Multiple Contractors and Legal Malpractice

In New York City condominiums are a rich source of litigation. At the ownership level, one sees litigation over the buying and selling; at a personal injury level, one sees slips and falls. In the construction of the buildings, negligence and indemnification between general contractors and subs is an ongoing field of law. Here, in Flintlock Constr. Servs., LLC v Rubin, Fiorella &
Friedman LLP
; 2012 NY Slip Op 31835(U) July 9, 2012 Supreme Court, New York County
Docket Number: 109657/2011 judge: Saliann Scarpulla we see how the insurance carriers move their attorneys around in a never ending circle of litigation.

"As alleged in the complaint, FCS is a general contractor, and RFF is a law firm which was designated by FCS’s insurer to represent FCS in a construction dispute. CS states in the complaint that on or about March 30, 2004, FCS entered into a standard AIA form contract with owner Well-Come Holdings, LLC (“Well-Come”) (the contract”) for the construction of an 8-story condominium apartment project located at 06 Mott Street, in New York City (the “Mott Street project”). FCS alleges that pursuant o the contract, “FCS’s responsibilities were limited and its indemnification obligations ere limited to damages caused by its own conduct; it had not indemnity or other obligations with respect to the scope of work reserved for Well-Come, and . . . it had no obligations to indemnify Well-Come for Well-Come’s own negligence or that of Well- Come’s subcontractors or ~consultants.~F’C S also pleads that it was required to provide insurance to protect FCS and Well-Come from claims of property damage stemming from performance of the contract.

FCS alleges that during the early stages of construction at the Mott Street project in the summer of 2004, one or more ‘Occurrences”to took place which allegedly caused property damage to three adjacent property owners. These owners filed three separate lawsuits in Supreme Court, New York County, against Well-Come, FCS and some of Well-Come’s subcontractors and consultants (the “underlying litigation”). Well-Come was originally defended in the underlying litigation by Marine pursuant to its liability policy. FCS was defended by American Safety, which assigned the defense to RFF. FCS alleges that at various times from 2004 through 2009, RFF defended
multiple claims asserted by numerous parties against FCS at the request and direction of American Safety or American Safety Indemnity Company,’ and that RFF regularly reported to American Safety’s claims personnel about developments and strategies in the defense of the claims against FCS.

At some point, FCS and American Safety came to an agreement whereby FCS would pay the cost of its defense in any given claim up to and including the amount of the self-insured retention under its American Safety policy. Upon exhaustion of the self insured retention for each claim, as alleged in the complaint, American Safety would pay for FCS’s defense. FCS alleges in the complaint that although both American Safety and FCS are named as defendants in the declaratory judgment action, RFF entered an appearance and filed pleadings only on behalf of FCS. Further, FCS alleges that American Safety admitted in the declaratory judgment action that it issued both primary and excess coverage to FCS as required by the contract, but denied that Well-Come was an
“additional insured” under its policy or that it had any duty to defend or indemnify Well- Come as an additional insured under any insurance policy issued by American Safety to FCS.
 

Here, the underlying litigation is still pending, therefore Well-Come’s negligence remains an open question. And as RFF acknowledges in reply, before it can be determined whether FCS suffered damages caused by the execution of the stipulation of dismissal, it must first be determined whether Well-Come was negligent.Moreover, FCS has sufficiently pled the existence of actual damages. FCS states in the complaint that because of the stipulation of dismissal, it now faces a claim by Well- Come and its insurer for in excess of $100,000 in attorneys’ fees and expenses incurred in the defense of Well-Come in the underlying litigation. While FCS also alleges future,
speculative damages, the claims it already faces from Well-Come for attorneys’ fees are real and ascertainable, and sufficient to plead a cause of action for legal malpractice, established by FCS’s submission of correspondence from Well-Come’s counsel requesting payment in the amount of $100,395.98. Accordingly, the first and second causes of action of the complaint can not be dismissed."
 

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