Advanced No-Fault Issues under Arkansas Law

by: Gerry Schulze

Reasonable and Necessary Medical Care - What is it?
Property Damage Issues
Evaluation of a Total Loss
Rejecting the Cheapest Estimate
Independent Medical Exams and Second Opinions
Wage Earner Disability Issues
Wrongful Death and Catastrophic Injury Issues


No Fault Statute

23-89-201 Broader-than-minimum benefits not prohibited

Nothing contained in this subchapter shall be construed to prevent an insurer from providing
broader benefits than the minimum benefits enumerated in Sec. 23-89-202.

23-89-202. Minimum medical and hospital benefits, etc.

Every automobile liability insurance policy covering any private passenger motor vehicle issued
or delivered in this state shall provide minimum medical and hospital benefits, income disability,
and accidental death benefits, under policy provisions and on forms approved by the Insurance
Commissioner, to the named insured and members of his or her family residing in the same
household injured in a motor vehicle accident, to passengers injured while occupying the insured
motor vehicle, and to persons other than those occupying another vehicle struck by the insured
motor vehicle, without regard to fault, as follows:

(1) MEDICAL AND HOSPITAL BENEFITS. All reasonable and necessary
expenses for medical, hospital, nursing, dental, surgical, ambulance, funeral
expenses, and prosthetic services incurred within twenty-four (24) months after
the automobile accident, up to an aggregate of five thousand dollars ($5,000) per
person and may include any nonmedical remedial care and treatment rendered in
accordance with a recognized religious method of healing. Expenses for hospital
room charges may be limited to semiprivate accommodations;

(2) INCOME DISABILITY BENEFITS. Seventy percent (70%) of the loss of
income from work during a period commencing eight (8) days after the date of the
accident, and not to exceed fifty-two (52) weeks, but subject to a maximum of one
hundred forty dollars ($140) per week. In the case of a nonincome earner, the
benefits shall consist of expenses not to exceed seventy dollars ($70.00) per week,
or any fractional part of a week, which are reasonably incurred for essential
services in lieu of those the injured person would have performed without income
during a period commencing eight (8) days after the date of the accident and not
to exceed fifty-two (52) weeks; and

(3) ACCIDENTAL DEATH BENEFITS. The sum of five thousand dollars
($5,000), to be paid to the personal representative of the insured, should injury,
sickness, or disease resulting from an automobile accident cause death within one
(1) year from the date of the accident.

Ark. Code 23-89-203 Rejection of coverage

(a) The named insured shall have the right to reject in writing all or any one (1) or more of the
coverages enumerated in Sec. 23-89-202.

(b) After a named insured or applicant for insurance rejects this coverage, the insurer or any of
its affiliates shall not be required to notify any insured in any renewal, reinstatement, substitute,
amended, or replacement policy as to the availability of such coverage.

23-89-204. Coverage requirements

(a) The coverages provided in 23-89-202 shall apply only to occupants of the insured vehicle
and to persons struck by the insured vehicle, including pedestrians, bicyclists, motorcyclists,
persons in a horse-drawn wagon or cart, and persons riding on an animal, and to none other.

(b) However, the coverages shall not be applicable, or payable, if the prescribed minimum
coverages are afforded to those occupants and to persons struck by the insured vehicle, either as
a named insured or additional insured under another valid and collectible automobile insurance
policy.

23-89-205. Excluded benefits

An insurer may exclude benefits to any insured, or his or her personal representative, under a
policy required by 23-89-202, when the insureds conduct contributed to the injury he or she
sustained in any of the following ways:

(1) Causing injury to himself or herself intentionally; or

(2) Causing injury while in the commission of a felony or while seeking to elude lawful
apprehension or arrest by a law enforcement official.

23-89-206. Tort liability

Tort liability arising from the ownership, maintenance, or use of a motor vehicle within this state
is retained.





23-89-207. Insurers right of reimbursement


(a) Whenever a recipient of benefits under 23-89-202(1) and (2) recovers in tort for injury,
either by settlement or judgment, the insurer paying the benefits has a right of reimbursement
and credit out of the tort recovery or settlement, less the cost of collection, as defined.

(b) All cost of collection thereof shall be assessed against the insurer and insured in the
proportion each benefits from the recovery.

(c) The insurer shall have a lien upon the recovery to the extent of its benefit payments.

(d) The insurer for the party who is liable in damages to the injured party shall not condition
settlement or payment of a judgment in favor of the injured party upon issuing a single check
jointly to the injured party and the injured partys insurance company.

23-89-208. Payment provision

(a) Payment under the coverages enumerated in 23-89-202(1) and (2) shall be made on a
monthly basis as benefits accrue.

(b) Benefits for any period are overdue if not paid within thirty (30) days after the insurer
received reasonable proof of the amount of all benefits accruing during that period.

(c) If reasonable proof is not supplied as to all benefits accrued, the portion supported by
reasonable proof is overdue if not paid within thirty (30) days after the proof is received by the
insurer.

(d) Any part or all of the remainder of the benefits that is later supported by reasonable proof is
overdue if not paid within thirty (30) days after the proof is received by the insurer.

(e) In the event the insurer fails to pay the benefits when due, the person entitled to the benefits
may bring an action in contract to recover them.

(f) In the event the insurer is required by the action to pay the overdue benefits, the insurer shall,
in addition to the benefits received, be required to pay the reasonable attorneys fees incurred by
the other party, plus twelve percent (12%) penalty, plus interest thereon from the date these sums
became overdue.


23-89-211. Total loss settlements

(a) If an insurer settles a claim for damages to an automobile as a total loss to its own insured or
a person having a claim against its insured, the insurer shall include with the payment for the
loss:

(1) All applicable taxes, including sales taxes and fees as required under Rule and
Regulation 43 of the State Insurance Department; and

(2) An itemized list stating the amount of the claim attributable to the value of the
automobile and attributable to the sales tax on an automobile of that value.

(b) When settling a claim against an insured for damages to an automobile as a total loss, the
insurer will take into consideration all applicable taxes, license fees, and other fees.

(c) An insurer may not abandon salvage to a towing or storage facility in lieu of payment of
towing and storage fees without the consent of the facility and the insured.

(d) The failure of an insurer to comply with the requirements of subsections (a)-(c) of this section
shall be considered an unfair claims settlement practice under 23-66-206(13).

