Professional Liability Blog

Following a post on the case of Sentry Select Ins. Co. v. Maybank Law Firm, LLC, – S.E2d –, 2018 WL 2423694 (S.C. 2018) regarding tripartite relationships, this article provides a brief overview of how Illinois, Missouri, and Kansas address the “tripartite” relationship between an insurer, its insured, and panel. Over the years, the tripartite relationship has taken on added significance with the prevalence of insured claims and the desire of insurers and insureds alike to safeguard their right to obtain the best possible legal services from their panel counsel.

Summary: This article provides a brief overview of the “tripartite” relationship between an insurer, its insured, and panel counsel and the theories under which a direct action can be brought by the insurer against panel counsel for legal malpractice. The “tripartite” relationship refers to the relationship among an insurer, its insured and defense counsel retained by the insurer to defend the insured. Panel counsel are familiar with the “tripartite” relationship and the ethical and professional concerns that it entails.

Generally, corporate officers and directors do not have a special relationship of trust (i.e., a fiduciary relationship) with third persons or creditors transacting business with the corporation. Moreover, unless they sign in an individual capacity, corporate officers and directors who negotiate and execute a contract on behalf of the corporation are not personally accountable on the contract, even if the corporation later defaults or otherwise breaches the contract. Likewise, corporate officers and directors will not be personally liable for the debts of the corporation, even if involved as an agent of the corporation in undertaking the debt.

Every corporate director needs to be aware of the potential for a shareholder derivative lawsuit or a shareholder direct lawsuit.