Jump To

Top Caption Lead Opinion

Support FLP

CourtListener is a project of Free
Law Project, a federally-recognized 501(c)(3) non-profit. Members help support our work and get special access to features.

Please become a member today.

Join Free.law Now

April 6, 2026 Get Citation Alerts Download PDF Add Note

Great American E & S Insurance Co., V. Sinars Slowikowski Tomasaka Llc

Court of Appeals of Washington

• Citations: None known

• Docket Number: 87386-5

• Opinion

• Authorities (30)

• Cited By (0)

• Summaries (0)

• Similar Cases (5K)

• PDF

Lead Opinion

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

GREAT AMERICAN E & S
INSURANCE COMPANY, individually, No. 87386-5-I
and as assignee of claims from its
insured C3 MANUFACTURING LLC, a DIVISION ONE
Colorado company,
PUBLISHED OPINION
Respondent,

v.

HOUSTON CASUALTY COMPANY,

Defendant,

GORDON REES SCULLY
MANSUKHANI, LLP, SINARS
SLOWKIOWSKI TOMASAKA LLC, J.
SCOTT WOOD, and CHRISTOPHER
FURMAN,

Petitioners.

BIRK, J. — A liability insurer asserts that it had to pay a greater settlement

to a claimant suing its insured because defense counsel it retained allegedly

committed legal malpractice. The question before us is whether Washington public

policy prohibits the insured from assigning their legal malpractice claims against

retained defense counsel to the liability insurer. We hold that Washington public

policy prohibits such an assignment where there is potential conflict between the

insurer and the insured, as there is where, as here, the insurer defended under a
No. 87386-5-I/2

reservation of rights to deny coverage. We reverse the superior court’s denial of

defense counsel’s motion for judgment on the pleadings.

I

Because we are reviewing a ruling on a motion for judgment on the

pleadings under CR 12(c), we accept as true the factual allegations contained in

the complaint. Silver v. Rudeen Mgmt. Co., 197 Wn.2d 535, 542, 484 P.3d 1251

(2021). According to the complaint of Great American E & S Insurance Company,

Michael Vandivere fell while climbing at Vertical World, an indoor climbing gym.

Vandivere filed a personal injury lawsuit against Vertical World. In Vandivere’s

second amended complaint he named C3 Manufacturing LLC as a defendant in

the lawsuit. He alleged that C3 was liable for his injuries because it manufactured

the auto belay device, which, due to alleged product defects, had failed to arrest

his fall. At the time of Vandivere’s injuries, C3 was insured by two applicable

liability insurance policies, a $1 million primary policy issued by Great American

and a $4 million excess umbrella policy issued by Houston Casualty Company.

C3 tendered Vandivere’s claims to Great American. Great American

defended under a full reservation of rights, retaining J. Scott Wood, then an

attorney at Foley & Mansfield PLLP, to represent C3. In January 2022, Wood left

Foley & Mansfield and joined Sinars Slowikowski Tomasaka LLC, and C3 retained

Sinars. While at Sinars, Wood worked with Christopher Furman on the Vandivere

lawsuit. Between April 2022 and April 2023, Furman visited two Vertical World

gyms, including the gym where Vandivere was injured, “dozens of times.” Neither

2
No. 87386-5-I/3

Furman nor Wood supplemented C3’s discovery responses to notify Vandivere of

Furman’s contact with Vertical World staff.

Houston Casualty later notified C3 that it was rescinding its $4 million

excess umbrella policy based on alleged material misrepresentations that it said

C3 made on its insurance policy application. Wood, who had earlier disclosed to

Vandivere the coverage of the Houston Casualty policy, failed to update C3’s

discovery responses with Houston Causality’s rescission. C3 disputed Houston

Casualty’s rescission attempt. Gordon Rees Scully Mansukhani LLP represented

Houston Casualty in its coverage dispute with C3.

In April 2023, Wood left Sinars and joined Gordon Rees. For two weeks,

Wood continued to represent C3 at Gordon Rees while the firm was also

representing Houston Casualty, creating a conflict of interest. In May 2023, Wood

and Gordon Rees disclosed the conflict and moved to withdraw as C3’s counsel.