23-89-212. Motor vehicle liability insurance--Extraterritorial provision

(a)(1) Motor vehicle liability insurance applies to the amounts which the owner is legally
obligated to pay as damages because of accidental bodily injury and accidental property damage
arising out of the ownership or operation of a motor vehicle if the accident occurs in the United
States, its possessions, or Canada.

(2) Motor vehicle liability insurance must afford limits of liability not less than those required
under the financial responsibility laws of this state.

(b) If the accident occurs outside this state but in the United States, its possessions, or Canada
and if the limits of liability of the financial responsibility or compulsory insurance laws of the
applicable jurisdiction exceed the limits of liability of the financial responsibility laws of this
state, the motor vehicle liability insurance is deemed to comply with the limits of liability of the
laws of the applicable jurisdiction.

(c) For purposes of this section, motor vehicle is defined as provided in 27-14-207.

23-89-215. Priority of primary motor vehicle liability insurance coverage

The liability insurance policy covering a motor vehicle is primary when the motor vehicle is
driven by:

(1) An insured; or

(2) Any other person:

(A) Not excluded from coverage under the policy;

(B) With the permission of an insured; and

(C) When the use of the motor vehicle is within the scope of the permission granted by an
insured.

23-89-216. Notice concerning use of insurance proceeds

(a) When making payment to a third party on a claim under a motor vehicle insurance policy for
damage to a motor vehicle, a motor vehicle liability insurer shall provide a written notice to the
third-party claimant in substantially the following form:

Failure to use the insurance proceeds in accordance with a security agreement between you and
a lienholder, if any, may constitute the criminal offense of defrauding a secured creditor in
violation of Arkansas Code 5-37-203. If you have any questions, contact your lienholder.

(b) The written notice required by subsection (a) of this section may be provided by including the
written notice on each written loss estimate prepared in connection with the claim.


Reasonable and Necessary Medical Care -What is it?
Reasonable and necessary medical care has a well-recognized meaning in tort litigation.
Ponder v. Cartmell, 301 Ark. 409, 784 S.W.2d 758 (1990). Several important principles include
the principle that medical expenses are reasonable and necessary if causally related to the
tortfeasors negligence and if the victim was not unreasonable in seeking treatment. Evidence
of expense incurred in good faith is some evidence that the charges were reasonable. Bell v.
Stafford, 284 Ark. 196, 680 S.W.2d 700 (1984). Expert medical testimony is not essential in
every case to prove the reasonableness and necessity of medical expenses; in some cases, the
testimony of the injured party alone can provide a sufficient foundation for the introduction of
medical expenses incurred. Id. Unfortunately, the cases defining reasonable and necessary for
tort litigation are not controlling in cases involving the no-fault provision of an insurance
policy. State Farm Mut. Ins. Co. v. Hill, 47 Ark. App. 21, 883 S.W.2d 867 (1994).
In order to make sense of this, it is important to understand the significance of
reasonable and necessary in tort litigation. The case of Ponder v. Cartmell, supra, is a good
place to start. In that case, a plaintiff was injured in a bus accdent. Her treating physician
testified as to the procedures he performed on her and testified that the treatment was made
necessary by the injury she received in the accident. The defendants presented an expert witness
who disagreed with the treating physician in several ways. The important way the defendants
expert disagreed with the plaintiffs treating doctor was discussed as follows:
In the third aspect of his testimony, Dr. Fletcher told the jury that Dr.
Jordan misdiagnosed the appellants symptoms and that this misdiagnosis
led to unnecessary surgery. He disagreed that the scalenotomy was the
proper treatment for the appellants continuing complaints of neck pain,
saying an anterior scalenotomy was not indicated for muscle spasm alone
or pain alone. He also said that the discectomy was not a proper treatment
for the appellants neck problems, saying discectomy is not indicated for
degenerative disc disease alone. Dr. Fletcher said he would not have
performed either operation. It is this part of Dr. Fletchers testimony that
the appellant says should not have been admitted into evidence, and we
agree.
The appellants recovery should not be diminished because Dr.
Jordans misdiagnosis, if indeed that was the case, led to the use of
extreme medical procedures. Given Dr. Fletchers testimony, the jury
might have determined that the appellant should have been treated more
conservatively and that surgery was an extreme or unnecessary measure.
This violates the principle that, so long as an individual has used
reasonable care in selecting a physician, she is entitled to recover from the
wrongdoer to the full extent of her injury, even though the physician fails
to use the remedy or method most approved in similar cases or adopt the
best means of cure. See Am.Jur.2d Damages, 536. This principle is also
recognized in Restatement (2d) Torts, 457, Illustration 1:
As negligence causes B serious harm. B is taken to a hospital. The
surgeon improperly diagnoses his case and performs an unnecessary
operation ... As negligence is the legal cause of the additional harm which
B sustains.
See also OQuinn v. Alston, 213 Ala. 346, 104 So. 653 (1925) (where
treating surgeon amputated finger, it was error to ask defense expert
whether amputation was necessary); Whitaker v. Kruse, 495 N.E.2d 223
(Ind.App.1986) (Plaintiff may recover expenses of unnecessary surgery).
It is true that a plaintiff who seeks to recover medical expenses must prove
the expenses are reasonable and necessary. Kay v. Martin, 300 Ark. 193,
777 S.W.2d 859 (1989). Necessary means causally related to the
tortfeasors negligence. See Bell v. Stafford, 284 Ark. 196, 680 S.W.2d
700 (1985). If a plaintiff proves that her need to seek medical care was
precipitated by the tortfeasors negligence, then the expenses for the care
she receives, whether or not the care is medically necessary, are
recoverable.

Id. at 411-12, 784 S.W.2d 760-61.

The Arkansas Supreme Court followed this line of reasoning in Young v. Barbera, 36
Ark. 120, 233 S.W.3d 651 (2006). In that case a trial judge, sitting as a finder of fact, found that
the plaintiffs chiropractic treatment was not reasonable and necessary because in his mind it was
excessive. The Supreme Court reversed, holding that the trial judges reasoning in reducing the
verdict was clearly erroneous.
In Hill, supra, the plaintiff sued her insurer under the no-fault provision of her insurance
policy. The plaintiff had been treated by a chiropractor. The chiropractors bills totalled at least
$5,000. The insurer decided that any more than $1,400 was not reasonable and necessary under
the no-fault provisions of the insureds policy. Plaintiff sued for the difference. The insurer
brought another chiropractor as its expert. The insurers expert testified that reasonable care for
Mrs. Hills problems would include no more than twenty-eight visits for treatment. The trial
court, in reliance on Ponder v. Cartmell, granted a directed verdict for the plaintiff. The Court
of Appeals reversed, relying on a decision of the United States Supreme Court distinguishing tort
from contract claims.

