In Estate of Schneider v. Finmann, 2010 NY Slip Op. 05281 (June 17, 2010), the Court of Appeals of New York relaxed its doctrine of strict privity, which holds that neither an estate nor its beneficiaries may maintain an action for malpractice against an attorney who advised a decedent regarding his estate plan.
In 2000, Saul Schneider purchased a $1 million life insurance policy on his life. Over several years, he transferred the policy to entities of which he was the principal owner. In 2005, he transferred the policy back to himself, individually. When Saul died in 2006, the insurance policy proceeds were included in his taxable estate. The personal representative of Saul's estate sued Saul's estate-planning attorney for malpractice, alleging that the attorney hadn't properly advised Saul of the estate-tax ramifications of both transferring and owning the policy. Both lower courts granted the attorney's motion to dismiss, holding that sufficient privity didn't exist to allow the estate to maintain its action against the attorney. In New York, an attorney generally isn't liable to third parties who aren't in privity with an attorney for harm caused by professional negligence.
However, the Court of Appeals held that there was sufficient privity between the personal representative of an estate and the deceased person's estate-planning attorney to maintain a malpractice action. The court noted that most states no longer adhere to the doctrine of strict privity and commented on the unfairness of a doctrine that left an estate without recourse against a negligent estate-planning attorney. It didn't relax the privity requirement to the extent necessary to allow beneficiaries or other third-party individuals to sue for malpractice without evidence of fraud or collusion or other special circumstances. To do so, the court explained, would produce uncertainty and limitless liability.