It is a little difficult to understand the claims in Peterec-Tolino v Ciacci
2024 NY Slip Op 01259 Decided on March 07, 2024 Appellate Division, First Department. The legal representation was in a personal injury setting, with a workers’ compensation component as well. Plaintiff was able to settle two personal injury cases, and got a cash advance from a funder. How the law firm might have been negligently involved is opaque.

“Supreme Court properly dismissed plaintiff’s breach of fiduciary duty claim, to the extent it arises from Ciacci’s suggestion that plaintiff and his wife seek funding for their personal injury action against nonparty City of New York and related parties (see Kurtzman v Bergstol, 40 AD3d 588, 590 [2d Dept 2007]). Plaintiff’s signed agreement with the nonparty funder, selling a portion of his interest in any potential future litigation proceeds, “conclusively establishes a defense to the asserted claim as a matter of law,” as it shows that defendants did not commit any misconduct by failing to warn plaintiff of the terms of the agreement (Leon v Martinez, 84 NY2d 83, 88 [1994]; see CPLR 3211[a][1]), which plaintiff admittedly signed (see VXI Lux Holdco S.A.R.L. v SIC Holdings, LLC, 171 AD3d 189, 193 [1st Dept 2019]; Tozzi v Mack, 169 AD3d 547, 548 [1st Dept 2019], lv denied 33 NY3d 908 [2019]). Plaintiff cannot demonstrate that defendants induced him into signing (see Countrywide Home Loans, Inc. v Gibson, 157 AD3d 853, 856 [2d Dept 2018]), or that the contract was usurious or unconscionable, given that he received a cash advance and the repayment terms were contingent upon him securing a judgment or settlement (see Cash4Cases, Inc. v Brunetti, 167 AD3d 448, 449-450 [1st Dept 2018]).

Supreme Court also properly dismissed the breach of fiduciary duty claim to the extent that it arose from defendants’ legal representation of plaintiff. Since plaintiff essentially alleges that defendants “provided inadequate and ineffective representation,” the claim is “properly treated . . . as sounding in legal malpractice” (Cherry Hill Mkt. Corp. v Cozen O’Connor L.P., 118 AD3d 514, 514 [1st Dept 2014]). As for plaintiff’s proceedings before the Workers’ Compensation Board (WCB), both the Administrative Law Judge and review panel’s appeal decisions constitute documentary evidence conclusively establishing that plaintiff would not have prevailed, as those decisions were based on his claim form, statements at an independent medical evaluation, and testimony during the WCB hearing (see O’Callaghan v Brunelle, 84 AD3d 581, 581-582 [1st Dept 2011], lv denied 18 NY3d 804 [2012]). As for his first personal injury action against the City, the MTA, and related parties, the complaint fails to state a cause of action for malpractice since defendants successfully negotiated [*2]a settlement on his behalf despite an adverse finding by the WCB. As for his second personal injury action against private construction companies, of which plaintiff disclaimed knowledge until after the settlement was negotiated, the stipulation of discontinuance demonstrates that the settlement covered those companies as well, as they were represented by the same attorney who represented the City defendants in the other action and negotiated the settlement with plaintiffs (see Chic Realty 712, LLC v GSA Holding Corp., 220 AD3d 914, 915 [2d Dept 2023]).”

Channel Fabrics, Inc. v Skwiersky, Alpert & Bressler LLP 2023 NY Slip Op 06471 [222 AD3d 512] December 19, 2023 Appellate Division, First Department illustrates the varying levels of service that accountants provide, and how the all important accountant’s retainer agreement can limit liability.”

“To state a claim for accountant malpractice, a complaint must allege that there was a departure from accepted standards of practice and that the departure was a proximate cause of the injury suffered by plaintiff (D.D. Hamilton Textiles v Estate of Mate, 269 AD2d 214, 215 [1st Dept 2000]; see also Friedman v Anderson, 23 AD3d 163, 164-165 [1st Dept 2005]). An accountant’s engagement letter governs the parameters of their retention (Italia Imports v Weisberg & Lesk, 220 AD2d 226, 226-227 [1st Dept 1995]). An accountant who has been retained to perform a “review engagement” is responsible for duties more limited in scope than an accountant hired to conduct an audit (William Iselin & Co. v Mann Judd Landau, 71 NY2d 420, 424-425 [1988]).