When a man commits a tort he incurs by force of the law a liability to damages,
measured by certain rules. When a man makes a contract he incurs by force of the
law a liability to damages, unless a certain promised event comes to pass. But
unlike the case of torts, as the contract is by mutual consent, the parties
themselves, expressly or by implication, fix the rule by which the damages are to
be measured.
Globe Refining Co. v. Landa Cotton Oil Co., 190 U.S. 540, 23 S.Ct. 754, 47 L.Ed. 1171
(1903):

This tells us what the rule isnt, but the case doesnt provide much guidance on what the
rule is. General contract interpretation rules apply. The approach in Arkansas is, in theory,
"Read the Statute and Read the Policy." State Farm Mut. Auto. Ins. Co. v. Beavers, 321 Ark. 292,
295, 901 S.W.2d 13 (1995), quoting from Douglass and Telegadis, Stacking of Uninsured and
Underinsured Motorist Vehicle Coverages, 24 U. Rich. L. Rev. 87 (Fall 1989). Of course, it
wouldn't hurt to review the applicable cases on interpretation of the particular policy provision
you have in mind.
Insurance is heavily regulated. Statutory regulations on insurance policy provisions are a
good starting point when considering any policy provisions. If a policy provision is inconsistent
with a statute, the statute controls. In fact, a statute applicable to an insurance policy is
considered part of the policy. Carner v. Farmers Ins. of Arkansas, 3 Ark. App. 201, 203, 623
S.W.2d 859, 860 (1981).
If you can find a statute that prohibits the policy provision that you are trying to interpret,
your job is done. The statute controls.
Here the statute reads:
(1) MEDICAL AND HOSPITAL BENEFITS. All reasonable and necessary expenses for
medical, hospital, nursing, dental, surgical, ambulance, funeral expenses, and prosthetic
services incurred within twenty-four (24) months after the automobile accident, up to an
aggregate of five thousand dollars ($5,000) per person and may include any nonmedical
remedial care and treatment rendered in accordance with a recognized religious method
of healing. Expenses for hospital room charges may be limited to semiprivate
accommodations.

Ark. Code Ann. 23-89-202.
The magic words reasonable and necessary are there in the statute, but all we know
about them is that they dont incorporate the meaning of reasonable and necessary in tort
cases. We do know, however, that the term reasonable and necessary, like all terms in an
insurance policy, are to be given their ordinary, plain English, interpretation. If there is any
ambiguity, the policy must be interpreted in the light most favorable to the insured, who did not
draft the policy.
The next step is to read the policy. An insurance policy is supposed to be written in plain
English.
Insurance policies are drafted from standard forms that are for general use, not specific
circumstances. Ordinarily, the goal of contract interpretation is to ascertain the intent of the
parties, but in the case of an insurance contract, the language was drafted long before at least one
of the parties, and perhaps before either of the parties was even identified.
Since the policy is supposed to be written in plain English, it is to be interpreted the same
way. Courts often say that they construe the meaning of contract provisions in their plain and
ordinary and popular sense, (1) Conley Transportation, Inc. v. Great American Insurance Co.,
312 Ark. 317, 849 S.W.2d 494 (1993) "rather than their legal or technical meaning." Union
Insurance Co. v. The Knife Co., Ltd., 897 F. Supp. 1213, 1215 (W.D. Ark. 1995). "Courts often
ascertain the ordinary and popular sense of undefined words in an insurance policy by consulting
a dictionary. Id., quoting from David B. Goodwin, Review Essay: Disputing Insurance Company
Disputes, 43 Stan. L. Rev. 779, 784 (1991).
That does not mean that the courts ignore the fact that it is an insurance policy that they
are interpreting. A good example is Deal v. Farm Bureau Mutual Insurance Co., 48 Ark. App.
48, 889 S.W.2d 774 (1994). In that case a policy application asked whether the insured had
suffered a previous "fire loss." The insured answered in the negative. After a fire, the insurer
learned that property the insured owned had been destroyed in a fire in 1976. The insured
countered that although the property had been destroyed, he did not have an insurance claim
arising out of the fire. The Arkansas Court of Appeals agreed with the insured that the word
"loss" has an established meaning in the field of insurance, i.e. "Death, injury, destruction, or
damage in such a manner as to charge the insurer with a liability under the terms of the policy."
"Loss" in this context is at best ambiguous. The lesson is that if a term has one meaning in
English, and another in insurance language, it can be ambiguous.
Rules of construction are applicable to insurance policies. The most commonly cited rule
of construction is the one that ambiguities in insurance policies are construed in the light most
favorable to the insured. Provisions of a policy of insurance must be construed most strongly
against the insurance company that prepared it, and if a reasonable construction could be placed
on the contract that would justify recovery, it would be the duty of the court to so construe.
Southern Farm Bureau Cas. Ins. Co. v. Pettie, 54 Ark. App. 79, 91, 924 S.W.2d 828, 834 (1996).
In order to be ambiguous, a term in an insurance policy must be susceptible to more than
one equally reasonable construction. Insurance Co. of North America. v. Forrest City Country
Club, 36 Ark. App. 124, 127, 819 S.W.2d 296, 298 (1991).
This rule is so old and venerable it has a Latin name, contra proferentum. It comes from
ordinary contract law. In contract law, an ambiguous provision is construed against the drafter.
This rule is followed with particular vigor in the insurance context because insurance is a
contract of adhesion in which the terms are not subject to negotiation. This language is so
favorable to insureds, that they seek to quote it whenever possible. The problem is, that this
language is not applicable unless there is an ambiguity. The party asserting that there is an
ambiguity has the duty to point the ambiguity out to the court. Reynolds v. Shelter Mutual Ins.
Co., 313 Ark. 145, 852 S.W.2d 799 (1993). Only when the court finds an ambiguity can the
doctrine of contra proferentum apply.
Another rule of construction is that the policy should be read so as to give meaning to all
its parts:
In construing a contract, even one for insurance drawn by the insurer, we must assume
that the use of different language to define different obligations was deliberate and accompanied
by an intention to convey different meanings rather than the same one. Different clauses of a
contract must be read together and the contract construed so that all of its parts harmonize, if that
is at all possible, and, giving effect to one clause to the exclusion of another on the same subject
where the two are reconcilable, is error.
Kelsey and Fletcher v. Brown and Hackney, 165 Ark. 613, 264 S.W. 930; American
Indemnity Co. v. Hood, 183 Ark. 266, 35 S.W.2d 353.
A construction which neutralizes any provision of a contract should never be adopted if
the contract can be construed to give effect to all provisions.
Fowler v. Unionaid Life Ins. Co., 180 Ark. 140, 20 S.W.2d 611. Continental Casualty
Co. v. Davidson, 250 Ark. 35, 40-41, 463 S.W.2d 652, 655 (1971).
Since we place such importance on the language of an insurance policy, we require that
insureds read that language. They fail to do so at their peril. The insured has a duty to educate
himself or herself about the language of the policy. Scott-Huff Insurance Agency v. Sandusky,
318 Ark. 613, 887 S.W.2d 516 (1994).
Under Ark. Code Ann. 23-89-207, an insurer is entitled to subrogation of medical
payments claims when the insured makes a recovery from the tortfeasor. An important condition
of subrogation is that the insureds recover make him or her whole for the damages suffered.
Ryder v. State Farm Mutual Automobile Ins. Co., 371 Ark. 508, 268 S.W.3dd 298 (2007).
Property Damage Issues

