Arguments between insurers and reinsurers are a fertile area of litigation.  Important decisions on attorney-client privilege have come from these cases, and in this particular report, Federal Ins. Co. v North Am. Specialty Ins. Co. ,2007 NY Slip Op 08391 ,Decided on November 8, 2007 ,Appellate Division, First Department , the issue of privity between the attorneys defending a personal injury case and the re-insurer is discussed.

Here, there is no privity between them, and the case is dismissed.  "Plaintiff Federal Insurance Company, claiming it should have contributed only $1,000,000 to the settlement, sues individually and as subrogee of Galaxy General Contracting Corp. to recoup half of the $2,000,000 it paid as Galaxy’s excess liability insurer to settle an underlying personal injury action in which Galaxy was a named defendant. In this action, Federal named as defendants Rivkin Radler, LLP and Bruce A. Bendix (collectively Rivkin), who represented Galaxy in the underlying action, asserting legal malpractice, and also Allied World Assurance Company (U.S.) Inc., formerly known as Commercial Underwriters Insurance Company (CUIC), Galaxy’s primary liability insurer, asserting as against it bad faith, indemnity and legal malpractice.

Federal’s fourth cause of action, against both CUIC and Rivkin, alleged legal malpractice. Without asserting a client relationship with Rivkin or alleging the existence of privity or any allegations of "near privity," Federal claimed merely that CUIC and Rivkin owed Galaxy a duty to defend. Federal further alleged that Rivkin was negligent in opposing the owners’ motion for summary judgment on their indemnification claims by failing to assert antisubrogation or to apprise Federal in a timely manner that the owners had asserted such cross claims. According to [*4]the complaint, had Rivkin raised the antisubrogation rule, the court would have "limited any right of indemnity to the amount above the $1,000,000 limit of CUIC’s OCP." Federal’s fifth cause of action, also against CUIC and Rivkin, alleged a similar theory of liability, but as Galaxy’s subrogee.

None of the determinations reached to justify denial of Rivkin’s motion withstands scrutiny, and its dismissal motion should have been granted. To state a cause of action for legal malpractice, a complaint must allege the negligence of the attorney, that the negligence was a proximate cause of the loss sustained, and actual damages (Leder v Spiegel, 31 AD3d 266, 267 [2006], affd 9 NY3d 836 [2007]). In addition, "New York courts impose a strict privity requirement to claims of legal malpractice; an attorney is not liable to a third party for negligence in performing services on behalf of his client"
(Lavanant v General Acc. Ins. Co., 164 AD2d 73, 81 [1990], affd 79 NY2d 623 [1992]; see also D’Amico v First Union Natl. Bank, 285 AD2d 166, 172 [2001], lv denied 99 NY2d 501 [2002]). Thus, absent an attorney-client relationship, a cause of action for legal malpractice cannot be stated (Baystone Equities, Inc. v Handel-Harbour, 27 AD3d 231 [2006]; Linden v Moskowitz, 294 AD2d 114, 115 [2002], lv denied 99 NY2d 505 [2003]).

In the instant matter, there is no privity between Rivkin and Federal; Rivkin’s duty in the Bermejo lawsuit ran only to its client, Galaxy, and not to any third party ."