Whether a law firm retained to defend a corporate client has a duty to advise the client about possible insurance coverage for the costs of the litigation.

No. Since the claim rested on a novel theory not accepted by courts in the relevant stataes, the firm had no duty or raise the issue with the client.

Defendant Florida corporation retained Plaintiff law firm to represent it in two Florida lawsuits alleging patent, trademark, and trade dress infringement. Defendant failed to fully compensate Plaintiff for their representation in these lawsuits, and Plaintiff subsequently filed suit to recover $209,199.33 in unpaid attorney's fees, interest, and other costs.

Plaintiff moved for summary judgment to recover payment. Defendant counterclaimed for legal malpractice and breach of fiduciary duty, arguing that Plaintiff failed to advise them that their litigation expenses could possibly have been covered under the corporation's general liability insurance policy. Plaintiff filed a motion to dismiss for failure to state a cause of action. The trial court denied Plaintiff's motions for summary judgment and dismissal.

On appeal, the Appellate Division modified the trial court's order, awarded Plaintiff summary judgment on its claim for unpaid attorney's fees, and dismissed Defendant's counterclaims for failure to state a cause of action. The Appellate Division held that, "absent a factual allegation that plaintiff's representation specifically encompassed advice on insurance coverage, plaintiff owed defendants no duty to inquire into the nature and scope of that coverage." The Appellate Division thereafter certified a question to the Court of Appeals, asking whether its order was properly made.

The Court of Appeals affirmed the Appellate Division's order, reasoning that Plaintiff owed no duty to advise Defendants that their general liability insurance policy might cover Florida litigation costs because at the time of Plaintiff's representation, neither New York nor Florida recognized the duty of an insurer to defend patent infringement claims under a general liability policy's advertising clause. Indeed, only a handful of courts had recognized a duty to defend patent infringement claims under such theory. Furthermore, the Court emphasized that although attorneys must be aware of legal developments, they should not be held liable for failing to advise on novel and questionable theories. The Court thus found that Plaintiff acted in a reasonable and consistent manner under existing law.