You should be aware that in the event of a total loss of your automobile,
the actual value of your car may be less than the balance you owe to your lender. The
purchase of Gap protection should be given consideration at the time of purchase
of a vehicle.
-Arkansas Insurance Department Brochure, Automobile Insurance.

Evaluation of a Total Loss

With more creative financing plans available all the time, it is increasingly common that
a total loss will result in the owner ending up with a claim that is worth less than he or she owes
on the car. Frequently matters such as sales tax, extended warranties, cash-back promotions, and
other benefits are in reality financed with the vehicle. A car can be upside-down for years.
The impact of this rule is mitigated somewhat by Arkansass total loss statute. If an
insurer settles a claim for damages to an automobile as a total loss . . . to a person having a claim
against its insured, the insurer shall include . . . all applicable taxes, including sales taxes and
fees . . . with the payment for the loss. Ark. Code Ann. 23-89-211(a)(1). The failure of an
insured to make such payment is an unfair claims settlement practice. Ark. Code Ann. 23-89-
211 (d). The obligation of the insurer as to first party claimants under Rule and Regulation 43 of
the State Insurance Department is incorporated by reference in Ark. Code Ann. 23-89-211. That
regulation specifically requires that the cash settlement include all applicable taxes, including all
applicable taxes, license fees and other fees actually incurred incident to transfer of evidence of
ownership of a comparable automobile. Arkansas Insurance Department Rule and Regulation 43,
Unfair Claim Settlement Practices, 10.
http://www.insurance.arkansas.gov/Legal%20Dataservices/rulesandregs/rnr43-2000.pdf
There is a problem with the plain language of this statute and regulation. It only applies
when an insurer settles a loss. In a recent case in Pulaski County Circuit Court, we were unable
to settle the claim as the adverse driver denied liability. The trial court, however, refused to
allow us to rely on this statute and regulation to tack on the sales tax and license fees our client had
to pay when she purchased a replacement automobile. The amount in dispute was not great
enough to justify an appeal.

Rejecting the Cheapest Estimate

In all cases involving damage to motor vehicles, the measure of damages shall be the
difference between the value of the vehicle immediately before the damage occurred and the
value after the damage occurred, plus a reasonable amount of damages for loss of use of the
vehicle. 27-53-401.
This statute leaves quite a bit for proof. What is the value of a vehicle before or after an
accident? What factors go into determining the value.
Fair market value means the price that the property would bring on the open market in a
sale between a seller who is willing to sell and a buyer who is willing and able to buy after a
reasonable opportunity for negotiations. AMI 2221.
When proving damages for property that was not a total loss, the difference in fair market
value may be established by the reasonable cost of repairing the damaged property. Zhan v.
Sherman, 323 Ark. 172, 913 S.W.2d 776 (1996) Minerva Enter., Inc. v. Howlett, 308 Ark. 291,
824 S.W.2d 377 (1992).
A property owner may testify as to his or her opinion of the value of damaged property.
Hickman v. Carter, 315 Ark. 678, 870 S.W.2d 382 (1994). The Arkansas appellate courts give
the factfinder some latitude in its decision in awarding damages when arriving at a fair-market-
value figure and have not required exactness on the proof of damages. Crooms v. Capps, 101
Ark.App. 221, 274 S.W.3d 364 (2008).
Independent Medical Exams and Second Opinions

An insurer has a right to investigate any claim. That implies a right to an independent
medical examination in an appropriate case. Although the minimum amount of coverage
($5,000) might seem to make independent medical exams unreasonably expensive in proportion
to the amount payable, recall that the minimum is just thata minimum. An insured may
purchase far more than $5,000 in medical payments benefits, and many do.
An insurer has a duty to investigate a claim within a reasonable time. The reasonable time in
no-fault cases is 30 days after the insurer received reasonable proof of the amount of all benefits
accruing. Ark. Code Ann 23-89-208 (b) and (c). If the insurer does not do so, it will be
subject to suit, including a claim for statutory penalty and attorneys fees. Ark. Code Ann. 23-
89-208 (f). Cases under the penalty and attorneys fee statute are the source for a lot of the law
regarding an insurers right and duty to investigate claims.
Presentation of a claim and medical bills can be sufficient proof to put an insurer on notice of
the obligation to pay a claim. State Farm. Mut. Automobile Ins. Co v. Brown, 48 Ark. App. 136,
892 S.W.2d 519 (1995). However, it is clear from cases such as. State Farm Mut. Ins. Co. v.
Hill, 47 Ark. App. 21, 883 S.W.2d 867 (1994) that the mere fact that the insured incurred
expenses may not be enough to show that the expenses are reasonable and necessary.
The plaintiff who refuses to undergo an independent medical examination will very likely
have to deal with his or her claim not being paid. That forces the plaintiff to sue. Of course,
once litigation is initiated, Rule 35 of the Arkansas Rules of Civil Procedure will permit an
examination for good cause shown. It may be very difficult to convince a judge that the statutory
penalty and attorneys fees are in order if the plaintiff refuses an examination.
That doesnt mean that the parameters of the examination are not subject to negotiation.
Some insurers will negotiate matters such as the identity of the examining physician or the city in
which the examination will take place.