The crux of the complaint is that defendants were negligent and committed malpractice by not discovering an alleged deficit in plaintiff’s financial statements, and by failing to report that deficit to plaintiff. However, these allegations are “utterly refute[d]” by the documentary evidence, which defined the scope of the parties’ engagement and confirmed that defendants had no such duty (Chen v Romona Keveza Collection LLC, 208 AD3d 152, 157 [1st Dept 2022] [internal quotation marks omitted]; CPLR 3211 [a] [1]).

The engagement letters specified that defendants had been retained to conduct a “review engagement”—not an audit—and that defendants’ engagement could “not be relied upon to identify or disclose any financial statement misstatements.” The engagement letters also stated that defendants would “assist in the preparation of [plaintiff’s] financial statements . . . but the responsibility for the financial statements remains with [plaintiff],” and expressly stated that defendants would not express an opinion regarding the financial statements. Thus, the engagement letters confirmed that the responsibility for discovering issues with plaintiff’s finances remained with plaintiff, not defendants.

Nor did the complaint allege facts indicating that defendants’ review engagement deviated from the accepted standards of practice. Rather, the complaint presented only conclusory allegations that defendants failed to identify errors in the financial information that plaintiff had provided to them. Plaintiff refers to vague “analytical procedures” that purportedly would have uncovered mistakes in its financial reporting, which then were to have been verified through defendant’s questioning of plaintiff (and not, as in an audit, the questioning of third parties). However, plaintiff fails to explain how engaging in “analytical procedures” would have uncovered the deficit or identify the specific “analytical procedures” that defendants [*2]should have, but did not, perform. Plaintiff has also not identified the specific errors in its accounts receivable that the analytical procedures would have supposedly revealed.”

Guliyev v Banilov & Assoc., P.C. 2023 NY Slip Op 05493 [221 AD3d 589] November 1, 2023 Appellate Division, Second Department concerns a claim that comes up a lot in potential client inquiries. Clients often say that the attorney “settled” the case without their approval, and forced them into a settlement. The general starting point in responding is that there can never be a settlement without the client signing a release. This is not always true.

“The plaintiff retained the defendants Banilov & Associates, P.C., and Nick Banilov (hereinafter together the Banilov defendants) to represent him in connection with an action to recover damages for personal injuries allegedly sustained as a result of a motor vehicle accident (hereinafter the underlying action). The defendant Harlan Wittenstein was of counsel to the Banilov defendants, assisting with the underlying action. Wittenstein negotiated a settlement with the defendants in the underlying action and conveyed to them that the plaintiff had accepted that settlement. The plaintiff thereafter terminated the Banilov defendants’ services and retained another law firm. The defendants in the underlying action moved to compel enforcement of the settlement. The plaintiff opposed, asserting that he did not authorize Wittenstein or the Banilov defendants to accept the settlement. Following a framed-issued hearing, the Supreme Court granted the motion to compel enforcement, concluding that Wittenstein and the Banilov defendants had the authority to settle the underlying action.”

