Arch subsequently filed the present lawsuit against Kubicki under various legal theories. Just before trial, the underlying litigation settled within the insured’s policy limits for $3.5 million. Kubicki sent an engagement letter informing Spear Safer that Kubicki had been retained by Arch to represent and defend Spear Safer. In accordance with the terms of the insurance policy, Arch retained Kubicki Draper, LLP (Kubicki) to defend its insured, Spear -3- Safer, in the separate underlying federal litigation filed by the receiver. You shall do nothing after any loss to prejudice such rights. The insurance policy also included the following subrogation provision: To the extent of any payment under this Policy, we shall be subrogated to all your rights of recovery therefor against any person, organization, or entity and you shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights. Subject to prior written notice to you, we reserve the right to remove and replace selected counsel if it is deemed by us that such action is warranted. No legal counsel shall be appointed without our prior approval.
Subject to our review and consent, you have the right to appoint legal counsel to defend any covered Claim and such consent will not be unreasonably withheld or delayed by us. Pursuant to the insurance policy, Arch had a duty to defend Spear Safer: We have the right and duty to defend any Claim made against you.
ARCH INSURANCE PROFESSIONAL
This lawsuit against Spear Safer by MBC gave rise to its claim on its professional liability policy with Arch Insurance Company (Arch). MBC, through a court-appointed receiver, then filed a lawsuit in federal court against Spear Safer for alleged accounting malpractice. The record below also refers to “Spear Safer CPAs & Consultants, L.P.” and “Spear, Safer, Harmon & Company, PC.” -2- reached a settlement with MBC. There are differing names used in the record for this entity. MBC was in the viatical and life settlement business and became subject to an action by the Securities and Exchange Commission (SEC) “for the violation of various federal securities regulations in the trade of life insurance policies of terminally ill people.” S.E.C. Spear Safer CPAs and Advisors (Spear Safer) 2 is an accounting firm that performed audits of the financial statements of Mutual Benefits Corporation (MBC). BACKGROUND This case involves a legal malpractice action by an insurer against a law firm retained to represent its insured in a separate prior litigation. For the reasons explained below, we answer the rephrased certified question in the affirmative, quash the Fourth District’s decision, and remand for proceedings consistent with this opinion. WHETHER THE INSURER HAS STANDING THROUGH ITS CONTRACTUAL SUBROGATION PROVISION TO MAINTAIN A MALPRACTICE ACTION AGAINST COUNSEL HIRED TO REPRESENT THE INSURED WHERE THE INSURER HAS A DUTY TO DEFEND. at 1215.1 We rephrase the certified question as follows: 1. 4th DCA 2019), in which the Fourth District certified the following question of great public importance: WHETHER AN INSURER HAS STANDING TO MAINTAIN A MALPRACTICE ACTION AGAINST COUNSEL HIRED TO REPRESENT THE INSURED WHERE THE INSURER HAS A DUTY TO DEFEND. We review the Fourth District Court of Appeal’s decision in Arch Insurance Co. SC19-673 _ ARCH INSURANCE COMPANY, Petitioner, vs.
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