Saturday, March 28, 2009
On the distinction between malpractice and breach of fiduciary duty
Many jurisdictions recognize a cause of action against lawyers based on allegations of "breach of fiduciary duties" as distinct from a cause of action for malpractice. I am not sure that distinction is always warranted, but that would be the subject of a much longer conversation. At this point I want to report a decision of the New York Appellate Court which illustrates one important aspect of making that distinction. (Thanks to Mike Frisch of Legal Profession Blog for the information). In this case, the court held an insurance company had no duty to provide coverage for a firm when it was sued for a breach of fiduciary duty because the policy limited its coverage to claims which are caused by "any actual or alleged act, error, omission or personal injury which arises out of the rendering or failure to render professional legal services." The court held that "Inasmuch as there is no allegation of negligence or malpractice arising out of the . . . Firm's performance, or failure to perform, legal services, the claim in the underlying action does not fall within the ambit of the policy." This language suggests that a claim for breach of a fiduciary duty is based on intentional conduct, which is really what was argued in the case. The claim was based on the alleged intentional misappropriation and use by the firm of the client's trade secrets.