“

“In an action to recover damages for legal malpractice, a plaintiff must demonstrate that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the attorney’s breach of this duty proximately caused the plaintiff to sustain actual and ascertainable damages” (Bua v Purcell & Ingrao, P.C., 99 AD3d 843, 845 [2012]; see Marinelli v Sullivan Papain Block McGrath & Cannavo, P.C., 205 AD3d 714, 716 [2022]). “The plaintiff is required to plead actual, ascertainable damages that resulted from the attorneys’ negligence” (Bua v Purcell & Ingrao, P.C., 99 AD3d at 847; see Marinelli v Sullivan Papain Block McGrath & Cannavo, P.C., 205 AD3d at 716). “Conclusory allegations of damages or injuries predicated on speculation cannot suffice for a malpractice action, and dismissal is warranted where the allegations in the complaint are merely conclusory and speculative” (Bua v Purcell & Ingrao, P.C., 99 AD3d at 848 [citations omitted]; see Marinelli v Sullivan Papain Block McGrath & Cannavo, P.C., 205 AD3d at 716). Here, the complaint failed to plead specific factual allegations demonstrating that, but for the defendants’ alleged negligence, there would have been a more favorable outcome in the underlying action or that the plaintiff would not have incurred any damages (see Williams v Silverstone, 215 AD3d 787, 789 [2023]; Katsoris v Bodnar & Milone, LLP, 186 AD3d 1504, 1506 [2020]). In addition, the plaintiff is precluded by the doctrine of collateral estoppel from relitigating the issue of whether the defendants had the authority to settle the underlying action (see CPLR 3211 [a] [5]; Reid v Reid, 198 AD3d 993, 994 [2021]; Shifer v Shifer, 165 AD3d 721, 723 [2018]).

Pursuant to Judiciary Law § 487, an attorney who is “guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party” is liable to the injured party for treble damages (see Cordell Marble Falls, LLC v Kelly, 191 AD3d 760, 762 [2021]). “A violation of Judiciary Law § 487 requires an intent to deceive” (Moormann v Perini & Hoerger, 65 AD3d 1106, 1108 [2009]; see Cordell Marble Falls, LLC v Kelly, 191 AD3d at 762). “Allegations regarding an act of deceit or intent to deceive must be stated with particularity” (Bill Birds, Inc. v Stein Law Firm, P.C., 164 AD3d 635, 637 [2018], affd 35 NY3d 173 [2020]; see CPLR 3016 [b]; Palmieri v Perry, Van Etten, Rozanski & Primavera, LLP, 200 AD3d 785, 787 [2021]). Here, the plaintiff’s allegations that the defendants hid true facts and acted to benefit themselves are conclusory and factually insufficient (see Palmieri v Perry, Van Etten, Rozanski & Primavera, LLP, 200 AD3d at 787; Cordell Marble Falls, LLC v Kelly, 191 AD3d at 762).”

As Rondeau v Houston 2024 NY Slip Op 00987 Decided on February 27, 2024 Appellate Division, First Department, reminds us, relief in Judiciary Law 487 is not “lightly given.”

“Order and judgment (one paper), Supreme Court, New York County (Charles E. Ramos, J.), entered on or about September 15, 2015, which, to the extent appealed from as limited by the briefs, granted defendants’ motions to dismiss, with prejudice, the claims in plaintiff’s two actions captioned Rondeau v Houston (Sup Ct, NY County, index No. 159541/2014) (the third action) and Rondeau v Dolan (Sup Ct, NY County, index No. 151239/2015) (the fourth action), and granted defendants’ motion for sanctions to the extent of enjoining plaintiff from commencing any further actions against defendants or any other individual or entity arising out of or concerning his prior lawsuits against defendants without prior written approval of the court, unanimously affirmed, with costs.

The doctrine of res judicata applies to preclude plaintiff’s claims asserted in the third action, as those claims arise out of the same transaction or series of transactions that were brought to a final conclusion in the first action by plaintiff against, among others, defendant Allan Houston (Rondeau v Houston, 2013 NY Slip Op 33363[U] [Sup Ct, NY County 2013], affd 118 AD3d 638 [1st Dept 2014], lv dismissed 24 NY3d 999 [2015]; see In re Hunter, 4 NY3d 260, 269 [2005]; Pitcock v Kasowitz, Benson, Torres & Friedman, LLP, 80 AD3d 453, 454 [1st Dept 2011], lv denied 16 NY3d 711 [2011]). Furthermore, in the third action, plaintiff failed to state a cause of action for fraud, as he did not sufficiently allege out-of-pocket losses that stemmed from any alleged fraud, but rather, asserted only speculative losses (see Lama Holding Co. v Smith Barney, 88 NY2d 413, 421 [1996]).”

