Verdict: Defense Lawyers Must Act Independently of Insurance Companies
It's a question that courts have wrestled with: if your insurance company provides you with a personal injury lawyer, does that lawyer act on behalf of the insurance company or you?
Last week, a Kentucky state Court of Appeals ruled that litigation conduct couldn't be used against insurance companies in bad-faith claims.
The case that sparked this ruling involved a 1998 accident where a shipping company employee fell asleep at the wheel, crossed driving lanes and struck a car with George Hofmeister driving and his wife in the passenger seat.
The impact caused George to break his femur, ribs and wrist and have a scalp laceration.
Hofmeister got personal injury attorney Dale Golden to represent him in his personal injury lawsuit and eventually settled the case for $1 million. The shipping company's defense lawyer, Dan Murner, told Golden that the $1 million figure was the insurance policy limit.
But that wasn't the case. The shipping company's limit was actually $5 million.
When Golden discovered this, he and Hofmeister sued the insurance company for allegedly handling his claim in bad faith, making him settle the case for less than he could have.
In 2004, Golden and Hofmeister were awarded $20 million.
The case went all the way to the state Court of Appeals where Golden alleged that the shipping company's attorney had improperly advised both the insurance company and the shipping company, making litigation conduct fair game for a lawsuit against the insurance company.
But the Kentucky state Court of Appeals disagreed.
In Kentucky, a civil defense lawyer's only client is the insured driver. The court applied that principle and said that the unfair claims handling lawsuit against the shipping company's insurance company should have never even gone to trial.
The court basically said that the law is simple: civil defense attorneys can only serve one person—the insured driver. The court also faulted Golden, saying there were numerous instances where he was told that the insurance policy limits were higher than $1 million.
Although Golden agrees that defense lawyers are only supposed to represent the insured, he said that there was a conflict of interest because the insurance company was trying to control the defense strategy.
The court said that Murner, the shipping company's attorney, was not acting as an employee of the insurance company, but rather as an independent contractor.
Golden said that he would appeal the ruling.
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