Delaware Supreme Court Rules that Attorneys Are Liable for Malpractice Claims If a Sufficiently Developed Record Could Have Impacted the Outcome of a Case

Update: Prior to publication of this alert, the Delaware Supreme Court vacated its earlier opinion in GMG Ins. Agency v. Margolis Edelstein, 2024 WL 1688869 (Del. Apr. 19, 2024), pending reconsideration before the entire Delaware Supreme Court. On July 10, 2024, the full Delaware Supreme Court heard arguments in the case and an opinion is expected to be forthcoming.

The Delaware Supreme Court reversed the April 2023 Superior Court opinion in GMG Ins. Agency v. Margolis Edelstein, 2023 WL 2854760 (Del. Super. Ct. Apr. 10, 2023). In this case, the plaintiff, an insurance agency, claimed that its attorneys failed to develop a sufficient record for purposes of prevailing on a summary judgment motion in an underlying tortious interference with contract case brought against it by a competitor. The insurance agency ultimately settled the underlying case for $1.2 million after a key employee changed his testimony in the form of an affidavit, essentially implicating the insurance agency in wrongdoing. The insurance company claimed that if its lawyers had properly developed the record, it would have prevailed on its summary judgment motion and the tortious interference claim would have been dismissed by the court before the key employee had a chance to change his testimony. 

The Superior Court concluded that the lawyers did sufficiently develop the record and that the underlying settlement was the result of an unforeseeable intervening event. The Delaware Supreme Court, however, reversed the Superior Court’s decision, concluding that it is conceivable that the plaintiff could have demonstrated that its attorneys breached the standard of care by failing to develop a record that would have allowed the client to prevail on summary judgment. The Supreme Court also concluded that there were disputed issues of fact as to whether the attorney defendants breached the standard of care by representing both the insurance agency and the employee who later changed his testimony in the underlying lawsuit.

This is an interesting result in light of the fact that the record that was developed ultimately implicated the insurance agency in wrongdoing, resulting in a substantial settlement. The Delaware Supreme Court is essentially opining that the underlying plaintiff would not have obtained the favorable settlement if the defendant attorneys had been able to develop a record sufficient to obtain summary judgment for their client, notwithstanding that evidence discovered later would have ultimately implicated the insurance agency in wrongdoing. 

_{Case Law Alerts, 3rd Quarter, July 2024 is prepared by Marshall Dennehey to provide information on recent developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2024 Marshall Dennehey, all rights reserved. This article may not be reprinted without the express written permission of our firm.}