“Similarly, Supreme Court providently dismissed plaintiff’s Judiciary Law § 487 claim in the fourth action. The record presents no evidence that defendants’ counsel intended to deceive this Court when they offered a characterization of plaintiff’s claims and his conduct in the litigation (see e.g. Seldon v Lewis Brisbois Bisgaard & Smith LLP, 116 AD3d 490, 491 [1st Dept 2014], lv dismissed 25 NY3d 985 [2015]).”

Sang Seok Na v Pulvers, Pulvers & Thompson, LLP 2024 NY Slip Op 00978
Decided on February 27, 2024 Appellate Division, First Department is the rare case of legal malpractice that has been heard in both the First and Second Departments. It is similarly rare in the number and length of cases associated with the plaintiff.

“Initially, many of plaintiff’s arguments are not reviewable by this Court as they either arise from Queens County Supreme Court orders that are not the subject of the instant notice of appeal (CPLR 5501[c]) or claims that were previously presented to, and decided by, the Appellate Division, Second Department (Sang Seok Na v Schietroma, 172 AD3d 1263, 1263 [2d Dept 2019]; Sang Seok NA v Schietroma, 163 AD3d 597, 597 [2d Dept 2018]; Sang Seok Na v Greyhound Lines, Inc., 88 AD3d 980, 981 [2d Dept 2011]; see Delgado v City of New York, 144 AD3d 46, 51 [1st Dept 2016]).

To the extent his claims are reviewable and are based on the order on appeal, we conclude that Supreme Court properly granted defendants’ motion to dismiss because the record establishes that the statute of limitations on plaintiff’s legal malpractice claim expired on April 1, 2018, and plaintiff did not initiate the instant action until, at minimum, September 25, 2019 (see CPLR 214[6]; Sharp v Ferrante Law Firm, 220 AD3d 587, 587-588 [1st Dept 2023]).

Supreme Court also properly found that plaintiff failed to sufficiently plead a claim of fraud where plaintiff’s complaint was incomprehensible, conclusory, and unsupported by any admissible evidence (see Cronos Group Ltd. v XcomIP LLC, 156 AD3d 54, 61-62 [1st Dept 2017]).”

Kaufman v Boies Schiller Flexner 2024 NY Slip Op 00804 Decided on February 15, 2024
Appellate Division, First Department is a case where a second bite at the apple fails.

Initially, “The complaint stated a limited cause of action for breach of contract against BSF. The complaint sufficiently alleged that BSF overbilled or billed for unnecessary expenses associated with attorneys not admitted to practice law in, or based out of, New York, and the documentary submissions do not utterly refute those allegations (e.g. Ullmann-Schneider v Lacher & Lovell-Taylor, P.C., 121 AD3d 415, 416 [1st Dept 2014]; Goldfarb v Hoffman, 139 AD3d 474, 475 [1st Dept 2016]; Cascardo v Dratel, 171 AD3d 561, 562 [1st Dept 2019]; see CPLR 3211 [a] [1], [7]). The complaint otherwise failed to state a cause of action for breach of contract or violation of Judiciary Law § 487 (1) (see generally Second Source Funding, LLC v Yellowstone Capital, LLC, 144 AD3d 445, 445-446 [1st Dept 2016]; Brookwood Cos., Inc. v Alston & Bird LLP, 146 AD3d 662, 669 [1st Dept 2017]; Facebook, Inc. v DLA Piper LLP [US], 134 AD3d 610, 615 [1st Dept 2015], lv denied 28 NY3d 903 [2016]; CPLR 3211 [a] [7]). We decline to modify the order for review to indicate that dismissal was without prejudice as plaintiff has not sought clarification or relief from Supreme Court in the first instance.”