Great American was “forc[ed]” to “bring in a new law firm to defend C3 only weeks

before the scheduled trial. C3’s new counsel notified the parties of Houston

Casualty’s attempted rescission of the $4 million excess umbrella policy. And, also

in May 2023, Vertical World disclosed to Vandivere that Furman had visited its

gyms “more than two dozen times,” even though Furman’s contact with Vertical

World had not been disclosed in response to Vandivere’s discovery requests.

Vandivere moved for sanctions against C3. The court granted monetary

sanctions and “indicated it would provide a jury instruction that would allow the jury

3
No. 87386-5-I/4

to make a negative inference from what it found to be C3’s discovery misconduct.”1

Vandivere alleged that, because of this misconduct, Great American was

“obligated to fund the entirety of any judgment, irrespective of its limit.” C3 and

Great American settled the lawsuit with Vandivere, with Great American agreeing

to pay $5 million, in addition to court ordered sanctions against C3 and Sinars.

According to Great American, any amount over $1 million “should have been paid

by Houston Casualty (or by one or more of [Gordon Rees, Sinars, Wood, or

Furman]).” As part of the settlement agreement between C3 and Great American,

C3 agreed to “assign, transfer, and convey to Great American all of C3’s rights,

title and interest in any and all claims, rights, privileges, and causes and choses of

action” against Sinars and Gordon Rees, including legal malpractice claims.

In September 2023, Great American filed a complaint, individually and as

assignee of C3, against Gordon Rees, Sinars, Wood, and Furman (collectively

referred to as “defense counsel”) asserting, among other things, claims for legal

malpractice and breach of fiduciary duty. Defense counsel filed CR 12(c) motions

for judgment on the pleadings, arguing that they owed no duty to Great American

and that Washington should prohibit the assignment of legal malpractice claims.

Contemporaneously, Great American filed a motion for partial summary judgment

seeking, among other things, an order affirming the validity of C3’s assignment of

legal malpractice claims to it and striking defense counsel’s affirmative defenses

asserting the invalidity of the assignment.

1 C3 and Sinars appealed the sanctions order to this court, and we affirmed.

Vandivere v. Vertical World, Inc., No. 85568-9-I, slip op. at 1-2 (Wash. Ct. App.
Dec. 2, 2024) (unpublished), https://www.courts.wa.gov/opinions/pdf/855689.pdf.

4
No. 87386-5-I/5

The superior court granted defense counsel’s motion in part, dismissing the

direct claims asserted by Great American against them, but denied their motion as

to the assigned claims. Correspondingly, the superior court granted in part Great

American’s motion for partial summary judgment, dismissing defense counsel’s

affirmative defenses asserting the invalidity of assignment. The superior court

granted defense counsel’s motion for certification to this court under RAP 2.3(b)(4).

The superior court certified the question, “Whether a legal malpractice claim is

assignable to a non-adversary in the same litigation that gave rise to the alleged

legal malpractice?” A commissioner of this court granted discretionary review.

II

A

Preliminarily, we exercise our discretion to re-frame and narrow the scope

of the certified question. See RAP 2.3(e); State v. LG Elecs., Inc., 185 Wn. App.

123, 151, 340 P.3d 915 (2014) (appellate courts determine scope of discretionary

review), aff’d, 186 Wn.2d 1, 375 P.3d 636 (2016). Consistent with Washington’s

case by case approach to the attempted assignment of a legal malpractice claim—

which we describe below—it is not necessary to decide if a legal malpractice claim

may ever be assigned to a non-adversary. See Kenco Enters. Nw., LLC v. Wiese,

172 Wn. App. 607, 612, 291 P.3d 261 (2013) (Washington follows a case-by-case

approach based on public policy to decide assignability of legal malpractice

claims). Rather, we address only whether Washington public policy prohibits the

insured from assigning a legal malpractice claim against retained defense counsel

to their liability insurer where there is potential conflict between the insurer and the

5
No. 87386-5-I/6

insured, because among other potential reasons the insurer defended under a

reservation of rights to deny coverage. Our review of this issue is de novo. Silver,

197 Wn.2d at 542 (CR 12(c) ruling); Rowe v. Klein, 2 Wn. App. 2d 326, 332, 409

P.3d 1152 (2018) (certified question of law).

