Texas Appeals Court Upholds Use of Staff Counsel

A Texas appellate court confirmed the right of insurers to defend their customers with staff attorneys, according to the American Insurance Association (AIA).

The insurance trade group said in American Home & Travelers vs. Dallas County UPLC, the 11th Court of Appeals found the practice of using staff attorneys to be both legal and ethical. They further ruled that this practice is essentially the same as utilizing outside counsel. The decision reaffirmed the status of insurers and insureds as co-clients of defense counsel, clearly recognizing that a tripartite relationship exists among the three parties. The decision also reaffirms that staff counsel is no different from outside counsel, and therefore, its use is not the unauthorized practice of law. AIA filed an amicus brief in this case.

“This significant decision will help preserve insurers’ freedom to efficiently manage their policyholder litigation,” said J. Stephen Zielezienski, AIA assistant general counsel. “The Travelers victory removes a cloud of uncertainty, and will allow insurers to initiate or expand staff counsel operations in one of the country’s largest insurance markets, saving both insurers and their customers tens of millions of dollars annually.”

Several legal challenges to the use of staff counsel have been mounted in Texas since 1998, but this decision is consistent with the nationwide trend of courts and ethics committees upholding the use of staff counsel.