Georgia Court of Appeals Holds That Legal Malpractice Claims Are Assignable

On October 27, 2011, the Georgia Court of Appeals issued an opinion that directly affects all title insurers issuing policies in Georgia. In Villanueva v. First American Title Ins. Co., the Court explicitly held, for the first time, that legal malpractice claims are assignable under O.C.G.A. § 44-12-24 and Georgia law.

The underlying facts in Villanueva are as follows: When a closing attorney, Villanueva, failed to satisfy several outstanding mortgages as part of a real estate closing, the lender’s title insurer, First American, was forced to pay off those outstanding loans. Prior to the closing, First American issued a closing protection letter to the lender that stated, in part, if First American reimbursed the lender for any loss, First American would be “subrogated to all rights and remedies [the lender] would have had against any person or property.” After satisfying the outstanding mortgages, First American filed suit in its name against the closing attorney and his law firm, asserting claims for both legal malpractice and breach of contract.

Villanueva filed a motion for summary judgment on First American’s malpractice claim, alleging that professional malpractice claims are not assignable in Georgia. The trial court denied the closing attorney’s motion, and the Court of Appeals affirmed. In its ruling, the Court held that “[l]egal malpractice claims often involve injury to property in the form of financial loss, rather than personal injury, and therefore may be assignable under O.C.G.A. § 44-12-24.” It also noted that “since its enactment in 1895, the legislature has never amended O.C.G.A. § 44-12-24 to exclude legal malpractice claims from assignability. Consequently, we decline to hold that allowing the assignment of legal malpractice claims violates public policy.”

Villanueva resolves the previous ambiguity that existed in Georgia regarding whether a title insurer could bring a legal malpractice claim directly in its name after making payment on behalf of an insured lender. The “lack of assignability” defense was often raised by defendants, and typically required extensive briefing on part of title insurers who asserted malpractice claims. The Villanueva opinion should now streamline this issue and make recovery of losses easier for title insurers in such situations.