Wage Earner Disability Issues

The statute provides for income disability benefits beginning eight days after the accident
up to 52 weeks after the accident. In Glenn v. Farmers and Merchants Ins. Co. 649 F. Supp.
1447 (W.D. Ark. 1986) the plaintiff was involved in a motor vehicle accident on January 27,
1984, but missed no work until October 15, 1984 when she had knee surgery. She was off work
until January 20, 1985, and she received $140 per week for that period. Then in April of 1985
she began to lose time at work again. She made a claim for the wage loss incurred more than
fifty-two weeks after the accident. She argued that the 52 week limitation was a limit on the
number of weeks for which she could be paid, not a limit on how long the insurers obligation
could continue. The trial court found to the contrary. The Court interpreted the statute as
meaning that no income disability benefits could be due more than 52 weeks after the accident.
The statute provides for certain exclusions from no-fault coverage. That does not prevent
an insurer from adding additional exclusions to the policy. Aetna Ins. Co. v. Smith 263 Ark.
849, 568 S.W.2d 11 (1978) (upholding workers compensation exclusion). An insurer may
contract with its insureds on whatever terms the parties agree on unless the terms are contrary to
the statute or public policy. Id. At 852-53, 568 S.W.2d 13.



Wrongful Death and Catastrophic Injury Issues

The no-fault provision allows for a $5,000 death benefit to be payable to the personal
representative of the insured. Of course, an insured can purchase more than $5,000 if that is
desired. Note that the subrogation provisions do not apply to this coverage.
If an insured has not elected something greater than the minimal amount, no-fault
coverage is seldom going to be adequate. Five thousand dollars in medical expenses can be
exhausted quickly. The lost earnings provision, with its limits of $140 per week and fifty-two
weeks after the accident, will not be enough to compensate victims of anything other than the
least serious of accidents.
A five thousand dollar death benefit likewise is not likely to be adequate to protect the
insureds heirs. Its difficult to bury someone for five thousand dollars.
When there is a third party claim, frequently catastrophic injury cases will involve
collecting the no-fault benefits as partial temporary relief to the insured or his or her heirs. The
minimum limits under Arkansas law are seldom sufficient in catastrophic injury cases and almost
never enough when there is a wrongful death claim.
There are two reminders about wrongful death cases. The first is that the wrongful death
action can only be brought by the appropriate person. For all practical purposes, that is the
personal representative of the estate appointed by the appropriate Circuit Court. There is also
law to the effect that a wrongful death claim can be made by all the wrongful death beneficiaries
acting together. But as a practical matter this is seldom advisable. First, the requirement that all
beneficiaries join in the suit creates the risk that by leaving out one beneficiary, perhaps one
unknown, the suit would be dismissed as a nullity. Second, in 2001 the General Assembly added
survival damages for loss of life as an independent element of damages. Ark. Code Ann. 16-
62-101. Loss of life damages come under the survival statute, not the wrongful death statute. If
all the heirs together bring an action, instead of the personal representative, there is a strong
argument that the loss of life element is not available.
The second point has to do with the loss of life element itself. That element can be very
valuable. See, e.g. McMullin v. United States, 515 F.Supp.2d 914 (E.D.Ark.2007); One National
Bank v. Pope, 272 S.W.3d 98, 372 Ark. 208 (2008). But there remains substantial confusion as
to what it actually means. Before the 2001 amendment, damages in wrongful death cases were
limited. As the Arkansas Supreme Court stated in Durham v. Marberry, 356 Ark. 481, 156
S.W.3d 242 (2004):
Prior to the passage of Act 1516 of 2001, Arkansas had no statutory provision for
loss-of-life damages, nor was there any such provision in our case law.
Historically,damages recovered by a decedent's estate under the survival statute,
with the exception of funeral expenses, compensated the decedent and were
incurred pre-death. These include damages for medical expenses due to the injury,
lost wages between injury and death, pain and suffering, etc. See, e.g., Advocat,
Inc. v. Sauer, 353 Ark. 29, 111 S.W.3d 346 (2003); New Prospect Drilling Co. v.
First Commercial Trust, N.A., 332 Ark. 466, 966 S.W.2d 233 (1998). The
appellees argued below that the General Assembly's amendment did not add a
new element of damages, and that loss-of-life damages are merely a type of pain
and suffering.

Id. at , 156 S.W.3d 245.
In Durham, the Arkansas Supreme Court held that loss of life damages seek to
compensate a decedent for the loss of the value that the decedent would have placed on his own
life. In One National Bank, supra, the Supreme Court faced an issue of first impression of what
evidence an estate must present in order to seek an award of loss of life damages. This is
necessarily evidence that will have to be considered on a case-by-case basis. The Supreme Court
held that the following evidence was sufficient that the trial court should have submitted the loss
of life claim to the jury:
Here, the testimony clearly demonstrated that Ms. Kaz was a mother of four, as
well as a grandmother, that she was close to her oldest daughter, that she had
worked as a waitress, that she lived with a man for whom she had come to
Arkansas, and that, at the time of the accident, she was on her way to a family get-
together. While not direct evidence with respect to the value Ms. Kaz would have
placed on her life, we hold that this circumstantial evidence was substantial
evidence from which the jury could have inferred the value she would have
placed on her life and on which the jury could have awarded the Estate loss-of-life
damages. Accordingly, because there was substantial evidence from which a jury
could have determined that the Estate was entitled to loss-of-life damages, we
hold that the circuit court erred in granting American Manufacturers's motion for
directed verdict. For that reason, we reverse and remand on this issue.

