GEORGETOWN, KY -- A $20 million civil verdict out of Scott County was overturned Friday after the state Court of Appeals ruled that litigation conduct cannot be used against insurance companies in bad-faith claims handling lawsuits, reports the Lexington Herald-Leader in its Saturday edition.

The ruling is significant because it addresses a thorny legal issue that affects anyone being defended by an insurance company over a car wreck or liability claim: Are the lawyers that insurance companies provide for their customers acting on behalf of the insurance company instead of just the customer?

Under Kentucky law, a civil defense lawyer's only client is the insured driver — even if the insurance company is paying the bills and is on the hook for the settlement or jury verdict, reports the newspaper.

Applying that principle, the Court of Appeals, 3-0, said an unfair claims handling lawsuit against Cincinnati Insurance Company in 2004 should have never gone to trial. The court wrote that civil defense attorneys can only serve one master: the insured driver.

To hold otherwise, "would be inviting, if not requiring, the very conflicts our case law and ethical rules seek to avoid," Judge Glenn E. Acree wrote in a 72-page opinion, the newspaper reports.

The ruling stemmed from a November 1998 crash in which a shipping company employee fell asleep, crossed the centerline and struck a vehicle driven by George Hofmeister of Bourbon County, with his wife Kay as passenger. George Hofmeister suffered a shattered femur, broken ribs, a broken wrist and a scalp laceration, reports the Herald Leader.

Hofmeister's lawyer, Dale Golden, argued in a 2004 trial that Cincinnati Insurance offered $25,000 to settle Hofmeister's personal injury lawsuit against the driver, Dasher Express' Eugene Clark, about a week before trial. The morning of trial, it upped the offer to $1 million, which was represented by Dasher's lawyer, Dan Murner, as the insurance policy limit.

In actuality, Dasher's policy limit was $5 million. Golden says Hofmeister settled for less than he could have, the newspaper reports.

During the negotiations, Hofmeister sued the insurance company for allegedly handling his claim in bad faith. He was awarded $20 million in 2004.

Golden said he agrees that defense attorneys are only supposed to represent the insured. But he said Dasher's attorney was improperly advising both the insurance company and Dasher, making litigation conduct fair game for a lawsuit against the insurance company, reports the newspaper.

The Court of Appeals, however, saw no evidence that the insurance company was trying to control the attorney's defense strategy, reports the Lexington Herald-Leader.

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