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Tuesday, October 22, 2019

Ark. SC: Insurance lawyer can't represent plumbing company

By Jessica M. Karmasek | Mar 8, 2011


LITTLE ROCK, Ark. (Legal Newsline) - The Arkansas Supreme Court has upheld a lower court's order disqualifying a lawyer from representing a plumbing company.

Mid-Central Plumbing Company and John W. Rogers, Mid-Central's sole shareholder, along with lawyer Stephen Toof Brown, brought an interlocutory appeal from an order of the Pulaski County Circuit Court disqualifying Brown from serving as the attorney for Mid-Central and Rogers in a case filed against them by Brian Kelton.

The case arose from a car accident in which Kelton's vehicle was struck by a vehicle owned by Mid-Central. Kelton filed suit against Mid-Central and Rogers, alleging damages from the collision.

Mid-Central and Rogers were insured by Truck Insurance Exchange for $1 million, and TEI was reinsured by Farmer's Insurance Exchange.

About three months after an answer was filed on behalf of Mid-Central and Rogers, their attorney filed a motion for substitution, seeking to name Brown, an attorney employed by FIE, as the new attorney on the case. The circuit court entered an order substituting counsel.

Kelton filed a response in opposition to the motion for substitution shortly after.

The circuit court held a hearing and the parties agreed that because the response in opposition had been filed after the motion to substitute had already been granted, it would be treated as a motion to disqualify.

After the hearing, the circuit court found that Brown's representation of Mid-Central and Rogers would have constituted the unauthorized practice of law by FIE pursuant to Arkansas Code; that a conflict of interest existed for Brown because his undivided duty of loyalty and confidentiality would have been owed to Mid-Central and Rogers, not to the insurance company that employed him; and that no effective waiver of the inherent conflict had or could have taken place.

Accordingly, the circuit court disqualified Brown from further participation in the case on behalf of FIE's insureds. The circuit court entered its order on June 2, 2010.

The state's high court, in an opinion filed Thursday, affirmed the Pulaski County Circuit Court's order.

Associate Justice Paul E. Danielson, who authored the Court's nine-page opinion, wrote that it is "undisputed" that FIE is not a party and will not become a party to the underlying lawsuit.

"Therefore, it was prohibited by Ark. Code Ann. § 16-22-211 from assigning appellant Brown, one of its in-house counsel, to defend the insureds in the litigation," the Court said.

Because the Court held that state code prohibited Brown from representing Mid-Central and Rogers, "and in light of our decision to hold the statute constitutional, any decision on the remaining arguments presented on appeal -- that there was not an inappropriate conflict and that no breach of duty to preserve Mid-Central and Roger's confidences had occurred -- would be purely advisory."

The Court said it would not issue an advisory opinion.

From Legal Newsline: Reach Jessica Karmasek by e-mail at

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