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The Florida Supreme Court heard arguments Friday that could shake up both the insurance and legal industries, while at the same time defining trial judges’ powers in their courtrooms. At issue: whether insurance companies may continue to portray their in-house defense lawyers as members of private law firms, with names like the “Law Office of Timothy W. Harrington.” These firms are commonly known as captive law firms. Also at issue is whether circuit court judges can establish their own rules requiring carriers’ in-house lawyers to identify themselves as such on pleadings. Florida Bar officials are on both sides of the dispute. A special Bar commission appointed to study the captive law firm issue concluded this month that captive law firms are ethically acceptable under certain conditions. But two members of the Bar’s professional ethics committee are arguing the case against captive firms. The case arises from an order issued by Miami-Dade Circuit Judge Paul Siegel in June. While presiding over a personal injury lawsuit, he became furious when he perceived that the insurance company was presenting its in-house lawyers to the court as members of private law firms. He subsequently ordered in-house lawyers for five insurance companies with cases in his courtroom to start disclosing their insurance company affiliation on their pleadings. He also chastised the Florida Bar for not enforcing its ethics rules in this matter. The insurance industry responded swiftly, hiring big-gun appellate lawyers and filing petitions with the Florida Supreme Court to set aside Siegel’s order. The court will hear oral arguments on the case this morning. If the justices uphold Siegel’s order, it could spell the end of a decades-old practice by insurance companies of operating captive law offices staffed by lawyers who are employed by the carriers. Such a ruling also could open the door to allow trial judges to establish their own rules regarding pleadings and other matters, rather than reserving judicial rule-making for the Florida Supreme Court. A similar fight over captive law firms is being waged in Texas. But there the State Bar of Texas has filed suit against the insurance industry over its use of captive law firms. Nationwide Mutual has fired back, filing a suit against the Bar’s unauthorized practice of law committee to stop its investigation of captive firms. The insurance industry is fighting to preserve captive law firms out of concern that if defense lawyers are identified as insurance company employees, juries will realize that the defendant has a deep-pocket insurance carrier behind him or her. If jurors know that, insurers argue, they will be more likely to find against the defendant and hand out a bigger judgment. Representing the insurance industry are some of the top appellate lawyers in the state, including former Florida Supreme Court Chief Justice Arthur England, now a partner at Greenberg Traurig in Miami, and former Chief Judge of the 11th U.S. Circuit Court of Appeals Joseph Hatchett, now a partner at Akerman Senterfitt in Tallahassee. The Florida Insurance Council, the American Insurance Association, the National Association of Independent Insurers, the Alliance of American Insurers and the Florida Bar have filed amicus briefs in the case. On the other side, defending Judge Siegel’s order, are Tim Chinaris, vice chair of the Florida Bar professional ethics committee, and Bob Sondak, of Cohen Chase in Miami. The Academy of Florida Trial Lawyers and the Dade County Trial Lawyers Association submitted a joint amicus brief. One of the attorneys who helped write the brief on a pro bono basis was George Vaka, a partner at Vaka Larson & Johnson in Tampa, Fla., who worked for many years as an insurance defense lawyer and headed the Florida Defense Lawyers Association before switching to plaintiffs’ work out of dissatisfaction with the insurance industry. Siegel, who has served on the bench for 10 years, was hearing a personal injury case when he discovered that one of the attorneys in his courtroom, Timothy Harrington, of the Law Office of Timothy W. Harrington in Miami, was actually an employee of Allstate and that he did not disclose this on his pleadings or letterhead. Siegel fumed. The judge quickly called five insurance companies with ongoing cases in his court to a hearing and ordered them to fully disclose the employment relationship of their lawyers on all pleadings and letterhead in his courtroom. He urged other judges to take similar actions. Saying he was on a crusade for candor, Siegel accused the lawyers of violating Florida Bar rules. Luis Figueroa, who runs Luis E. Ordo�ez & Associates, the 11-lawyer Miami office of Nationwide Insurance company, was another of the in-house lawyers who Siegel said had failed to disclose his employment relationship. But Figueroa argues in a brief to the Florida Supreme Court that his law office demonstrated to the judge that it fully revealed to its policyholder-clients that they were being defended by attorneys employed by Nationwide. He and his colleagues’ business cards indicated that they are “employees of Nationwide Mutual Insurance Co., not a partnership nor a P.A.,” he told the high court. The insurance companies mounted a strong counterattack against Siegel’s order. State Farm retained England, while Allstate hired Hatchett. They and a host of lawyers for insurers petitioned the Florida Supreme Court to vacate Siegel’s order. They went straight to the supreme court on the matter because the high court is solely responsible for regulating attorney conduct. Scheduled to argue before the supreme court today are England and Chinaris, who will be filling in for David Deehl, a partner at Deehl & Carlson in Coral Gables, Fla. Deehl represented the original plaintiff in the personal injury case in Siegel’s courtroom but is in trial in Miami all week. He wrote a brief to the high court defending Siegel’s order. In his brief, Deehl, who is a member of the Bar’s professional ethics committee, argues that captive law firms violate the Bar’s ethics rules and the lawyer’s oath of admission, as well as constituting the unlicensed practice of law. The practice breaches Bar ethics rules prohibiting attorneys from engaging in dishonesty, deceit or misrepresentation, as well as rules which prohibit corporations from operating law firms, Deehl argues. He contends that there is “incalculable harm” in allowing such deception. “Policyholders are being harmed in that they are paying for a defense that their insurer falsely leads them to believe will be provided by an independent law firm,” he wrote. The use of captive law firms also interferes with policyholder’s statutory right to choose their own private lawyers, he contended. England says his oral arguments will focus on the issue of whether Siegel has overstepped his bounds as a circuit court judge. “It is up to the supreme court to set the rules on pleadings,” he argues. “Otherwise we’ll have thousands of judges making up their own rules.” But Deehl notes that the supreme court has ruled in other cases that trial courts can set their own rules. “Judge Siegel acted to protect the integrity of court proceedings and to preserve public confidence in the administration of justice,” he wrote. “He was correctly concerned that jurors be provided with truthful, nonmisleading testimony.” England also says he will argue that the court should follow the recommendation of a Florida Bar commission. On March 1, a special Bar commission charged with studying the practice of in-house insurance attorneys and whether they need ethical guidelines supported the use of captive law firms. The commission concluded that insurance carriers should be allowed to operate captive firms with names like “Law Offices of John Doe” or “John Doe & Associates” as long as they disclose to judges their relationships with the insurers and keep records separate to protect client privacy and confidentiality. The commission recommended allowing in-house attorneys to sign pleadings and legal documents with private firm names as long as their employment relationship with the insurance company is disclosed to the judge at the initial appearance on a case. Currently, this is not required. The report will not be presented to the Supreme Court until it is adopted by the Bar’s board of governors on March 15. George Vaka, who wrote the brief for the trial lawyers’ academy, says he’s not surprised by the report. He says the commission was heavily made up of defense lawyers and insurers’ in-house counsel. Katherine Giddings, a partner with the Tallahassee-based firm Katz, Kutter, Alderman, Bryant & Yon, who represents the American Insurance Association, the National Association of Independent Insurers and the Alliance of American Insurers, doesn’t deny that. She says she’s pleased with the Bar commission’s report. “We worked with them in developing that report.” But Vaka insists the commission’s recommendation that captive law firms notify the court of their affiliation is inadequate. “We want to end the whole charade and offer full disclosure in the judicial system,” he says. “This was a further effort by the insurance industry to extend their influence.”

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