B

Turning to the certified issue, as reframed, we begin by recognizing the legal

principles that guide our inquiry. The insurance relationship is affected by the

public interest. Nat’l Sur. Corp. v. Immunex Corp., 176 Wn.2d 872, 878, 880, 297

P.3d 688 (2013). In the liability insurance setting, the relationship between the

insurer, the insured, and defense counsel is sometimes referred to as the tripartite

relationship. See Clark County Fire Dist. No. 5 v. Bullivant Houser Bailey, PC, 180

Wn. App. 689, 700, 324 P.3d 743 (2014). “To fulfill its duty to defend, an insurer

generally has the right to select the defense counsel who will represent its insured.”

Kruger-Willis v. Hoffenburg, 198 Wn. App. 408, 416, 393 P.3d 844 (2017). In

Washington, “only the insured is the client.” Tank v. State Farm Fire & Cas. Co.,

105 Wn.2d 381, 388, 715 P.2d 1133 (1986). “ ‘[T]he standards of the legal

profession require undeviating fidelity of the lawyer to his client. No exceptions

can be tolerated.’ ” Id. (quoting Van Dyke v. White, 55 Wn.2d 601, 613, 349 P.2d

430 (1960)).

The rule of unitary representation flows from Washington’s recognition of a

fiduciary duty owed by the insurer to the insured:

This fiduciary relationship, as the basis of an insurer’s duty of good
faith, implies more than the “honesty and lawfulness of purpose”
which comprises a standard definition of good faith. It implies “a

6
No. 87386-5-I/7

broad obligation of fair dealing”, [Tyler v. Grange Ins. Ass’n, 3 Wn.
App. 167, 173, 473 P.2d 193 (1970)], and a responsibility to give
“equal consideration” to the insured’s interests. [Id.] at 177. Thus,
an insurance company’s duty of good faith rises to an even higher
level than that of honesty and lawfulness of purpose toward its
policyholders: an insurer must deal fairly with an insured, giving
equal consideration in all matters to the insured’s interests.

Tank, 105 Wn.2d at 385-86. Washington law further recognizes the insurer has a

fiduciary duty to give the insured equal consideration in all matters as part of the

insurer’s “ ‘basic obligations.’ ” Id. at 387 (quoting Weber v. Biddle, 4 Wn. App.

519, 524, 483 P.2d 155 (1971)).

Where, as here, an insurer defends under a reservation of rights, it must

meet both these basic obligations and an additional “enhanced obligation” because

of the potential conflicts inherent in this kind of defense. Id. The insurer fulfills its

duty by defending the insured, but if the insurer later finds that there is no coverage,

it may seek a declaratory judgment that it had no duty to defend and no obligation

to pay. Truck Ins. Exch. v. Vanport Homes, Inc., 147 Wn.2d 751, 761, 58 P.3d

276 (2002). The enhanced obligation of Tank includes, among other things, that

the insurer retain competent defense counsel representing only the insured as the

client. 105 Wn.2d at 388.

Trask v. Butler, 123 Wn.2d 835, 842, 872 P.2d 1080 (1994), established

Washington’s test “to determine whether an attorney owes a duty to a nonclient.”

Under this test, “the threshold question is whether the plaintiff is an intended

beneficiary of the transaction to which the advice pertained.” Id. at 843. “While

the answer to the threshold question does not totally resolve the issue, no further

inquiry need be made unless such an intent exists.” Id. For purposes of whether

7
No. 87386-5-I/8

a nonclient is an intended beneficiary of the representation, the focus is on what

the client intends to accomplish through the representation. See Strait v. Kennedy,

103 Wn. App. 626, 633-34, 13 P.3d 671 (2000) (describing court’s “inquiry into

what [the client] intended to accomplish by virtue of her dissolution action and what

her attorney’s duties were to her in his representation in that action”). To be an

intended beneficiary, it is not enough that a nonclient is an incidental beneficiary.

