Texas Court Approves Insurer use of Staff Counsel

|

NU Online News Service, Nov. 12, 3:38 p.m. EDT

|

Kirk Hansen, director of claims for the Alliance of AmericanInsurers, based in Downers Grove, Ill., made his comments after aNov. 6 decision by the Texas 11th Court of Appeals.

|

The ruling came in a case brought by American Home AssuranceCompany Inc. and The Travelers Indemnity Company, which sought adeclaratory judgment against a staff counsel ban by the TexasLegislature's Unauthorized Practice of Law Committee, whose membersare appointed by the State Supreme Court.

|

The UPLC countered by seeking a judgment to prevent the insurersfrom continuing to use staff attorneys to represent theirinsureds.

|

Besides reversing a finding that the companies were engaged inunauthorized practice of law, the Circuit Court directed the lowercourt to determine the insurers' legal fees, which it said the UPLCshould pay.

|

The court found the practice of using staff attorneys to belegal and ethical. In addition, the court held that this practiceis essentially the same as utilizing outside counsel.

|

In Washington, D.C., the American Insurance Association hailedthe decision as a reaffirmation of the status of insurers andinsureds as "co-clients" of defense counsel, clearly recognizingthat a tripartite relationship exists among the three parties.

|

Mr. Hansen called the case a "major victory" for the insuranceindustry.

|

The court found that using staff counsel does not amount to theunauthorized practice of law and does not violate attorneys' rulesof professional conduct. Its decision also found that staff counselis no different from outside counsel, and therefore, its use is notthe unauthorized practice of law,

|

Both the Alliance and AIA filed amicus friend of courtbriefs in the case

|

"This significant decision will help preserve insurers' freedomto efficiently manage their policyholder litigation," said J.Stephen Zielezienski, AIA assistant general counsel. "The Travelersvictory removes a cloud of uncertainty and will allow insurers toinitiate or expand staff counsel operations in one of the country'slargest insurance markets, saving both insurers and their customerstens of millions of dollars annually."

|

Several legal challenges to the use of staff counsel have beenmounted in Texas since 1998. The Circuit Court's latest decision isconsistent with the nationwide trend of courts and bar associationethics committees upholding the use of staff counsel, the AIApointed out.

|

"The decision means that Texas joins the majority of states thatrecognize that the use of staff counsel is permissible," theAlliance's Mr. Hansen said. He indicated that only threestates?Kentucky and North Carolina ?still restrict the use ofinsurer staff attorneys.

Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader

  • All PropertyCasualty360.com news coverage, best practices, and in-depth analysis.
  • Educational webcasts, resources from industry leaders, and informative newsletters.
  • Other award-winning websites including BenefitsPRO.com and ThinkAdvisor.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.