Allstate Ins. Co., In re, 63975
| Decision Date | 13 January 1987 |
| Docket Number | No. 63975,63975 |
| Citation | 722 S.W.2d 947 |
| Parties | In re ALLSTATE INSURANCE COMPANY, an Illinois insurance corporation, Respondent. |
| Court | Missouri Supreme Court |
Ernest H. Fremont, Jr., Bert S. Braud, Kansas City, for informant.
Darrell L. Havener, Kansas City, Alex Bartlett, Jefferson City, Jeffrey Lennard, Chicago, Ill., for respondent.
Robert O. Hetlage, P. Terence Crebs, Matthew D. Menghini, St. Louis, for amicus curiae Nat'l Assn. of Independent Insurers, et al.
BLACKMAR, Judge.
The respondent, Allstate Insurance Company, is a liability insurer which sometimes assigns attorneys in its full-time employ to defend its insured in civil litigation. The Advisory Committee brought an action in this Court charging (1) that the use of employee attorneys in this manner violates § 484.020(1), RSMo Supp.1984, in that it constitutes the practice of law (§ 484.010(1), RSMo 1978) and the doing of law business (§ 484.010(2), RSMo 1978) by a corporation; and (2) that there are impermissible conflicts of interest between the insurer and the insured, in violation of various Rules of Professional Conduct, if an employee of the insurer represents the insured in litigation. We conclude that neither of these contentions has merit, and so dismiss the information.
The case was heard before Judge Ronald M. Belt as Master. He recommended dismissal but, of course, the ultimate decision is ours. We have jurisdiction to determine questions relating to unauthorized practice of law. In re Thompson, 574 S.W.2d 365 (Mo. banc 1978).
The essential facts are stipulated, as follows:
5. Allstate is contractually obligated under its automobile liability insurance policies issued in the State of Missouri to provide a defense for its insureds when bodily injury and property damage liability lawsuits are brought against Allstate's insureds in any court, state or federal.
6. Allstate employs attorneys licensed to practice law in Missouri on a full-time salaried basis to defend its insureds in certain lawsuits brought in the federal and state courts of Missouri involving claims against said insureds for personal injuries and property damage when such alleged injuries or damages are covered by the policy of insurance issued by Allstate to its insured.
7. All salaried trial counsel employed in Missouri by Allstate are full-time employees of Allstate who are duly licensed to practice law in Missouri and are in good standing to practice law under Missouri Rules. (Emphasis supplied).
Both parties agree that no contested factual issues remain and that the decision is purely legal.
Section 484.010(1), RSMo 1978, defines the "practice of law" as follows:
1. The "practice of law" is hereby defined to be and is the appearance as an advocate in a representative capacity or the drawing of papers, pleadings or documents or the performance of any act in such capacity in connection with proceedings pending or prospective before any court of record, commissioner, referee or any body, board, committee or commission constituted by law or having authority to settle controversies.
Section 484.010(2) likewise defines "law business"
2. The "law business" is hereby defined to be and is the advising or counseling for a valuable consideration of any person, firm, association, or corporation as to any secular law or the drawing or the procuring of or assisting in the drawing for a valuable consideration of any paper, document or instrument affecting or relating to secular rights or the doing of any act for a valuable consideration in a representative capacity, obtaining or tending to obtain or securing or tending to secure for any person, firm, association or corporation any property or property rights whatsoever.
Section 484.020(1), RSMo Supp.1984, reads as follows:
No person shall engage in the practice of law or do law business, as defined in section 484.010, or both, unless he shall have been duly licensed therefor and while his license therefor is in full force and effect, nor shall any association or corporation, except a professional corporation organized pursuant to the provisions of chapter 356, RSMo, engage in the practice of the law or do law business as defined in section 484.010, or both.
To the informants, the issue is very simple. They argue that the defendant is a corporation which is not a professional corporation, and that its employees practice law by preparing pleadings and appearing in court on behalf of insured. It follows, they say, that the respondent itself is practicing law, because the acts of its employees are the corporation's acts.