Id. at 631 (citing Trask, 123 Wn.2d at 845). In the event a nonclient meets the

threshold test, Trask describes additional factors that the court must then consider.

Trask, 123 Wn.2d at 842-43. Consistent with Trask’s demanding test, Washington

courts have generally been reluctant to extend professional malpractice protection

to nonclient third parties because such a duty could create potential conflicts.2

Stewart Title Guaranty Co. v. Sterling Savings Bank, 178 Wn.2d 561, 565-

67, 311 P.3d 1 (2013), applied the Trask test to the tripartite relationship in the

liability insurance setting. In Stewart Title, a builder on a construction site

discovered that its mechanic’s lien held first position, ahead of a lender’s security

2 See McKasson v. State, 55 Wn. App. 18, 28, 776 P.2d 971 (1989); see

also Trask, 123 Wn.2d at 845 (an attorney hired by the personal representative of
an estate did not owe a duty of care to the estate or the estate beneficiaries);
Bowman v. John Doe Two, 104 Wn.2d 181, 188-89, 704 P.2d 140 (1985) (an
attorney did not owe a duty of care to his client’s adversary, the mother, where the
attorney was hired by a child seeking alternative residential placement away from
his mother); Leipham v. Adams, 77 Wn. App. 827, 832-34, 894 P.2d 576 (1995)
(an attorney did not owe estate beneficiaries a duty of care for failing to file a
disclaimer of a joint tenancy interest); Harrington v. Pailthorp, 67 Wn. App. 901,
905-10, 841 P.2d 1258 (1992) (an attorney did not owe a former client’s ex-
husband a duty of care in a custody modification proceeding); Morgan v. Roller,
58 Wn. App. 728, 732-33, 794 P.2d 1313 (1990) (an attorney did not owe
beneficiaries of his former client’s testamentary plan a duty of care to disclose the
attorney’s views of the former client’s disability).

8
No. 87386-5-I/9

interest. Id. at 564. In the ensuing foreclosure action, the lender asked its title

insurer, Stewart Title, to defend it. Id. Stewart Title admitted its duty to defend

and hired counsel to do so. Id. Defense counsel stipulated that the builder had

first priority and sought a swift settlement. Id. Stewart Title sued defense counsel

for malpractice, arguing that it had neglected to assert a potential defense to the

builder’s claim of priority. Id.

The Washington Supreme Court rejected Stewart Title’s claim at the

threshold level of the Trask test, holding that Stewart Title failed to show that it was

an intended beneficiary of defense counsel’s services to the insured. Stewart Title,

178 Wn.2d at 567-68, 570. The insurer argued that “as long as there is no actual

conflict of interest between an insurer and its insured, a nonclient insurer is

presumed to be an intended beneficiary and ‘can bring a claim for malpractice’

against its insured’s attorney.” Id. at 567. The court rejected this analysis, because

the happenstance of the insurer’s and insured’s interests aligning was insufficient

to meet the threshold inquiry of the Trask test that “the attorney or client intended

the insurer to benefit from the attorney’s representation of the insured.” Stewart

Title, 178 Wn.2d at 567. Recognizing a duty to the insurer based merely on the

alignment of interests both would violate Washington’s RPC 5.4(c), prohibiting a

lawyer from allowing a third party payor to direct or regulate the lawyer’s

professional judgment and would violate the requirements of Trask. Stewart Title,

9
No. 87386-5-I/10

178 Wn.2d at 568. The court also found that Sterling Title’s retention letter with

defense counsel did not meet the Trask test.3 Stewart Title, 178 Wn.2d at 568-69.

