The Attorney's Liability to Third Parties: an Update
| Jurisdiction | Colorado,United States |
| Citation | Vol. 25 No. 12 Pg. 61 |
| Pages | 61 |
| Publication year | 1996 |
1996, December, Pg. 61. The Attorney's Liability to Third Parties: An Update
In 1981, an article appeared in this column bearing the same title as this one.(fn1) The article noted that in Colorado, lawyers are liable for damages caused by their professional misconduct only to those with whom they share privity of contract, or under a set of narrow exceptions in which a third party is required to show fraud, malice, or intentional wrongdoing on the part of the attorney. That article concluded that the Colorado judiciary would move away from the requirement of privity and would become more lenient in allowing nonclient third parties to recover from negligent attorneys. This article re-examines the Colorado judiciary's treatment of attorney liability to third parties in light of those predictions of the erosion of privity.
In general, the rule that an attorney is not liable to a third party for damages resulting from the attorney's negligence, absent conduct that is fraudulent, malicious, or intentionally tortious, is still the law in Colorado. Among the most recent opinions to reaffirm this rule is Glover v. Southard.(fn2) In Glover, the attorney, at his client's instruction, amended the terms of the client's trust. He failed, however, to revise the client's will to make it consistent with the trust's new terms. This oversight led to a dispute about the validity of the trust after the client's death. To settle the dispute, the various trust beneficiaries relinquished their rights under the trust instrument in exchange for a cash settlement. They then initiated a malpractice action against the attorney to recover for their loss resulting from his oversight.(fn3)
In its opinion, the Colorado Court of Appeals restated the general rule that an attorney is not liable to a third party absent conduct that is fraudulent or malicious. The court noted that the rule rests on three public policy bases: the protection of the attorney-client relationship; the potential of adversarial relationships between attorneys and third parties; and the potential for unlimited liability that an extension of the duty of care would pose.(fn4)
The plaintiffs urged the court to adopt a rule followed by other jurisdictions that imposes a duty of care on lawyers when drafting testamentary instruments in favor of the beneficiaries of those instruments. The court considered the plaintiffs' argument under a general standard of fairness and asked whether a reasonable person would recognize and agree that a duty of care should exist in such situations. In answering in the negative, the court declined to extend an attorney's duty of care to third-party beneficiaries of testamentary instruments under the tort theory of negligence.(fn5)
The plaintiffs also argued that they were intended third-party beneficiaries of the contract between the client and the attorney drafting the will. The court noted that even in jurisdictions that recognize liability to intended third-party beneficiaries, liability lies only when the attorney has failed to...
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