Extension of Prohibition on Assigning Legal Malpractice Claims

I am one of a number of attorneys defending attorneys and law firms against legal malpractice claims brought by an insurance company, in the case Great American E&S Insurance Company v. Houston Casualty Company, et al.[1]  This case may eventually go to the Washington Supreme Court but, for today, the Court of Appeals has extended in a published opinion the prohibition on assigning legal malpractice cases in the context of the “tripartite relationship” between an insurance company, an insured, and retained defense counsel.  Under the tripartite relationship, the insurance company retains and pays for the services of an attorney for the insured, but the attorney’s duty is to the insured, not the insurance company. 

In Kommavongsa v. Haskell,[2] the Washington Supreme Court previously held that legal malpractice claims are not assignable to a party’s adversary in the same litigation that gave rise to the alleged legal malpractice.  The decision was based on public policy reasons, such as the risk of collusion, the unseemliness of parties change in positions, and the potential to deter attorneys from representing certain clients. The Kommavongsa Court held that, whether assignment of legal malpractice claims is ever assignable would be taken on a case-by-case basis.[3] The issue addressed in Great American is whether an insured may assign legal malpractice claims against defense counsel to the insurance company, particularly in the context where an insurer defends under a reservation of rights. A reservation of rights is where the insurance company agrees to defend the insured in a lawsuit but reserves the right to deny coverage or enforce contractual rights later.

In Great American, the court held that assignment of legal malpractice claims from an insured to an insurer are prohibited under Washington public policy when there is a potential conflict between the insurer and the insured.  The court therefore ruled that an insured cannot assign legal malpractice claims against defense counsel to the insurer when the insurer defends under a reservation of rights. This prohibition is grounded in public policy concerns, particularly the need to preserve defense counsel’s undivided loyalty to the insured client.  The court emphasized that allowing such assignments would create competing loyalties for defense counsel. Defense counsel would have to consider both the insured’s interests and the potential for future malpractice scrutiny by the insurer, undermining the principle of unitary representation established in Tank v. State Farm Fire & Casualty Company.[4]  The court expressly limited its holding to cases involving a tripartite relationship with potential conflicts arising from a reservation of rights. It did not establish a blanket prohibition on the assignment of legal malpractice claims where the insurer accepts defense unconditionally and no conflict exists. 

In Great American, the court relied on prior decisions, including Stewart Title Guaranty Co. v. Sterling Savings Bank,[5] which rejected direct malpractice claims by insurers against defense counsel, and Kommavongsa, which prohibited assignment of malpractice claims to adversaries in the same litigation due to public policy concerns.  The court reasoned that permitting assignment of malpractice claims in this context would undermine the insured’s right to a defense free from competing interests.[6] Defense counsel’s duty is to the insured, and allowing assignments would compromise this duty by introducing the insurer’s interests into the attorney-client relationship. The court also highlighted the broader public policy implications, including the potential chilling effect on attorneys’ willingness to represent insureds in cases involving reservation of rights or excess liability. 

In Great American, the court reversed the lower court’s decision and remanded the case with instructions to dismiss the claims assigned by the insured to the insurer. This decision reinforces the principle that defense counsel’s loyalty must remain undivided and that public policy considerations preclude the assignment of legal malpractice claims in situations involving potential conflicts between the insurer and the insured.

To learn more, please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.

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[1] Great Am. E & S Ins. Co. v. Hous. Cas. Co., 2026 Wash. App. LEXIS 729 (Ct. App. Apr. 6, 2026).

[2] Kommavongsa v. Haskell, 149 Wn.2d 288, 291, 67 P.3d 1068, 1070 (2003).

[3] In a majority of states, legal malpractice claims are never assignable due to the unique nature of the attorney-client relationship.  Washington State’s case-by-case method of determining assignability is in the minority.

[4] Tank v. State Farm Fire & Cas. Co., 105 Wn.2d 381, 388, 715 P.2d 1133 (1986).

[5] Stewart Title Guaranty Co. v. Sterling Savings Bank, 178 Wn.2d 561, 311 P.3d 1 (2013).

[6] Of course, the insured can still directly sue the attorney for malpractice, he or she just cannot assign the claims to the insurance company or sue on its behalf.