Horulic v. Galloway started out as a garden or varietal auto accident case.  It blossumed into a unique legal malpractice – bad faith- Unfair Claims Settlement Act case in which at least one significant lesson is learned.  $ 500,000 is not sufficient coverage for attorneys who litigate personal injury matters.

Plaintiffs were injured in an auto accident and retained the Galloway law firm, which blew the statute on their case. 

" This matter was initially presented as a legal malpractice action filed by the Appellees against their former attorney, Mr. William O. Galloway and Galloway Law Offices. The original complaint alleged that Mr. Galloway committed legal malpractice by failing to observe a statute of limitations applicable to the Appellees’ automobile accident claims. (See footnote 1) Mr. Galloway was insured through a lawyers professional liability policy issued by the Appellant, TIG, with liability limits of $500,000.00. TIG undertook the defense of Mr. Galloway in the underlying legal malpractice action and hired attorney William D. Wilmoth to defend Mr. Galloway. Mr. Galloway also continued to retain his own private attorney, Jason Cuomo.
On October 27, 2003, the Appellees amended their complaint to assert a third- party bad faith claim against TIG, Cambridge Professional Liability Services, and Acordia of West Virginia. The bad faith claim was bifurcated, and discovery against TIG and Cambridge was stayed, pending the outcome of the legal malpractice action against Mr. Galloway."

Settlement was discussed: "allegedly selected by the parties included the following pertinent provisions: TIG would pay policy limits of $500,000.00, minus costs; Mr. Galloway would confess judgment in the amount of $1.5 million; TIG would consent to the judgment order and the confessed judgment; the Horkulics would agree not to execute against Mr. Galloway and would not record the judgment; a dismissal order would be entered in favor of Mr. Galloway; and the Horkulics would receive one-third of any recovery Mr. Galloway would have against TIG or Cambridge. "  However, these negotiations did not bear fruit.

"On appeal to this Court, TIG contends that the lower court improperly included language in the order indicating that TIG had granted broad authority to enter into the settlement. Further, TIG maintains that the lower court erred in entering findings of fact and conclusions of law against TIG that are central to the issues which will be subsequently addressed in the separate litigation of the bad faith claims asserted by the Horkulics. TIG also contends that the lower court erroneously permitted the inclusion of Mr. Galloway’s motion for injunctive relief on the issue of protection of his personal assets; that the court erred in permitting waiver of Mr. Galloway’s attorney-client privileges; and that the court permitted hearsay testimony by Mr. Wilmoth with regard to settlement negotiations. In the request for a writ of prohibition, TIG also alleges that the lower court erroneously awarded attorney fees to by paid by TIG and that the attorney fees were excessive."

"The primary issue in the case presently before this Court is whether the findings of fact and conclusions of law contained in the lower court’s August 25, 2006, order will be deemed binding upon TIG in the subsequent bad faith action."  Read the entire decision for the balance of the reasoning.