Although not involving the tripartite relationship, one more case,

Kommavongsa v. Haskell, 149 Wn.2d 288, 291, 67 P.3d 1068 (2003), speaks to

the public policy relevant to the assignment of a legal malpractice claim. In

Kommavongsa’s underlying case, the defendant settled the plaintiffs’ personal

injury claim, stipulated to monetary damages of over $12 million, but contributed

3 In Stewart Title, the Washington Supreme Court implicitly recognized that

the states vary in approach when it declined to depart from long-settled
Washington law based on decisions from other states. 178 Wn.2d at 567 n.2.
Some states bar assignment of legal malpractice claims altogether, e.g. Picadilly,
Inc. v. Raikos, 582 N.E.2d 338, 343-45 (Ind. 1991), abrogated on other grounds
by Liggett v. Young, 877 N.E.2d 178 (Ind. 2007), while others reject limitations on
assignment, e.g. Eagle Mountain City v. Parsons Kinghorn & Harris, P.C., 2017
UT 31, 408 P.3d 322, 334.
Similarly, Washington has long followed a rule of unitary representation by
defense counsel, Tank, 105 Wn.2d at 388, while some states have recognized a
theory of dual representation, e.g. Raymond v. N.C. Police Benevolent Assoc.,
Inc., 365 N.C. 94, 98, 721 S.E.2d 923 (2011). Stewart Title rejected Restatement
(Third) of the Law Governing Lawyers § 51 (2000). 178 Wn.2d at 567 n.2.
Comment g to § 51 describes a direct duty of care to the insurer, stating, “Under
Subsection (3), a lawyer designated by an insurer to defend an insured owes a
duty of care to the insurer with respect to matters as to which the interests of the
insurer and insured are not in conflict, whether or not the insurer is held to be a co-
client of the lawyer.” But besides having been rejected in Washington, this duty is
usually limited to situations in which the insurer and the insured are not in conflict.
E.g. Unigard Ins. Grp. v. O’Flaherty & Belgum, 38 Cal. App. 4th 1229, 1236-37, 45
Cal. Rptr. 2d 565 (1995) (absent coverage dispute or other conflict, defense
counsel has dual attorney-client relationship with insurer and insured). In Stewart
Title, the insurer confined its argument to seeking a direct duty only “as long as
there is no actual conflict of interest between an insurer and its insured.” 178
Wn.2d at 567. Here, where there is a clear conflict between the insurer and the
insured, even if the Supreme Court had accepted the insurer’s argument in Stewart
Title, it would not follow that Great American could pursue the claims it seeks to
pursue.
But review of out-of-state decisions primarily reinforces that the states have
taken disparate approaches. Like the Supreme Court in Stewart Title, we conclude
that existing and long-standing Washington law controls the outcome here.

10
No. 87386-5-I/11

only his policy limits of $50,000 in exchange for a covenant not to execute the

judgment and the assignment of his legal malpractice claims against his attorney.

Id. at 293. The injured plaintiffs, as assignees holding the legal malpractice claims,

sought to recover on the stipulated judgment from the defendant’s attorney. Id. at

293-94. The court held that assignment of legal malpractice claims to an adversary

in the same litigation that gave rise to the alleged legal malpractice violated public

policy. Id. at 291.

The court noted that though “assignability is the general rule,” many

jurisdictions have limited the assignability of legal malpractice claims for public

policy reasons. Id. at 295-96. Three rationales persuaded the court to prohibit

assignment in Kommavongsa’s context: (1) risk of collusion; (2) the “trial within a

trial,” which follows the assignment where parties who had argued one position in

the underlying case “shameless[ly] shift” their position in the subsequent legal

malpractice suit, demeaning the legal profession; and (3) permitting assignment

would deter lawyers from representing defendants “who are judgment-proof or

nearly so, and who are uninsured or underinsured,” because doing so “might place

them, their malpractice insurers and their assets within reach of plaintiffs who

otherwise might have an uncollectible judgment.”4 Id. at 307, 310. Kommavongsa

therefore prohibited the assignment of legal malpractice claims to adversaries in

the same litigation that gave rise to the alleged malpractice. Id. at 311.

4 The court considered two other policy rationales, which it said “may be

overstated,” those being that (4) permitting assignment would compromise
attorney-client confidences, and (5) that a “lucrative business” of factoring
malpractice claims would arise and encourage unjustified lawsuits.
Kommavongsa, 149 Wn.2d at 306-07.

