Accidental Bomb Leads to Legal Malpractice Suit

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Accidental Bomb Leads to Legal Malpractice Suit ITT Federal Services Corp. v. Montano, 2007 U.S. App. LEXIS 1742 (1st Cir. Jan. 26, 2007). Terra Bowling, J.D. The First Circuit Court of Appeals has ruled that a company and its insurer did not have a statutory right to recover legal malpractice damages from an injured employee’s attorneys. ITT Federal Services (ITT) and its insurer had filed the claim seeking relief under the Longshore and Harbor Workers’ Compensation Act (LHWCA). Background The claim originated when a Navy pilot accidentally dropped two bombs near the control tower where Edgar Colon, an employee of ITT, was working. As a result of his injuries, Colon filed an administrative claim seeking benefits under the LHWCA from ITT and its insurance carrier, Pacific Employers Insurance Company (PEI). ITT and PEI settled the claim with Colon for $305,000. While the administrative claim was pending, Colon’s attorneys brought suit against ITT and the Navy in federal district court under the Federal Tort Claims Act (FTCA). The court dismissed the suit against the Navy, noting that the United States may be sued under the FTCA, but individual military departments may not. The district court also dismissed the suit against ITT, citing the fact that the LHWCA provided Colon with an exclusive remedy. Colon’s lawyers never refiled the federal suit or appealed the district court’s decision. After two years, the statute of limitations on the FTCA claim ran, and the district court’s judgment became final. ITT and the insurance carrier then brought suit against Colon’s attorneys, claiming that they could have recovered payments made to Colon under the LHWCA if the attorneys had refiled the lawsuit naming the United States as a defendant.1 The U.S. District Court for the District of Puerto Rico dismissed the claims and the companies appealed. Subrogation Section 933 of the LHWCA provides that an employee may bring suit against third parties that have injured him or her. When an injured employee is compensated by third parties in such a suit, § 933 of the LHWCA gives the employer a limited right of subrogation for payments made to the employee by a third party. This means that if Colon had recovered money from the United States, ITT could have recovered the benefits it had paid Colon in the settlement. Furthermore, the LHWCA provides that if the employee does not bring suit against a third party within six months, the right to bring an action reverts to the employer—or to the insurer if it has paid the compensation under the LHWCA—for 90 days. After the 90 day time period, the right reverts back to the employee. On appeal, ITT and PEI argued that Colon had suffered an injury when his lawyers did not refile the claim against the United States and therefore they were entitled to a subrogation lien in a legal malpractice suit against Colon’s attorneys under § 933. The First Circuit noted that although § 933(b) does provide a limited subrogation right for an employer when a third party is liable for injury, “injury” is defined as “accidental injury … arising out of and in the course of employment …” The court concluded that the subrogation right was only available for the injury that Colon sustained during the course of his employment, which would have included the injury sustained as a result of the accidental bombing but precluded the malpractice claim. Furthermore, the court acknowledged that legal malpractice is not the type of injury that entitles an employee to compensation under the LHWCA. The court affirmed the district court’s judgment, observing that both ITT and PEI could have pursued claims against the United States under the LHWCA. Endnotes 1. The companies also argued that the lawyers breached their duty of care to the companies; however, the district court held that the lawyers only owe a duty of care to clients and non-clients if the lawyers reasonably foresee that the non-client will rely on his services. SandBar 6.2
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Accidental Bomb Leads to Legal Malpractice Suit

ITT Federal Services Corp. v. Montano, 2007 U.S. App. LEXIS 1742 (1st Cir. Jan. 26, 2007).

Terra Bowling, J.D.

The First Circuit Court of Appeals has ruled that a company and its insurer did not have a statutory right to recover legal malpractice damages from an injured employee’s attorneys. ITT Federal Services (ITT) and its insurer had filed the claim seeking relief under the Longshore and Harbor Workers’ Compensation Act (LHWCA).

Background
The claim originated when a Navy pilot accidentally dropped two bombs near the control tower where Edgar Colon, an employee of ITT, was working. As a result of his injuries, Colon filed an administrative claim seeking benefits under the LHWCA from ITT and its insurance carrier, Pacific Employers Insurance Company (PEI). ITT and PEI settled the claim with Colon for $305,000.

While the administrative claim was pending, Colon’s attorneys brought suit against ITT and the Navy in federal district court under the Federal Tort Claims Act (FTCA). The court dismissed the suit against the Navy, noting that the United States may be sued under the FTCA, but individual military departments may not. The district court also dismissed the suit against ITT, citing the fact that the LHWCA provided Colon with an exclusive remedy.

Colon’s lawyers never refiled the federal suit or appealed the district court’s decision. After two years, the statute of limitations on the FTCA claim ran, and the district court’s judgment became final. ITT and the insurance carrier then brought suit against Colon’s attorneys, claiming that they could have recovered payments made to Colon under the LHWCA if the attorneys had refiled the lawsuit naming the United States as a defendant.1 The U.S. District Court for the District of Puerto Rico dismissed the claims and the companies appealed.

Subrogation
Section 933 of the LHWCA provides that an employee may bring suit against third parties that have injured him or her. When an injured employee is compensated by third parties in such a suit, § 933 of the LHWCA gives the employer a limited right of subrogation for payments made to the employee by a third party. This means that if Colon had recovered money from the United States, ITT could have recovered the benefits it had paid Colon in the settlement. Furthermore, the LHWCA provides that if the employee does not bring suit against a third party within six months, the right to bring an action reverts to the employer—or to the insurer if it has paid the compensation under the LHWCA—for 90 days. After the 90 day time period, the right reverts back to the employee.

On appeal, ITT and PEI argued that Colon had suffered an injury when his lawyers did not refile the claim against the United States and therefore they were entitled to a subrogation lien in a legal malpractice suit against Colon’s attorneys under § 933. The First Circuit noted that although § 933(b) does provide a limited subrogation right for an employer when a third party is liable for injury, “injury” is defined as “accidental injury … arising out of and in the course of employment …” The court concluded that the subrogation right was only available for the injury that Colon sustained during the course of his employment, which would have included the injury sustained as a result of the accidental bombing but precluded the malpractice claim. Furthermore, the court acknowledged that legal malpractice is not the type of injury that entitles an employee to compensation under the LHWCA. The court affirmed the district court’s judgment, observing that both ITT and PEI could have pursued claims against the United States under the LHWCA.

Endnotes
1. The companies also argued that the lawyers breached their duty of care to the companies; however, the district court held that the lawyers only owe a duty of care to clients and non-clients if the lawyers reasonably foresee that the non-client will rely on his services.

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