developments in the lawsuit, including that the last settlement offer in the case was $6.5 million when the plaintiffs were really willing to settle for as little as $3.25 million.

Ironshore sued Schiff Hardin for negligent misrepresentation in a Texas state court last year, a suit which the law firm had removed to federal court. Schiff Hardin later asked Gilstrap to dismiss the case under the Texas attorney immunity doctrine, which generally shields lawyers from civil liability to nonclients for actions taken in connection with representing a client.

However, Gilstrap noted Texas law has long recognized an attorney may be liable for negligent misrepresentation where a third party, even a nonclient, justifiably relies on the attorney's misrepresentations under Section 552 of the Restatement of Torts.

“Accordingly, the court concludes that as it stands under current Texas law, the doctrine of attorney immunity does not foreclose a Section 522 negligent misrepresentation claim,” Gilstrap wrote in his decision partially denying the law firm's motion to dismiss.

Gilstrap did grant other parts of the firm's motion to dismiss after finding claims related to the firm's predictions about the future did not fall within the scope of a negligent misrepresentation. He also ruled the firm's “statements of opinion” to Ironshore are not actionable, “either because they are predictions about a future event or [are] mere puffery.”

George Kryder, a partner with Dallas' Vinson & Elkins, who represents Schiff Hardin, did not return a call for comment. Sawnie McEntire, a partner in Dallas' Parsons McEntire McCleary & Clark who represents Ironshore, declined to comment.