Id. at 272 S.W, 3d 104
In wrongful death and catastrophic injury cases, there frequently is not enough liability
insurance to go around. The subrogation rights of the insurer under Ark. Code Ann. 23-89-207
is contingent upon the insured being made whole.
It is now well settled that there is no subrogation lien unless and until the injured insured
is made whole for his injury. Ryder v. State Farm Mut. Auto. Ins. Co, 371 Ark. 508, 268
S.W.3d 298 (2007); General Accident Insurance Company v. Jaynes, 343 Ark. 143, 33 S.W.3d
161 (2000), The Travelers Insurance Co. v. O'Hara, 350 Ark. 6, 84 S.W.3d 419 (2002), and
Caldwell v. TACC Corp., 423 F.3d 784 (8th Cir., 2005). The purpose of Ark. Code Ann. 11-9-
410 is to prevent double recovery.
The formula for determining whether an injured worker is made whole is set out in the
case of South Central Arkansas Electric Cooperative v. Buck, 354 Ark. 11, 117 S.W.3d 591
(2003). The amount of actual damages must be calculated. Proper deductions for matters such
as comparative fault, costs, and attorneys fees must be reduced. Then the workers
compensation benefits received at the time of settlement must be added back in. If the
employees total recovery does not exceed the damages incurred, he was not made whole. There
is an illustration of the application of these principles in Buck:

Here, the jury determined that Appellee incurred damages of $80,000. He
actually received a judgment of $48,000. From that judgment amount, costs and
attorneys' fees totaling $21,973.22 must be deducted, leaving $26,026.78 in
proceeds. This amount combined with the $21,979.33 that Appellee received in
compensation benefits totals $48,006.11. Clearly, this amount does not exceed
the damages incurred by Appellee. Assuming arguendo that the jury did take into
account the $21,979.33 paid by Appellants, Appellee still incurred $58,020.67 in
non-reimbursed losses; thus, the judgment of $48,000 is still less than the
damages incurred by Appellee. In sum, Appellee was not made whole by his
judgment against Froozan. We, therefore, cannot say that the trial court erred in
determining that Appellants' lien right under section 11-9-410 was not
enforceable.

Id. at 20, 117 S.W.3d at 597.
This gives us a formula for calculating whether an insured has been made whole.
Frequently, a case will be settled, rather than tried by a jury. In such a case, it is necessary to
resolve the dispute as to whether the claimant has been made whole. If the insurer and the
insured cannot come to a settlement, it is frequently necessary to have a judge determine the
issue. The question whether an insured has been made whole is an equitable question for a judge
rather than a jury question. Farm Bureau Cas. Ins. Co. v. Tallant, 362 Ark. 17, 207 S.W.3d 468
(2005). It is not necessary to get policy limits for the made whole doctrine to apply. Shelter v.
Kennedy, 347 Ark. 184, 60 S.W.3d 458 (2001), but it certainly doesnt hurt either.
Under appropriate circumstances, depending on how the pleadings are worded, an
insured may be entitled to penalty and attorneys fees for fighting a subrogation battle. Caroline
Cameron v. State Farm Mut. Auto. Ins. Co., Craighead County Circuit Court, No. 2008-0376
(RP).


Ethical Issues in Representation
J.G. "Gerry" Schulze



The Client Who Lies
Coverage Defeating Admissions


You are an insurance defense lawyer for Consolidated Federated. Another
Consolidated Federated fender-bender comes across your desk. One Andrew Volstead was
rear-ended by Jos Cuervo. Your insured is Guillermo Cuervo, Joss brother, the owner of the
car.
Jos got a ticket for following too close and driving while intoxicated, his third.
Volsteads lawyer demanded the limits. The policy excludes punitive damages, and Volstead
wasnt seriously injured. He went to a doctor who treated him for two weeks and released him.
The total medical involvement was $625. Volsteads attorney has, of course, sued both Jos
and Guillermo, alleging negligent entrustment.

Jos and Guillermo come to see you. Guillermo tells you that the car isnt really even
his. Its just in his name because Jos couldnt get insurance because of his driving record.
Thats why the insurance agent recommended that Guillermo buy his car and take out the
insurance in his own name.

1. Do you have an ethical problem regarding the fraud that Guillermo and Jos have
just disclosed to you?
a. Can you tell the insurer about it?
b. Must you tell the insurer about it?
c. Must you remain silent about it?
2. Does the insurance agents alleged fraud change anything in your analysis.

A. Rules of Professional Conduct

Ethical questions always start with the Rules of Professional Conduct. What are the
Rules of Professional Conduct but another set of Rules? How are the Rules of Professional
Conduct different from the Rules of Evidence, the Rules of Civil Procedure, or the Rule against
Perpetuities?
We call our Rules of Professional Conduct rules of ethics. Im talking about these
rules today because we have a mandatory one-hour ethics requirement in our continuing legal
education obligation: Every member of the Bar of Arkansas, except as may be otherwise
provided by these rules and, excepting those attorneys granted voluntary inactive status by the
Arkansas Supreme Court Committee on Professional Conduct, shall complete 12 hours of
approved continuing legal education during each reporting period as defined by Rule 5(A)
below. Of those 12 hours, at least one hour shall be ethics, which may include professionalism as
defined by Regulation 3.02. Ark. R. Minimum Con't Legal Educ. Rule 3 (2009)
So what is this ethics hour supposed to be all about, anyway? Here it is:
Rule 3.02. Ethics
Ethics presentations shall be distinct segments no less than one hour in
length, shall be specifically designated separately on the program application and
shall be accompanied by appropriate documentation. Likewise, claims for ethics
credit shall be designated separately on certificates of attendance submitted to the
Secretary.
Ethics shall be defined as follows: "Legal ethics includes, but is not necessarily
limited to, instruction on the Model Rules of Professional Conduct and the Code
of Judicial Conduct."
Ethics may include professionalism courses addressing the principles of
competency, dedication to the service of clients, civility, improvement of justice,
advancement of the rule of law, and service to the community.

Professionalism courses may include a lawyer's responsibility as an officer of the
Court; responsibility to treat fellow lawyers, members of the bench, and clients
with respect and dignity; responsibility to protect the image of the profession;
responsibility generally to the public service; the duty to be informed about
methods of dispute resolution and to counsel clients accordingly; and misuse and
abuse of discovery and litigation.

