A law firm cannot be charged by an Ironshore Inc. unit with negligent misrepresentation in defending a policyholder because the firm had acted on its client’s behalf, says a federal appeals court, in overturning a lower court ruling.

In 2015, Nicole and Cameron Hinson filed a lawsuit against Columbus, Indiana-based Dorel Juvenile Group Inc., which had allegedly designed, marketed and sold the forward-facing car seat in which their one-year-old child was seated when their vehicle was involved in an accident in Texas, according to Wednesday’s ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in Ironshore Europe DAC v. Schiff Hardin LLP.

The Hinsons alleged the boy suffered a paralyzing spinal cord and brain injury in the accident and filed suit against Dorel.

Dorel was self-insured for up to $6 million and an excess policy issued by Ironshore Inc. unit Ironshore Europe DAC provided an excess layer of an additional $25 million in coverage, according to the ruling.

The policy included an “assistance and cooperation” provision that gave the insurer the right to associate with Dorel in the defense of any claim, required Dorel to cooperate if Ironshore exercised that right, and required Dorel to promptly provide any litigation-related information Ironshore requested, according to the ruling.

Dorel retained Chicago-based Schiff Hardin in the litigation. Although the law firm did not represent Ironshore, the firm provided the insurer with information about the litigation, according to the ruling.

A jury awarded the couple $24.4 million in compensatory damages and an additional $10 million in exemplary damages, according to the ruling. 

After the verdict, Ironshore retained its own counsel for the first time. Post-trial mediation led to a confidential settlement in an amount that reached Ironshore’s policy, the ruling said.

Ironshore then filed suit against Schiff Hardin in U.S. District Court in Marshall, Texas, charging it with negligent misrepresentation. It claimed the law firm had made various misrepresentations and omissions in its reporting to it on the Hinson litigation and that its conduct had led the insurer to believe the couple’s suit “posed no threat of exposure to its policy,” the ruling said.

The district court denied Schiff Hardin’s motion to dismiss the case on the basis of its attorney immunity. The ruling was unanimously overturned by a three-judge appeals court panel.

Attorney immunity applied here, according to the ruling. “The factual allegations of complaint in this case reflect that all of the alleged misrepresentations and omissions were related to Schiff Hardin’s representation of Dorel in the Hinson litigation,” the ruling said.

The law firm’s conduct “falls squarely within the scope of the firm’s representation of its client,” it said. “Schiff’s first duty was to its client, Dorel, and it was up to Ironshore to retain its own counsel if it was dissatisfied with the comprehensiveness of the information it was received from its insured’s attorneys,” said the ruling, in reversing the lower court ruling and dismissing the complaint.