This time around, the AD was troubled by the “increasingly conspiratorial spin.” “Plaintiff contends that she was not required to establish the merits of her proposed amended complaint, and that her proposed causes of action were not palpably insufficient. We have considered each of the proposed causes of action that were brought before us, and find that the motion court properly exercised its discretion in determining that those claims were palpably insufficient and clearly devoid of merit (see MBIA Ins. Corp. v Greystone & Co., Inc., 74 AD3d 499, 500 [1st Dept 2010]; Eighth Ave. Garage Corp. v H.K.L. Realty Corp., 60 AD3d 404, 405 [1st Dept 2009], lv dismissed 12 NY3d 880 [2009]). A review of the proposed amended complaint reveals that the “new” allegations are largely a repackaging of the same allegations that had been alleged in the original complaint to recoup legal fees which were previously dismissed, and the dismissal affirmed by this Court (Kaufman v Boies Schiller Flexner, LLP, 211 AD3d 428 [1st Dept 2022]). Further, the proposed amended complaint adds an increasingly conspiratorial spin on the facts, asserting claims that are implausible on their face and otherwise clearly refuted by the record.”

Allen v Thompson 2024 NY Slip Op 00929 Decided on February 22, 2024 Appellate Division, First Department, in what may be a pyrrhic victory (Defendant attorney is pro-se), is an unusual set of facts.

”

In this case, plaintiff alleges that on or about February 28, 2012, she was terminated from Chanel after nineteen years of employment. She was not satisfied with the severance package offered and believed that her employment was terminated on the basis of discrimination. Plaintiff thus consulted with defendant to negotiate a more favorable separation and release agreement (the Agreement) from Chanel that would still permit her to retain her legal right to move forward on her discrimination claims.

After a few weeks of negotiation, defendant received the final draft of the Agreement from Chanel which contained language that included a release from any discrimination claims. Unbeknownst to plaintiff at the time, defendant unilaterally and without plaintiff’s consent, changed one word in the Agreement so that plaintiff would be released from all of her rights as part of the settlement, except for any right arising under Title VII, the New York State Human Rights Law and the New York City Human Rights Law, thereby allowing plaintiff to still file a lawsuit under these statutes. Plaintiff was instructed by defendant to initial each page of the release and sign it, which she did.

On or about April 15, 2012, plaintiff received her first severance check. Subsequently, on or about September 6, 2012, defendant filed a discrimination lawsuit on plaintiff’s behalf in the United States District Court for the Southern District of New York (Allen v Chanel, Inc., et al., 12-cv-6758 (LAP). Chanel’s motion to dismiss was denied on the grounds that plaintiff had not knowingly or voluntarily waived any of her rights to file a discrimination lawsuit against Chanel.

On or about December 3, 2012, defendant emailed to plaintiff an affidavit that he had prepared and instructed plaintiff to sign, that stated that plaintiff herself, not defendant was responsible for modifying the Agreement.

On or about June 18, 2013, Chanel filed a counterclaim in the Federal action alleging that plaintiff knowingly and fraudulently misrepresented the severance agreement to Chanel and demanded that they be reimbursed the amount already paid in severance to plaintiff as well as for the costs of defending the discrimination lawsuit. Chanel then filed a motion for summary judgment on its counterclaim as well as on the discrimination claims, which was granted on or about November 13, 2014, and Chanel was awarded damages.

Plaintiff further alleges that she expressed to defendant the importance of having the discrimination suit sealed upon completion, as it would harm her job and career opportunities. She was continuously assured by defendant that he would make sure it was sealed [*2]and there was nothing to worry about. However, this was never done.”

“

On the merits, the complaint sufficiently states a claim for legal malpractice. Defendant fails to offer a reasonable explanation as to how changing a word in the release entered into between his client and her former employer, which substantially changed the meaning of the contractual provisions, or suborning his client’s perjury in the related Federal discrimination action, constitute reasonable strategic choices (cf. Leon Petroleum, LLC v Carl S. Levine & Assoc., P.C., 122 AD3d 686, 687 [2d Dept 2014]). Plaintiff also sufficiently pleaded causation by asserting that defendant’s failure to seal the file in the federal action damaged her job-hunting efforts for new employment. While plaintiff did not identify specific lost employment opportunities on this basis, she did allege specifically that she was told this was the case by recruiters. At the pleading stage, this is sufficient (see Gotay v Breitbart, 14 AD3d 452, 454 [1st Dept 2005]).

Moreover, the claims were not barred by the statute of limitations, which was tolled by both executive order (9 NYCRR 8.202.8), as extended, and the continuous representation doctrine (Murphy v Harris, 210 AD3d 410, 411 [1st Dept 2022]).

