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(Article from Insurance Law Alert, September 2015)

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Addressing a matter of first impression, the Supreme Court of South Carolina deemed impermissible the assignment of a legal malpractice claim between adversaries in the litigation in which the alleged malpractice arose.  Skipper v. ACE Prop. & Cas. Ins. Co., 775 S.E.2d 37 (S.C. 2015).

ACE retained counsel to represent Specialty Logging in a lawsuit arising out of a motor vehicle accident involving a company truck.  Unbeknownst to ACE or its appointed counsel, Specialty Logging entered into a settlement with the other driver.  Under the settlement, Specialty Logging admitted liability and confessed judgment in the amount of $4.5 million.  Specialty Logging further agreed to pursue a legal malpractice claim against ACE and its attorneys and assigned the predominant interest in that claim to the other driver.  In exchange, the other driver agreed not to execute judgment so long as Specialty Logging cooperated in the legal malpractice claim against ACE and the attorneys. 

Answering a question certified by a South Carolina federal district court, the Supreme Court of South Carolina held that such an assignment is invalid.  Joining the majority of jurisdictions that have ruled on this issue, the court explained that a prohibition on the assignment of legal malpractice claims between adversaries in the litigation in which the alleged malpractice occurred is necessary to avoid the risk of collusion and to preserve the integrity of the attorney-client relationship.