Ark. Regulation Con't Legal Bd. Rule 3.02 (2009).
The ethics hour ought to also have something to do with the program.
The rule tells us that the Rules of Professional Conduct and a few related issues are
entitled to an hour out of our twelve hour annual continuing legal education requirement. As
substantive law, these rules are not all that complex. They are, to be sure, vague, but Im not
sure that they are conspicuously vaguer than some of the other broad rules of general
applicability. They are difficult to apply, and frequently there is precious little authority to go
on. We could look to the cases in which people get in trouble, but for the most part, with a few
exceptions here and there, those seem to be fairly obvious cases. The only thing that bothers me
about them sometimes is that I think the committee is too willing to take action on cases that in
my opinion, if I were on the committee, I think Id leave to the legal malpractice bar. If someone
lets a statute of limitations run, sure, its probably a legitimate violation of the rules about
competence, but theres always circuit court for those cases. Thats just me. Im not likely to be
on the committee any time soon.
Back to the question: What is it about this relatively short set of rules that requires that it
dominate one twelfth of our annual continuing legal education requirement?
To understand this requirement, I believe we have to look beyond the letter of the law
and seek out its spirit. Unfortunately, that is often an invitation to impose our own values and
prejudices on a set of rules, reading things into them rather than taking guidance from them. We
cannot read the Rules of Professional Responsibility as a moral code. It is a body of substantive
law. We are obliged to comply with the strictures of that substantive law, even if our personal
moral code might counsel us to act differently than the rules require. In many areas a cogent,
strong, and principled ethical argument can be made for behavior that would violate the code.
But if we are to practice law, we must set our personal moral beliefs to one side and live up to
our oath to follow the Code of Professional Conduct. Still, I think the aspiration of the ethics
hour is more than that we engage in a dispassionate analysis of the substantive requirements of
the Model Rules of Professional Conduct, and that we spend this hour discussing our ethical
obligations above and beyond the mere obligations imposed by the Model Rules. Which brings
us to the question, are there any moral or ethical obligations above, beyond, or different from
those imposed by the rules?
The drafters of the Preamble to the Model Rules seemed to think so. The Rules do not .
. . exhaust the moral and ethical considerations that should inform a lawyer, for no worthwhile
human activity can be completely defined by legal rules. The Rules simply provide a framework
for the ethical practice of law. Preamble, Arkansas Model Rules of Professional Conduct.
Scope. But what is the content of the additional moral and ethical considerations that should
inform a lawyer? Reasonable minds can differ, and the minds of lawyers are seldom limited to
the ideas that inhabit the hypothetical reasonable mind.
The Model Rules are a starting point. The Model Rules are the ethical rules that are
actually enforcedthe violation of which will subject us to sanctions.
Most real ethical quandaries arise out of conflicting ethical obligations. The most
common situation in which this occurs is when a conflict of interest arises. We may owe
conflicting duties of loyalty to our clients and the legal system. We may owe conflicting legal
duties to different people.

APPLICABLE RULES AND EXCERPTS FROM THE COMMENTS

Rule 1.6. Confidentiality of information

(a) A lawyer shall not reveal information relating to representation of a client unless the
client gives informed consent, the disclosure is impliedly authorized in order to carry out
the representation or the disclosure is permitted by paragraph (b).
(b) A lawyer may reveal such information to the extent the lawyer reasonably believes
necessary:
(1) to prevent the commission of a criminal act;
(2) to prevent the client from committing a fraud that is reasonably certain
to result in injury to the financial interests or property of another and in
furtherance of which the client has used or is using the lawyer's services;
(3) to prevent, mitigate or rectify injury to the financial interest or property
of another that is reasonably certain to result or has resulted from the
client's commission of a crime or fraud in furtherance of which the client
has used the lawyer's services;
(4) to secure legal advice about the lawyer's compliance with these Rules;
(5) to establish a claim or defense on behalf of the lawyer in a controversy
between the lawyer and the client, to establish a defense to a criminal
charge or civil claim against the lawyer based upon conduct in which the
client was involved, or to respond to allegations in any proceeding
concerning the lawyer's representation of the client or,
(6) to comply with other law or a court order.
(c) Neither this Rule nor Rule 1.8(b) nor Rule 1.16(d) prevents the lawyer from giving
notice of the fact of withdrawal, and the lawyer may also withdraw or disaffirm any
opinion, document, affirmation or the like.