Defendant’s contention that plaintiff’s prior affidavit in the Federal action constituted documentary evidence sufficient to dispositively refute her claims was properly rejected. The affidavit does not constitute documentary evidence under CPLR 3211(a)(1) (Mamoon v Dot Net Inc., 135 AD3d 656, 657 [1st Dept 2016]), nor does the affidavit utterly refute the claims.”

Century Prop. & Cas. Ins. Corp. v McManus & Richter 2024 NY Slip Op 00799
Decided on February 15, 2024 Appellate Division, First Department
KAPNICK, J. is a decision with great implications for insurers regarding how defense attorneys might be liable to the carrier for mistakes made during the defense of cases. The question of privity, near-privity and equitable subrogation are all taken up in great detail. The reader should go to the full decision for the well-reasoned discussion of in stari decisis, equitable subrogation, privity and many other core doctrinal issues.

“The instant action arises out of an underlying personal injury matter entitled Palaguachi v The Battery Park City Authority, New York County,index No. 157779/2015, in which defendants were retained by WFP Tower B, L.P. (Tower B) and its insurers, through their claims representatives, to represent Tower B and its affiliates.^[FN1] In the underlying action, Ramon Palaguachi, an employee of Rite-Way Internal Removal, Inc. (Rite-Way), sustained injuries when he fell off an unsecured ladder while performing demolition work at a site owned by Tower B, which had contracted with Rite-Way to perform the demolition work. Palaguachi filed the underlying action against Tower B and its affiliates alleging they were vicariously liable for his injuries pursuant to Labor Law § 240 (1) as the owners and general contractors of the site.”

“As alleged in plaintiff’s amended complaint, the claims against Tower B in the underlying action were covered by a $3 million primary insurance policy issued to Tower B by ACE American Insurance Company which was reinsured by ACE INA Overseas Insurance Company Limited (ACE INA). Plaintiff and ACE INA then entered into the retrocessional agreement, pursuant to which plaintiff accepted a 100% pro rata quota share reinsurance (retrocession) of ACE INA’s interest and liabilities with respect to certain insurance policies, including the Tower B policy. Therefore, any loss under the Tower B policy was ultimately to fall upon plaintiff. According to plaintiff, as the retrocessional insurer for Tower B, it “was contractually obligated to fund” a portion of the settlement in the underlying action on Tower B’s behalf. This contractual obligation forms the basis of plaintiff’s instant claims of legal malpractice against defendants. In its amended complaint, plaintiff alleges that defendants were negligent in voluntarily withdrawing the motion and discontinuing the third-party action against Rite-Way; had they not done so, Tower B would have received complete indemnification from Rite-Way. Instead, because defendants withdrew the claims against Rite-Way, Tower B was left with exposure of approximately $2.8 million, which plaintiff ultimately paid.”

“

“[A]bsent fraud, collusion, malicious acts or other special circumstances, an attorney is not liable for professional negligence to third parties not in privity” (Block v Brecher, Fishman, Feit, Heller, Rubin & Tannenbaum, 301 AD2d 400, 401 [1st Dept 2003], lv denied 100 NY2d 509 [2003]). However, in cases where the elements of negligent misrepresentation are present, a relationship of “near privity” may be sufficient to sustain a legal malpractice claim (see Prudential Ins. Co. of Am. v Dewey, Ballantine, Bushby, Palmer & Wood, 80 NY2d 377, 382-385 [1992] [attorney may be held liable to third parties for submitting a false opinion letter upon which a third party relied]). In this case, Supreme Court correctly rejected plaintiff’s argument that it had standing to assert a direct legal malpractice claim against defendants based on the doctrine of “near privity.” To establish such a claim, the third party must allege “(1) an awareness by the maker of the statement that it is to be used for a particular purpose; (2) reliance by a known party on the statement in furtherance of that purpose; [*4]and (3) some conduct by the maker of the statement linking it to the relying party and evincing its understanding of that reliance” (id. at384; see also Federal Ins. Co., 47 AD3d at 61). Although this doctrine may allow a nonclient to sue for legal malpractice, plaintiff here was not in “near privity” with defendants, as it has not pleaded that it relied upon a negligent misrepresentation made by defendants.

