Facts

Plaintiff Carlisle Insurance Co., Red Bank, N.J. issued a legal malpractice insurance policy to an unnamed California law firm. In 1996, the law firm was sued. Carlisle hired an unnamed San Francisco law firm to handle the defense for its law firm insured. The policy limit was $1 million. Prior to trial, the plaintiff made three settlement demands in the amount of $650,000, $400,000, and finally $325,000. On the eve of trial, Carlisle offered $50,000 on behalf of its law firm insured. The jury returned a verdict against the law firm insured in the amount of $10 million. Although this amount was reduced to $7,000,000 after post-trial motions, interest which accrued on appeal, and other costs resulted in a total judgment of $10,138,736. The law firm insured then sued Carlisle on the ground that it acted in bad faith in refusing to settle before trial within the policy limit. Carlisle satisfied the excess judgment and then sued the San Francisco law firm for malpractice in mishandling the claim against its law firm insured. Carlisle also sued the attorney who handled the underlying case.

PLAINTIFFÆS CONTENTIONS:
Carlisle contended that the San Francisco law firm negligently handled the malpractice claim against its law firm insured. Carlisle claimed that the San Francisco law firm did not properly evaluate the merits of the case.

DEFENDANTSÆ CONTENTIONS:
The San Francisco law firm contended that the decision to place a low value on the underlying action was made by Carlisle early on in the case and that Carlisle rejected its advice to increase its settlement offer beyond $50,000.

Settlement Discussions

On the first day of trial, Carlisle demanded $4,000,000. Carlisle previously demanded $10,000,000. The San Francisco law firm made a Code of Civil Procedure Section 998 offer of $250,000 which was increased to $300,000 on the first day of trial.

Damages

Carlisle sought damages in the amount of $10,136,736, the amount of the verdict against its law firm insured, minus the amount deemed necessary to settle the underlying action.

Result

The jury returned a verdict for the defense.

Deliberation

five hours

Poll

10-2

Length

six days