11
No. 87386-5-I/12

C

Applying the above legal principles to the tripartite relationship, we conclude

that Washington law does not permit C3 to assign to Great American its legal

malpractice claims against defense counsel. Trask and Tank confine the lawyer’s

duty to the client in the manner that they do to ensure that counsel will protect the

client’s interests without competing loyalties. Trask, 123 Wn.2d at 844 (“The policy

considerations against finding a duty to a nonclient are strongest where doing so

would detract from the attorney’s ethical obligations to the client.”); Tank, 105

Wn.2d at 388 (“potential conflicts of interest between insurer and insured must be

fully disclosed and resolved in favor of the insured”). The assignment in this case,

if permitted, would allow Great American through the malpractice claim to

reexamine defense counsel’s handling of the defense. As a practical matter, when

defending C3, defense counsel would need to consider both C3’s interests and the

insurer’s ability to later challenge counsel’s decisions as malpractice. This would

give the insurer the very sway over defense counsel’s decisions that Trask and

Tank sought to prevent.

Two potential conflicts between the insured and the liability insurer (but not

the only ones) occur when a claim exceeds the available insurance limits and when

the litigation of the underlying claim would affect the availability of coverage. In

Weber, 4 Wn. App. at 521, the insured defendant “gave two versions” of a motor

vehicle accident to her insurer, one stating that she was driving the car and ran a

red light, and another stating that “a 17-year-old boy was driving without her

consent and against her wishes.” The second version, if true, would have

12
No. 87386-5-I/13

precluded coverage and exempted her and the insurance company from any

liability. Id. After trial resulted in a verdict above the insurance limits, the insurer

argued that it did not need to cover the insured’s excess liability because it could

justifiably rely on the version of events more favorable to its interests, rather than

risk that the other version might be believed. Id. In Mutual of Enumclaw Insurance

Co. v. T&G Construction, Inc., 165 Wn.2d 255, 259, 199 P.3d 376 (2008), the

liability insurer believed “its insured should have prevailed on an affirmative

defense,” and while the judge in the underlying case “rejected the proffered

affirmative defense several times,” the insurer continued to argue that it was not

required to cover a settlement where the defense “was never litigated to absolute

finality.” And Stewart Title implied that the insured defendant preferred a swift,

reasonable settlement over the liability insurer’s interest in pursuing a potential

defense to liability. 178 Wn.2d at 567.

Washington imposes fiduciary responsibility on the insurer among other

reasons because, typically, it retains control over the defense. Weber, 4 Wn. App.

at 525. Tank’s rule of unitary representation, and Stewart Title’s application of

Trask’s rule of the intended beneficiary, both give effect to the liability insurer’s

fiduciary responsibility. Under Tank and Stewart Title, in all three situations noted

above—the competing versions of the facts in Weber and the affirmative defenses

that could defeat the claim but if unsuccessful could exacerbate the liability in T&G

and Stewart Title—defense counsel’s sole loyalty was to the insured client. But

under the assignment Great American seeks to pursue here, in all three situations

defense counsel would have needed to decide how to pursue the defense while

13
No. 87386-5-I/14

also facing the possibility that the insurer, later, would second guess those same

defense decisions as legal malpractice.

This is true even though defense counsel’s legal duty, even after the

assignment, runs only to the client. While the duty to the client defines the scope

of the lawyer’s responsibility, once the assignment is complete, it is the liability

insurer through the complaint and development of expert testimony that would

shape and characterize the assertions of negligence by counsel. In all three

situations above, pursuing the alternative defenses preferred by the insurers was

characterizable as serving the client’s interests—after all, the alternative defenses

potentially defeated liability. At the same time, in all three situations above, the

client’s interests lay in reasonably settling within limits. Washington law is clear

that defense counsel must serve the insured’s interests, and only the insured’s.

See Tank, 105 Wn.2d at 388. Where there is potential conflict between the liability

insurer and the insured defendant, as there is when there is a reservation of rights

to deny coverage, allowing assignment of the insured’s legal malpractice claims to

the liability insurer would create the competing loyalties for defense counsel that

Stewart Title, Trask, and Tank sought to eliminate.