This Court considered the nature of the liability insurance business many years ago, in Liberty Mutual Insurance Co. v. Jones, 344 Mo. 392, 130 S.W.2d 945 (banc 1939). That case dealt with the adjustment stage, before suit was filed, and held that employees of the insurer, in negotiating settlements of claims against its insured, did not engage in the practice of law or in the doing of law business. We concluded as follows:
1. The Court declares the law to be that the relationship existing between an appellant company and the person to whom it issues any of its forms of casualty insurance policies is that of insurer and insured, and it is not that of attorney and client.
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10. The court declares the law to be that the issuance by an appellant company of a policy of liability insurance, and the act of such company, in accordance with the terms of such policy, in interceding by an attorney at law and maintaining a defense in behalf of the insured when a claim is made or a suit is brought against the insured, do not constitute the practice of law or the doing of law business, though the amount sued for exceeds the amount of insurance coverage.
It is argued that Liberty Mutual did not deal with the filing of pleadings or with appearances in cases in court, and so does not answer the question now before us. Its reasoning nonetheless applies. An insurer has a very substantial interest in litigation involving its insured, and is entitled to retain counsel of its own choosing to protect its interest. The opinion recognized that the relationship between insurer and insured is of relatively recent origin and of a special nature which may not fit readily into traditional conceptualization.
The weak point in the informants' argument is that they quite agree that the services in question may properly be rendered by outside counsel hired and paid by the insurance company. They indeed seek to obtain the business for private practitioners, by denying it to employed attorneys. If, however, the respondent practices law by assigning employee attorneys to the defense of claims, it would just as logically be said to practice law by retaining independent contractors as counsel for its insured. This is shown by State ex rel. McKittrick v. C.S. Dudley & Co., 340 Mo. 852, 102 S.W.2d 895 (1937), in which a collection agency retained attorneys to bring suit on debts in which chasing had not been successful. The attorneys were not employees of the corporation, but rather private practitioners. We found that the corporation was practicing law, because it received a percentage of the fees charged by the attorneys. The primary purpose of § 484.020(1) is to preclude a corporation with non-professional shareholders from having a proprietary interest in or sharing in the emoluments of a law practice. In this respect it makes no difference whether the legal services are rendered by employed lawyers or by independent contractors.
Counsel for the informants could not cite us to a single instance in the law in which a person may lawfully do something through an independent contractor which could not be done through an employee. By the standard definition, one retains an independent contractor to obtain a desired result. 1 Responsibility for the result sought necessarily follows.
The problem now before us has been considered in numerous judicial and professional opinions. With the exception of Gardner v. North Carolina State Bar, 316 N.C. 285, 341 S.E.2d 517 (1986), these authorities hold that an insurance company which defends cases through its employees does not engage in the practice of law. 2
The informants commend Gardner to us, but we are not persuaded. The North Carolina court, for one thing, would apparently reject the rationale of Liberty Mutual. The case also assumes that classic conflict of interest situations would arise which, as Part II of this opinion demonstrates, are not present here. We prefer to follow the great weight of authority, which is consistent with our earlier holding.
The informants append to their brief statistics compiled by the respondent and tending to show that defense of claims through employed attorneys is more economical than retention of private practitioners. From this showing they make the astonishing argument that the respondent derives financial advantage by employing lawyers and therefore is engaged in the "law business" for valuable consideration. The legislature, in enacting the governing statutes, surely had no purpose of dissuading insurance companies from pursuing economies in the defense of claims.
The statutes in issue were enacted in 1915, when automobiles were relatively few and the liability insurance industry was in its infancy. The only change has been to allow lawyers to form professional corporations. We conclude that the legislature, in enacting these statutes, did not intend to limit or restrict liability insurers in the selection of attorneys to defend claims against their insured, and that the actions described in the stipulation constitute neither the practice of law nor the doing of law business.
The informants also argue that a liability insurer cannot assign its own employed attorneys to defend claims...
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