The Second Department this month in Grogan v. Nizam, 2009 NY Slip Op (NYAD 2 Dept. October 13, 2009), addressed the inadvertent mention of "Insurance" during Trial. A mistrial was granted in the Lower Court before Justice Spinner in Suffolk County in a medical malpractice action. During the Plaintiff's direct examination, Plaintiff's counsel made the error of asking his own expert whether he was involved in "Risk Management Work". Following an objection by the defense, and motion for a mistrial, the trial continued when the defense settled for the Court striking the question from the record. No curative charge was given and it is assumed that both sides and the Court wanted to leave this question alone.

The jury brought the question to the forefront during deliberations with the foreperson asking, "I don't know if I should ask this or not, is this award given as a whole or is it given yearly by the insurance company to the individual?" You can envision the reaction of defense counsel on this "Now what" moment after a long trial.

The Court, attempting to have the jury focus on the post-trial instructions, stated: "I can't even tell you whether or not there is an insurance company involved, so I can't tell you that. That's not something that you need to be concerned with. I can't tell you if there is an insurance company. I can't tell you that." The jury was not satisfied however and the Foreperson asked, "Who is making the payment," and in response the Court again stated, "I can't tell you that. I don't know that information." After a verdict in favor of the Plaintiff, the defense again moved for a mistrial which was granted in the Lower Court and the Plaintiff took an appeal.

The Appellate Division affirmed the mistrial order indicating, "Evidence of insurance on the part of a defendant in a medical malpractice action is inadmissible (see, Simpson v. Foundation Co., 201 NY 479, 490; Alben v. Mid-Hudson Med. Group, P.C., 31 AD3d 471, 472; Ward v. Kovacs, 55 AD2d 391; see also, Prince, Richardson on Evidence § 4-614 [Farrell 11th ed]). Where testimony concerning insurance is elicited during trial, even innocently by counsel, and where, as here, the opposing party makes a post verdict motion for a mistrial, it is appropriate to grant that motion, even where such offending testimony has been stricken from the record, if it cannot be determined that the offending testimony clearly did not have an influence on the verdict (see, Ward v. Kovacs, 55 AD2d at 399-400). "The decision to grant or deny a mistrial is within the sound discretion of the court, and is to be made on a case-by-case basis" (Frankson v. Philip Morris Inc., 31 AD3d 372, 373). ... Although there was only the one mention of insurance by the plaintiffs' expert, it cannot be said that this one instance did not have an influence on the jury. The jury's inquiry to the trial court, along with the foreperson's questions regarding that inquiry, revealed, not only that the jury was aware of the defendants' insurance coverage, but also that the defendants' insurance coverage was the subject of its deliberations."

Here, one question and one mention of Insurance sink the whole case. A week of trial, thousands of dollars on both sides for preparation, the time of the Court and jury, and (much to Plaintiff's anguish), a two year delay and a trip to the Appellate Division. The lesson here is the Appellate Devision felt a fair verdict could not be accomplished with the hovering issue of "Insurance" before the jury, an issue that is not to be mentioned in the Courtroom.

Attorney's Lien On Settlement Proceeds

Clients are fickle and often switch counsel in the middle of a case, for both legitimate reasons, and some not so legitimate ones. When the case is concluded the Attorney who settled the case expects to be paid in accord with CPLR section 5003(a) as soon as a release is tendered and a stipulation of discontinuance. Every correspondence accompanying these documents recites the mandate of payment within 21 days as per the CPLR provision.

What happens when the insurance carrier is aware of an attorney's lien due to a substitution of counsel during the pendency of the action? The lawyer who brought the case over the finish line tells the insurance carrier, "I'll take care of the lien" and provides a "Hold-Harmless" agreement.

Rarely is there a problem, but what happens when there is?  How should defense counsel and claims handle these situations to avoid a disaster? Schneider, Klenick, Weitz, Damashek & Shoot v. The City of New York 302 AD2d 183, 754 NYS2d 220 (NYAD 1st Dept. 2002) is a good warning worth repeating to both claims professionals and defense counsel. In this case plaintiff's counsel prosecuted a lead poisoning case against the City of New York on behalf of two infant plaintiffs and conducted all pre-trial discovery and put the case on the trial calendar. Post note of issue the Schneider Kleinick firm was substituted by new counsel who eventually settled the case for $625,000, receiving a fee of $218,000, and refused to honor the attorney's lien of prior counsel. The Schneider Kleinick law firm then filed suit against the City of New York to recover their legal fees. Here the Appellate Court affirmed an award of attorneys fees totaling $175,563.40 for the plaintiffs citing Judiciary Law section 475.
 
Judiciary Law § 475, provides:
"From the commencement of an action, special or other proceeding in any court or before any state, municipal or federal department, except a department of labor, or the service of an answer concerning a counterclaim, the attorney who appears for a party has a lien upon his client's cause of action, claim or counterclaim, which attaches to a verdict, report, determination, decision, judgment or final order in his client's favor, and the proceeds thereof in whatever hands they may come; and the lien cannot be affected by any settlement between the parties before or after judgment, final order or determination. The court upon the petition of the client or attorney may determine and enforce the lien"
 
The Appellate Court stated, "...the City was nonetheless on notice that the Schneider firm had an outstanding claim, and it was responsible to safeguard the full amount of the Schneider firm's lien."  In Sherman & Basichas, LLP v. GEICO  (8 Misc.3d 1013(A), 801 NYS2d 2005) a more alarming result occurred where GEICO put both the Sherman & Basichas law firm on the settlement check with successor counsel. The second attorney endorsed both names on the check and cashed the draft and never paid Sherman & Basichas, who then sought the fee directly from GEICO. Here the claims representative acknowledged the lien and put both firms on the settlement check. Despite this protection, and the misdeeds of the successor counsel in forging the name of Sherman & Basichas on the settlement draft, GEICO was held liable for the attorney's lien and judgment with interest was entered in their favor.
 
What should defense counsel and insurance carriers do to prevent this situation? First and foremost, before any settlement check is issued a thorough review of the file is needed to ascertain whether an attorney's lien is present. "Is the insurance carrier or defense counsel on notice of a lien?" should be a mandatory question on every settlement. If a lien exists, notice of the settlement must be provided to prior counsel and a written agreement should be procured, signed by both prior and successor attorneys, waiving all claims against the insurance carrier and defense counsel for attorney's fees under Judiciary Law section 475 or " quantum meruit" recovery. Finally if such an agreement cannot be obtained, an interpleader action under CPLR 1006 should be entertained to discharge the obligation of the insurance carrier.

No one wants to be caught in a fight over attorneys fees, an event which rivals any sibling argument. More importantly, no one wants to be the claim's representative or the attorney who is forced to defend a claim against the carrier for fees which were already paid. The thought of having to pay the fee twice is enough to push for the precautions suggested above.