Chappell v. Kuhlman Electric Corp., 2006-SC-0000140-DG (Ky. 2009). This case holds twofold: (1) In a workers’ compensation claim, if an employer is a defense attorney’s client (vis-à-vis retention by an insurer), the employer does not cease being that attorney’s client just because the employer later elects to become self-insured; and (2) In order to prove that the actions of an attorney caused plaintiff harm, plaintiff must show that but for the attorney’s negligence plaintiff would have been more likely successful.
Chappell is not per se a workers’ compensation claim, but rather a malpractice claim (among other claims) arising from Chappell’s representation of Kuhlman Electric in a workers’ compensation action. The essential facts were that Chappell’s firm Landrum & Shouse (hereinafter “the law firm”) was retained by Kuhlman’s workers’ compensation insurer Amerisure to represent Kuhlman in a workers’ compensation claim filed by one of its employees. Following resolution of the original claim, Kuhlman became self-insured.
Some time thereafter, the employee successfully reopened his claim against Kuhlman alleging a worsening of his original injury. Again, Amerisure retained the law firm to represent Kuhlman Electric. Thereafter, the law firm filed a motion to join Kuhlman in its capacity as self-insurer as a party to the workers’ compensation action alleging that the employee’s original condition had not worsened but was the result of a new injury suffered while employed by Kuhlman in its self-insured capacity. The ALJ agreed and found Kuhlman liable in its self-insured capacity.
Kuhlman then filed a civil action against the law firm and Amerisure alleging, among other things, malpractice and bad faith, respectively. The Circuit Court granted both the law firm and Amerisure’s motions for summary judgment. Kuhlman appealed and the Court of Appeals affirmed. The matter then went before the Kentucky Supreme Court.
The Supreme Court acknowledged that there indeed was a potential conflict since a new legal entity was not created when Kuhlman elected to self-insure. Kuhlman was still the law firm’s client. However, it also determined, as did the Court of Appeals, that regardless of any breach of fiduciary duty, another law firm would have pursued the same course of action and Kuhlman would not therefore have been more likely successful.
Commentary: This is a type of conflict which can often arise in workers’ compensation claims and one which is often overlooked or ignored by attorneys. The Court’s decision was correct on both counts: (1) Kuhlman was the law firm’s client when insured by Amerisure and did not cease being a client when its interests became adverse to Amerisure’s; and (2) Since Kuhlman would have fared no better even in the absence of the conflict, no damages could be proven.