Metropolitan News-Enterprise


Monday, November 4, 2002


Page 3


C.A. Overturns Award That Would Have Let Lawyer Profit From Malpractice


By a MetNews Staff Writer


A San Francisco Superior Court judge’s ruling that would have given a financial windfall to a lawyer as a result of being sued for malpractice has been overturned by the First District Court of Appeal.

Div. Three Thursday slashed a judgment award in favor of attorney Lawrence D. Miller against fellow lawyer Mitchell D. Ellis from $40,000 to $2,500.

The dispute between the lawyers grew out of a case in which they served as co-counsel for a personal injury plaintiff named Michael Fay. Miller represented the client at a trial setting conference and apparently agreed to a trial date that was more than five years after the complaint was filed, resulting in the dismissal of the case.

The client sued Miller, Ellis, and another attorney, Joseph Pisano, who was alleged to be Ellis’ partner. Miller was the only one of the three with malpractice coverage, but the carrier agreed to provide a “courtesy defense” to the other two lawyers.

The case eventually settled, with the insurer paying $75,000 for a dismissal and release as to all three defendants. The insurer’s defense costs were $14,000, of which Miller paid $5,000 as a deductible.

Miller then sued Ellis and Pisano for “implied equitable indemnity.” The defendants argued that the good-faith settlement of the underlying action precluded any liability on their part, but Judge Gerald Ragan, who conducted a two-day non-jury trial, disagreed.

Ragan exonerated Pisano after finding that he was not Ellis’ partner and had no role in the malpractice. But he concluded that because Miller had paid the premiums for the malpractice policy, he was entitled under the collateral source rule to indemnification based on the amount paid by the insurer, rather than solely on the basis of his out-of-pocket costs.

Ragan reasoned that Ellis and Miller were equally negligent in handling the personal injury case, so he awarded Miller 50 percent of what the insurer paid to settle the case, plus 50 percent of what he paid out of pocket.

But Presiding Justice William McGuiness, writing for the Court of Appeal, said Miller’s right to indemnity did not entitle him to any portion of the amount that his insurer paid to settle the claim. Ragan, the justice said, misapplied the collateral source rule. McGuiness explained:

“The rule is intended to insure that the right of an injured party to be fully compensated for all his or her damages is protected, even if in some instances it entails that party obtaining double recovery from both the insurer and the wrongdoer….Here, respondent Miller was one of the two tortfeasors whose malpractice and professional negligence resulted in damages to Fay, the only injured party in this case. Obviously, the only right to damages for the joint malpractice of Miller and Ellis was Fay’s, not that of either one of the two tortfeasors. Miller was in no sense an ‘injured party’ entitled to damages.”

The right of indemnity, the justice emphasized, applies only to “sums paid by Miller in excess of Miller’s share of the fault,” or 50 percent of the $5,000 deductible.

The case is Miller v. Ellis, 02 S.O.S. 5614.


Copyright 2002, Metropolitan News Company