In Kumar v. American Tr. Ins. Co. (49 AD3d 1353 [4th Dept 2008]), plaintiffs (assignees of the insured) sued the insured's insurer for bad faith, and in turn, the insurer brought a third party action against the insured's counsel alleging that the damages were caused by negligence and malpractice of counsel.
The Fourth Department rejected the attorneys' argument in support of dismissal that the absence of privity defeated the third party complaint.
The Court held that the parties were not foreclosed from proceeding under the principle of equitable subrogation, as the "pleadings raise serious issues involving ethical considerations."
The Court then noted that the third party complaint "alleges that the loss sustained by" the insured "resulted from the malpractice" of counsel in failing to appear and defend the insured.