AAI Praises Fla. Supreme Ct. Order Permitting Insurer Use of Staff Counsel

A recent order by the Supreme Court of Florida to approve amendments to the rules regulating the Florida Bar is a significant victory for insurers and consumers alike, according to the Alliance of American Insurers (AAI).

“This is a huge win for consumers and insurers,” Kirk Hansen, Alliance director of claims, commented. “The Florida Supreme Court’s order will create an environment that will foster efficient operations while preserving the independent professional judgment of staff counsel. This will result in reduced litigation costs for insurers that ultimately benefit policyholders.”

The rules approved by the court specifically recognize the propriety of staff counsel representing insureds. The rules also confirm the existence of the tripartite relationship between insurer, attorney and insured, and that the attorney may represent both insurer and insured, absent any conflict of interest. The amendments become effective July 1.

The Jan. 23 order ends years of debate in Florida over the role of staff counsel in defending liability claims against insureds and whether insurers were engaging in the unauthorized practice of law by using staff counsel to defend insureds and litigation guidelines for staff attorneys. In 1999, the Florida Bar Association issued three proposed advisory opinions that prohibited insurers from having input on claims against insureds, prohibited defense attorneys from complying with litigation guidelines issued by insurers, and prohibited staff counsel from defending insureds without the insureds’ consent. The linchpin of each of the opinions was that insurers were not clients of defense attorneys.

These were ultimately rejected.

In addition, the Alliance and several other insurer associations filed friend-of-the-court briefs that were successful in convincing the Florida Supreme Court to overturn a lower court’s ruling that a law firm violated state bar rules by using letterhead that did not make clear they were employees of an insurer. The state supreme court reversed that finding last year, determining that the trial court’s orders encroached upon the higher court’s ultimate jurisdiction to adopt rules for the courts. (USAA v. Goodman, 826 So.2d 914).

“The rules approved by the Florida Supreme Court are a practical way to meet the interests of insurers, insureds and the bar,” said Patrick Watts, Alliance assistant vice president. “The court’s rules recognize that the availability of liability insurance is generally not mentioned in litigation for the good of the public. For this reason, the amended rules do not require disclosure of the lawyer’s employment relationship with the insurer in all papers filed in court. A lawyer’s duty of candor may require disclosure in other circumstances, but disclosure is not required in all pleadings.”

“Disclosing the presence of insurance serves no purpose other than to alert juries to the availability of the deep pockets of insurance companies backing a defendant,” Hansen, added. “The court’s order eliminates the prejudicial information that can lead to artificially inflated monetary awards that ultimately harm all consumers through increased insurance costs.”