Are lost punitive damages recoverable in a Kentucky legal malpractice action? "No" answered the Kentucky Supreme Court addressing a question of first impression in its recent decision in Osborne v. Keeney, 2010-SC-397 (December 20, 2012).
Brenda Osborne sued her lawyer, Steven Keeney, after Keeney allowed the limitations period to lapse on her personal injury claims that arose after an airplane crashed into her home. A pilot, Quesenberry, experienced mechanical problems with his plane before taking off. The plane's engine lost power not long after take-off and was crashed into Osborne's home, slicing "through her chimney, inflict[ing] significant damage to the second story and set[ting] the house afire[.]" Osborne heard noise from the crash, ran outside to see her house afire; she was not struck by any crash debris and suffered no physical injury
Osborne hired Keeney about 6 months after the crash to represent her with on her claims. Keeney got a homeowner's insurance claim settled but allowed Osborne's claims against Quesenberry to lapse, as they were dismissed as untimely by a federal district judge, who criticized Keeney for this conduct of the case and bad-faith. Keeney never told Osborne that her case had been dismissed.
Osborne sued Keeney for legal malpractice. A jury returned a verdict in Osborne's favor as follows: (1) $54,924.04 for loss of her personal property; (2) $500,000 for pain and suffering from the airplane crash; (3) $750,000 as punitive damages against Quesenberry; (4) $53,025.39 for legal fees paid to Keeney; (5) $250,000 for mental anguish resulting from Keeney's representation. And the jury awarded Osborne $3,500,000 in punitive damages against Keeney.
The Court reversed the verdict because of the trial court's reversible error in instructing the jury on Kentucky's case-within-a-case approach to legal malpractice cases, as was discussed in a previous post, Kentucky Legal Malpractice: The Case-Within-A-Case Approach. It also abandoned the "physical impact" rule as a requirement for recovery of emotional distress damages, as another post discussed, Kentucky Abandons the Physical Impact Requirement for Recovery of Emotional Distress Damages.
The Court ruled that a Kentucky legal malpractice plaintiff could not recover damages covering the lost punitive damages that the malpracticing lawyer caused her to lose. The Court offered two reasons for this ruling: (1) "the argument that punitive damages can be recast as compensatory damages in a legal malpractice claim is flawed and unsuppoted by our case law"; and, (2) "the deterrence function of punitive damages would be completely written out of the law because the nexs between the attorney accused of malpractice and the actual wrongdoer is far too attenuated." However, the Court did state that punitive damages were recoverable based on the malpracticing attorney's actual conduct.