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Paradigm Insurance Company v. The Langerman Law Offices8/31/1999
AFFIRMED IN PART; REVERSED IN PART; REMANDED
In this appeal, we must decide whether an attorney-client relationship can be created between an insurer and the attorney it hires to represent its insured. We hold that one can be created, and thus the insurer may sue the attorney for malpractice. We also hold that the insurer may not withhold payment of fees owed to the attorney pending resolution of its malpractice claim against that attorney.
I. BACKGROUND
Paradigm Insurance Company hired The Langerman Law Offices ("Langerman") to represent its insured doctors. Paradigm asserts that Langerman agreed that if Paradigm hired Langerman to defend its insureds, Langerman would not accept cases against other Paradigm insureds. Soon thereafter, Langerman began to represent Dr. Vanderwerf, a Paradigm insured, in a medical malpractice case. After Langerman had performed some legal work in the matter, Paradigm concluded that Langerman violated the alleged agreement not to take cases against Paradigm insureds, and hired new counsel to handle the Vanderwerf matter.
The new attorney told Paradigm that the defense should be tendered to Samaritan Insurance Funding because Samaritan Insurance was likely the doctor's primary insurer. Langerman previously had told Paradigm that there was "no viable theory" against Samaritan Health Service, the doctor's employer. But when Paradigm tendered the defense to Samaritan Insurance, Samaritan Insurance argued that the tender was untimely. Paradigm believed that Langerman's actions caused the untimely tender. As a result, Paradigm alleged that costs it incurred in unnecessarily defending and indemnifying Dr. Vanderwerf should have instead been incurred by Samaritan Insurance.
Paradigm then refused to pay attorneys' fees billed by Langerman. Langerman sued Paradigm to collect the fees, and Paradigm counterclaimed for breach of contract, malpractice, breach of fiduciary duty, and breach of Langerman's ethical obligations to Paradigm. Both parties filed motions for summary judgment on various grounds.
The trial court granted summary judgment for Langerman on the malpractice claim, finding that there was no attorney-client relationship between Langerman and Paradigm. The trial court later granted summary judgment for Langerman on its claim for fees. Also, the trial court granted summary judgment in favor of Langerman on Paradigm's remaining counterclaims. Although the court found a question of fact regarding whether Langerman breached an oral promise not to take cases against Paradigm's insureds, the court granted Langerman's motion in limine to preclude Paradigm from presenting evidence of damages on this issue because Paradigm had failed to disclose such evidence to Langerman. The parties stipulated to entry of judgment in favor of Langerman.
Paradigm appealed, raising five issues. We need only discuss the following issues: whether Paradigm had an attorney- client relationship with Langerman; whether Paradigm could bring a malpractice action against Langerman; and whether Paradigm could withhold payment of fees Langerman incurred pending resolution of Paradigm's malpractice claim against Langerman. We discuss these issues in turn below.
II. DISCUSSION
A. Standard of Review
"On appeal from a summary judgment we determine de novo whether there are any genuine issues of material fact and whether the trial court erred in its application of the law." Gonzalez v. Satrustegui, 178 Ariz. 92, 97, 870 P.2d 1188, 1193 (App. 1993). The party with the burden of proof for the claim or defense must respond to a motion for summary judgment by showing evide
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