A third party may still have standing to bring a claim for legal malpractice where, through contractual or equitable subrogation, it brings the claim on behalf of the attorney’s client by stepping into their shoes legally (see Allianz Underwriters Ins. Co. v Landmark Ins. Co., 13 AD3d 172, 174 [1st Dept 2004]; Great Atl. Ins. Co. v Weinstein, 125 AD2d 214, 215 [1st Dept 1986]; Hartford Acc. & Indem. Co. v Michigan Mut. Ins. Co., 93 AD2d 337, 341 [1st Dept 1983], affd 61 NY2d 569 [1984]; see also Kumar v American Tr. Ins. Co., 49 AD3d 1353, 1355 [4th Dept 2008]). Plaintiff makes a persuasive argument that the decision of the motion court contradicts itself regarding plaintiff’s claims based in contractual and equitable subrogation on behalf of Tower B. The motion court determined that plaintiff was not entitled to bring its claims based in equitable subrogation because the payment it made as retrocessionaire on behalf of Tower B was actually a payment by the primary insurer, ACE American. However, the motion court then simultaneously held that plaintiff was not entitled to contractual subrogation because, despite the formal assignment by ACE American to plaintiff of its rights to all claims that it had against defendants arising from their representation of Tower B in the underlying Palaguachi action, ACE American did not actually have any claims to assign because it never made a payment. Clearly these positions are mutually exclusive.

As an equitable doctrine, subrogation is “designed to promote justice, and thus, is dependent upon the particular relationship of the parties and the nature of the controversy in each case” (Hamlet at Willow Cr. Dev. Co., LLC v Northeast Land Dev. Corp., 64 AD3d 85, 106 [2d Dept 2009], lv dismissed 13 NY3d 900 [2009], citing Matter of Costello v Geiser, 85 NY2d 103, 109 [1995]). The doctrine of equitable subrogation “is broad enough to include every instance in which one party pays a debt for which another is primarily answerable and which in equity and good conscience should have been discharged by the latter, so long as the payment was made either under compulsion or for the protection of some interest of the party making the payment, and in discharge of an existing liability” (Gerseta Corp. v Equitable Trust Co. of NY, 241 NY 418, 425-426 [1926]).”

“Recently, in Innovative Risk Mgt., Inc. v Morris Duffy Alonso & Faley (204 AD3d 518 [1st Dept 2022]),this Court found that plaintiff, the third-party administrator for the primary insurer, lacked standing to pursue a legal malpractice claim as equitable subrogee “because it did not insure the insureds; more specifically, the complaint [did] not allege, and the evidence [did] not show, that plaintiff had a contractual obligation to pay the claims in the underlying action” (id. at 518-519). In this case however, plaintiff specifically alleged that it was contractually obligated to pay, and did in fact pay, the remaining amount of the settlement on behalf of Tower B as retrocessionaire to Tower B’s primary insurer’s reinsurer, thus distinguishing the facts here from the facts in Innovative, where the plaintiff was a third-party administrator and not an insurer [*6]or reinsurer obligated to make a payment on behalf of the insured.”

“Where a reinsurer, or retrocessionaire, has paid a claim on behalf of an insured, equitable principles demand that the reinsurer be entitled to equitable subrogation on behalf of the insured. Having pleaded that it was contractually obligated to, and did, pay the majority of Tower B’s settlement amount in the underlying personal injury action, and that it brings the instant action for legal malpractice as subrogee of Tower B, plaintiff can proceed with this action under the theory of equitable subrogation.

Any rights plaintiff has as equitable subrogee accrued to it independently of any contractual provision upon payment of the loss under the Tower B policy. Therefore, “if we hold that plaintiff may properly make a claim as . . . equitable subrogee, as we do, it becomes unnecessary to determine whether plaintiff also has a valid claim as contractual subrogee. . . .” (see Federal Ins. Co., 75 NY2d at 371).”