holding that when an insurance company appoints an attorney to represent the insured party, an attorney’s negligence in his subsequent representation of the insured party is not attributable to the insurance company
How later courts described this case
- holding that when an insurance company appoints an attorney to represent the insured party, an attorney’s negligence in his subsequent representation of the insured party is not attributable to the insurance company
Written by the judges who cited it.
The opinion
THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
SOUTHERN DIVISION
No. 7:22-cv-00119-BO-BM
PORTERS NECK COUNTRY CLUB, )
INC., )
Plaintiff, )
)
) ORDER
)
WEST CHESTER FIRE INSURANCE )
COMPANY AND CHUBB LIMITED, )
)
Defendants. )
This cause is before the Court on defendants’ motion to dismiss plaintiffs Second Claim for Relief.
[DE 5]. Plaintiff responded, and defendants replied. In this posture, the matter is ripe for
adjudication.
BACKGROUND
Westchester provided liability insurance to plaintiff, Porters Neck Country Club (PNCC).
PNCC was subsequently sued in state court by Porters Neck Limited (PNL). To defend PNCC in
that PNL lawsuit, Westchester retained Gordon Rees Scully Mansukhani, LLP (Gordon Rees).'
During discovery, Gordon Rees repeatedly failed to turn over certain documents to PNL, which
resulted in sanctions against PNCC, including the striking of PNCC’s liability defenses. [DE 1-1
10, 11, 13, 22]. PNCC sued Westchester, and in its “Second Claim for Relief,” PNCC claimed
' PNCC also retained the law firm Ward & Smith, P.A. to aid in the defense. PNCC claims that Westchester has not
reimbursed PNCC “for all of Ward and Smith’s reasonable fees and expenses.” [DE 1-1 § 29]. Westchester does not
seek to dismiss that claim, and therefore, the Court expresses no opinion on the matter. [DE 6 at 2].
that Westchester was vicariously liable for the damages caused by Gordon Rees’ malpractice. [DE
1-1]. Westchester filed a Fed. R. Civ. P. 12(b)(6) motion to dismiss this Second Claim for Relief.
DISCUSSION
A Rule 12(b)(6) motion tests the legal sufficiency of the complaint. Papasan v. Allain, 478
US. 265, 283 (1986). When acting on a motion to dismiss under Rule 12(b)(6), “the court should
accept as true all well-pleaded allegations and should view the complaint in a light most favorable
to the plaintiff.’ Mylan Lab'ys, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). A complaint
must allege enough facts to state a claim for relief that is facially plausible. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). Facial plausibility means the pleaded facts “allow[] the court
to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009). Mere recitals of the elements of a cause of action supported by
conclusory statements do not suffice. Jd. A complaint must be dismissed if the factual allegations
do not nudge the plaintiffs claims “across the line from conceivable to plausible.” Twombly, 550
US. at 570. “[I]issues involving performance and damage for nonperformance [of a contract] are
governed by the laws of the place of performance.” Contract A.L. Green & Co. v. Great-W. Life
Assur. Co., 738 F. Supp. 965, 969 (W.D.N.C. 1990)). All the operative facts occurred in North
Carolina. And since the parties do not reasonably dispute this issue, the Court applies North
Carolina law.
PNCC’s Second Claim for Relief holds Westchester Fire Insurance vicariously liable for
the harm caused! by Gordon Ree:s’s misconduct. However, North Carolina law stétes that insurers
ere not vicariously liable for the acts of counsel retained to defend their insureds. Brown □□□
Lumbermens Mut. Cas. Co., 90 N.C. App. 464, 369 S.E.2d 367 (19838) (holding that when an
insurance company appoints an attorney to represent the insured party, an attorney’s negligence in
his subsequent representation of the insured party is not attributable to the insurance company).
Pursuant to the parties’ insurance agreement, Westchester appointed Gordon Rees to defend
PNCC. Therefore, PNCC cannot hold Westchester vicariously liable for the acts of Gordon Rees.
PNCC contends that Westchester should be liable because it (1) negligently selected
Gordon Rees to serve as counsel, (2) “failed to investigate” Gordon Rees’ litigation strategy, and
(3) “ratified” Gordon Rees’s alleged misconduct. [DE 1-1 § 33-35; 13]. However, the complaint
contains no evidence that Westchester’s selection of Gordon Rees was negligent, that Westchester
played any role in Gordon Rees’ defense of PNCC, or that Westchester had any knowledge of
Gordon Rees’ malpractice. The only specific allegation was that “PNCC’s general counsel
informed Westchester that PNCC had been sanctioned by the Court.” [DE 13 at 6]. Even if
true, Westchester’s knowledge of sanctions does not equate to their control over the litigation.
Furthermore, PNCC’s timeline puts Westchester on notice only after the alleged malpractice
had already occurred. Thus, even when viewed in a light most favorable to plaintiff, this Court
is unable to draw a reasonable inference that Westchester is liable for the conduct alleged in
PNCC’s second claim for relief.
CONCLUSION
For the foregoing reasons, defendants” motion to dismiss [DE 5] is GRANTED, and
plaintiff's Second Claim for Relief [DE 1-2 9 31-36] is DISMISSED.
SO ORDERED, this / f day of January, 2023
Vacuee Wf A gt
TERRENCE W. BOYLE
UNITED STATES DISTRICT JUDGE