Legal malpractice.

• Author: Richard, Herschel E., Jr.
• Position: Kentucky

IN A suit filed by the American Insurance Association, the National Association of Independent Insurers, and two State Farm companies, the Kentucky Supreme Court affirmed an ethics opinion barring lawyers from agreeing to do all of an insurer's defense work for a set fee.(28)

The complainants, so termed by the court, were seeking review of Advisory Ethics Opinion E-368, issued by the Kentucky Bar Association Board of Governors. The court upheld the decision of the bar association, which answered "No" to the question: "May a lawyer enter into a contract with a liability insurer in which the lawyer or his firm agrees to do all of the insurer's defense work for a set fee?" The court concluded that such an arrangement would violate Rules 1.7(b) and 1.8(f)(2) of the Kentucky Rules of Professional Conduct because, at least to some extent, the lawyer becomes the insurer and stands to gain by limiting services rendered to the insured-client.

The plaintiffs argued that the rules of professional conduct should not prohibit a set-fee arrangement and that set-fee arrangements do not create an impermissible conflict of interest between the insurance defense attorney and the insured. The court disposed of these arguments by stating that the mere...