Kommavongsa also counsels against Great American’s position. It was

concerned with the adversarial relationship between the parties. Kommavongsa,

149 Wn.2d at 311. Although there was the potential for conflict between Great

American and C3 because of the reservation of rights, they were not litigation

adversaries. The first two policy concerns that Kommavongsa found compelling

are present here only to a lesser degree. 149 Wn.2d at 307. In the absence of a

14
No. 87386-5-I/15

covenant settlement, the risk of collusion leading to an inflated settlement is not

present. See Chaussee v. Md. Cas. Co., 60 Wn. App. 504, 510-11, 803 P.2d 1339,

812 P.2d 487 (1991) (When an insured agrees to a covenant settlement they “may

settle for an inflated amount to escape exposure and thus call into question the

reasonableness of the settlement.”). There is nevertheless some possibility of

collusion, to the extent the insurer and the insured may attempt to leverage

defense counsel’s alleged liability exposure to spread the cost of the insurer’s

responsibility to settle. And Kommavongsa’s second concern, with unseemly shifts

in position, 149 Wn.2d at 308-09, is present, to a limited degree. In the underlying

case, through its defense of C3, Great American pursued the argument that C3

was not required to make the discovery disclosures that were the subject of the

sanctions motion, whereas now it says that not making the disclosures was legal

malpractice.

But Kommavongsa’s third concern is fully present here. The court was

concerned about the willingness of defense counsel to accept defense in cases

where the defendant’s liability likely exceeds their assets, their coverage, or both.

Id. at 307. This was because in situations where the claim exceeds the defendant’s

ability to pay, defense counsel’s accepting the representation “might place them,

their malpractice insurers and their assets within reach of plaintiffs who otherwise

might have an uncollectible judgment.” Id. at 310. Kommonvongsa sought to

avoid defense counsel’s assets becoming a new fund available for the potential

settlement of the underlying case. Id. at 305, 310. Great American’s proposed

assignment would undermine that goal.

15
No. 87386-5-I/16

Great American argues that precluding the insured from assigning legal

malpractice claims to its insurer fails to deter legal malpractice because the insured

lacks the incentive to sue and the insurer is unable to do so. We find this argument

unpersuasive for two reasons. First, the insured remains able to sue defense

counsel, so the disincentive against negligence intended by tort law is not absent.

See Swank v. Valley Christian Sch., 188 Wn.2d 663, 679-80, 398 P.3d 1108 (2017)

(“One of the major purposes of tort law is to encourage people to act with

reasonable care and for the welfare of themselves and others.”). Second, within

the tripartite relationship, the insurer already typically retains control over the

defense, Weber, 4 Wn. App. at 525, and generally selects defense counsel,

Kruger-Willis, 198 Wn. App. at 416. An illustrative situation was discussed in

Arden v. Forsberg & Umlauf, PS, 189 Wn.2d 315, 320, 402 P.3d 245 (2017), where

the court analyzed defense counsel’s responsibilities where counsel “had an

established relationship” with the insurer that included representing the insurer on

coverage matters as well as representing its insureds. Through its control of the

defense, ability to select counsel, and relationship with counsel—and the ability to

terminate the relationship—the insurer is in a position to protect itself from risks of

legal malpractice.

Kommavongsa held that assignability is the general rule and declined to

adopt a blanket prohibition against assignment of legal malpractice claims. 149

Wn.2d at 295-96, 306-07. We confine our holding today to the unique tripartite

relationship that arises when a liability insurer retains defense counsel to defend

its insured against a third party claim, and there is a possibility of conflict between

16
No. 87386-5-I/17

the interests of the insurer and the insured—a possibility that is present when the

insurer reserves rights to deny coverage. Thus, we do not address the possibility

of assignment within the tripartite relationship where the insurer can demonstrate

that it accepted defense unconditionally and throughout the defense of the

underlying claim there was no possibility of conflict between the insurer and the

insured. But where there is potential conflict between the liability insurer and the

insured, as there is where the insurer defended under a reservation of rights to

deny coverage, the insured’s assignment to the insurer of legal malpractice claims

against retained defense counsel is prohibited by Washington public policy

established in Stewart Title, Trask, and Tank guaranteeing undivided loyalty to the

client.

III

We reverse and remand with instructions to dismiss Great American’s

claims against defense counsel assigned from C3 and otherwise for proceedings

consistent with this opinion.

WE CONCUR:

17