In the case of Musick, Peeler & Garrett et al. v. Employers Insurance of Wausau et al., 1992, the U.S Supreme Court addressed a dispute over insurance coverage for legal malpractice claims. The law firm Musick, Peeler & Garrett had been sued by clients who alleged that they were misled into investing in tax shelters that ultimately failed. When their insurer, Employers Insurance of Wausau refused to cover these claims under their professional liability policy due to late notice and lack of consent provisions in the policy contract, the law firm filed suit against them seeking declaratory relief and damages for breach of contract. The court ruled in favor of Employers Insurance on both issues - it held that an insured's failure to comply with a provision requiring prompt notice voids coverage if such noncompliance is prejudicial to the insurer; also it upheld insurers' right to withhold consent from settlements when there was no immediate threat or coercion involved. This decision underscored two important principles: first, insured parties must promptly notify insurers about potential claims; secondly, insurers have discretion regarding settlement agreements unless refusal is unreasonable or unjustified.

The dissenting opinion in the case of Musick, Peeler & Garrett v. Employers Insurance of Wausau argued that the majority's decision to allow insurance companies to sue lawyers for malpractice on behalf of their clients was a dangerous expansion of third-party rights. The dissent contended that this ruling could lead to an increase in frivolous lawsuits and potentially compromise attorney-client privilege by allowing insurers access to confidential information. They also expressed concern about potential conflicts of interest if attorneys were forced into dual loyalty between clients and insurers, which could undermine trust within the legal profession. Furthermore, they disagreed with the majority's interpretation that California law permitted such suits by insurance companies, arguing instead that it only allowed direct victims or beneficiaries of a lawyer’s services - not indirect parties like insurers - to bring malpractice claims.