NOTES: COMMENT

Disclosure Adverse to Client
[6] Although the public interest is usually best served by a strict rule requiring lawyers to preserve
the confidentiality of information relating to the representation of their clients, the confidentiality
rule is subject to limited exceptions. For instance, in becoming privy to information about a client,
a lawyer may foresee that the client or a third person intends to commit a crime and may reveal
that information to prevent the crime. The overriding value of life and physical integrity permits
disclosure reasonably necessary to prevent death or bodily harm. Other future harms as a result
of a criminal act, such as fraud, damage to economic interests, or loss of property which are
reasonably certain to occur, also permit disclosure if necessary to eliminate the threat. Several
situations must be distinguished.
[a] First, the lawyer may not counsel or assist a client in conduct that is criminal or fraudulent. See
Rule 1.2(d). Similarly, a lawyer has a duty under Rule 3.3(a)(3) not to use false evidence. This
duty is essentially a special instance of the duty prescribed in Rule 1.2(d) to avoid assisting a
client in criminal or fraudulent conduct.
[b] Second, the lawyer may have been innocently involved in past conduct by the client that was
criminal or fraudulent. In such a situation the lawyer has not violated Rule 1.2(d), because to
"counsel or assist" criminal or fraudulent conduct requires knowing that the conduct is of that
character.
[c] Third, the lawyer may learn that a client, or a third person, intends prospective conduct that is
criminal. As stated in paragraph (b)(1), the lawyer has professional discretion to reveal
information in order to prevent the crime which the lawyer reasonably believes is intended by the
client or a third person. It is, of course, sometimes difficult for a lawyer to "know" when such a
purpose will actually be carried out, for the client or the third person may have a change of mind.
[d] The lawyer's exercise of discretion requires consideration of such factors as the nature of the
lawyer's relationship with the client and with those who might be injured by the client, the lawyer's
own involvement in the transaction and factors that may extenuate the conduct in question.
Where practical, the lawyer should seek to persuade the client to take suitable action. In any
case, a disclosure adverse to the client's interest should be no greater than the lawyer reasonably
believes necessary to the purpose. A lawyer's decision not to take preventive action permitted by
paragraph (b)(1), (b)(2) or (b)(3) does not violate this Rule.
[7] Paragraph (b)(2) is a limited exception to the rule of confidentiality that permits the lawyer to
reveal information to the extent necessary to enable affected persons or appropriate authorities to
prevent the client from committing a fraud, as defined in Rule 1.0 (d), that is reasonably certain to
result in injury to the financial or property interests of another and in furtherance of which the
client has used or is using the lawyer's services. Such a serious abuse of the client-lawyer
relationship by the client forfeits the protection of this Rule. The client can, of course, prevent
such disclosure by refraining from the wrongful conduct. Although paragraph (b)(2) does not
require the lawyer to reveal the client's misconduct the lawyer may not counsel or assist the client
in conduct the lawyer know is fraudulent. See Rule 1.2 (d). See also Rule 1.16 with respect to
the lawyer's obligation or right to withdraw from the representation of the client in such
circumstances, and Rule 1.13 (c), which permits the lawyer, where the client is an organization, to
reveal information relating to the representation in limited circumstances.
[8] Paragraph (b)(3) addresses the situation in which the lawyer does not learn of the client's
crime or fraud until after it has been consummated. Although the client no longer has the option of
preventing disclosure by refraining from the wrongful conduct, there will be situations in which the
loss suffered by the affected person can be prevented, rectified or mitigated. In such situations,
the lawyer may disclose information relating to the representation to the extent necessary to
enable the affected person to prevent or mitigate reasonably certain losses or to attempt to
recoup their losses. Paragraph (b)(3) does not apply when a person who has committed a crime
or fraud thereafter employs a lawyer for representation concerning that offense.
[9] A lawyer's confidentiality obligations do not preclude a lawyer from securing confidential legal
advice about the lawyer's personal responsibility to comply with these Rules. In most situations,
disclosing information to secure such advice will be impliedly authorized for the lawyer to carry
out the representation. Even when the disclosure is not impliedly authorized, paragraph (b)(4)
permits such disclosure because of the importance of a lawyer's compliance with the Rules of
Professional Conduct.
[10] Where a legal claim or disciplinary charge alleges complicity of the lawyer in a client's
conduct or other misconduct of the lawyer involving representation of the client, the lawyer may
respond to the extent the lawyer reasonably believes necessary to establish a defense. The same
is true with respect to a claim involving the conduct or representation of a former client. Such a
charge can arise in a civil, criminal, disciplinary or other proceeding and can be based on a wrong
allegedly committed by the lawyer against the client or on a wrong alleged by a third person, for
example, a person claiming to have been defrauded by the lawyer and client acting together. The
lawyer's right to respond arises when an assertion of such complicity has been made. Paragraph
(b)(5) does not require the lawyer to await the commencement of an action or proceeding that
charges such complicity, so that the defense may be established by responding directly to a third
party who has made such an assertion. The right to defend also applies, of course, where a
proceeding has been commenced.
[11] A lawyer entitled to a fee is permitted by paragraph (b)(5) to prove the services rendered in
an action to collect it. This aspect of the rule expresses the principle that the beneficiary of a
fiduciary relationship may not exploit it to the detriment of the fiduciary.
[12] Other law may require that a lawyer disclose information about a client. Whether such a law
supersedes Rule 1.6 is a question of law beyond the scope of these Rules. When disclosure of
information relating to the representation appears to be required by other law, the lawyer must
discuss the matter with the client to the extent required by Rule 1.4. If, however, the other law
supersedes this Rule and requires disclosure, paragraph (b)(6) permits the lawyer to make such
disclosures as are necessary to comply with the law.
[13] A lawyer may be ordered to reveal information relating to the representation of a client by a
court or by another tribunal or governmental entity claiming authority pursuant to other law to
compel the disclosure. Absent informed consent of the client to do otherwise, the lawyer should
assert on behalf of the client all nonfrivolous claims that the order is not authorized by other law
or that the information sought is protected against disclosure by the attorney-client privilege or
other applicable law. In the event of an adverse ruling, the lawyer must consult with the client
about the possibility of appeal to the extent required by Rule 1.4. Unless review is sought,
however, paragraph (b)(6) permits the lawyer to comply with the court's order.
[14] Paragraph (b) permits disclosure only to the extent the lawyer reasonably believes the
disclosure is necessary to accomplish one of the purposes specified. Where practicable, the
lawyer should first seek to persuade the client to take suitable action to obviate the need for
disclosure. In any case, a disclosure adverse to the client's interest should be no greater than the
lawyer reasonably believes necessary to accomplish the purpose. If the disclosure will be made
in connection with a judicial proceeding, the disclosure should be made in a manner that limits
access to the information to the tribunal or other persons having a need to know it and
appropriate protective orders or other arrangements should be sought by the lawyer to the fullest
extent practicable.
[15] Paragraph (b) permits but does not require the disclosure of information relating to a client's
representation to accomplish the purposes specified in paragraphs (b)(1) through (b)(6). In
exercising the discretion conferred by this Rule, the lawyer may consider such factors as the
nature of the lawyer's relationship with the client and with those who might be injured by the
client, the lawyer's own involvement in the transaction and factors that may extenuate the
conduct in question. A lawyer's decision not to disclose as permitted by paragraph (b) does not
violate this Rule. Disclosure may be required, however, by other Rules. Some Rules require
disclosure only if such disclosure would be permitted by paragraph (b). See Rules 1.2(d), 4.1(b),
8.1 and 8.3. Rule 3.3, on the other hand, requires disclosure in some circumstances regardless of
whether such disclosure is permitted by this Rule. See Rule 3.3(c).

Rule 1.7. Conflict of interest: current clients

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the
representation involves a concurrent conflict of interest. A concurrent conflict of interest
exists if:
(1) the representation of one client will be directly adverse to another
clients; or
(2) there is a significant risk that the representation of one or more clients
will be materially limited by the lawyer's responsibilities to another client, a
former client or a third person or by a personal interest of the lawyer,
(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a),
a lawyer may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to provide
competent and diligent representation to each affected client;
(2) the representation is not prohibited by law:
(3) the representation does not involve the assertion of a claim by one
client against another client represented by the lawyer in the same
litigation or other proceeding before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing,

NOTES: COMMENT
Interest of Person Paying for a Lawyer's Service
[13] A lawyer may be paid from a source other than the client, including a co-client, if the client is
informed of that fact and consents and the arrangement does not compromise the lawyer's duty
of loyalty or independent judgment to the client. See Rule 1.8(f). For example, when an insurer
and its insured have conflicting interests in a matter arising from a liability insurance agreement,
and the insurer is required to provide special counsel for the insured, the arrangement should
assure the special counsel's professional independence. So also, when a corporation and its
directors or employees are involved in a controversy in which they have conflicting interests, the
corporation may provide funds for separate legal representation of the directors or employees, if
the clients consent after consultation and the arrangement ensures the lawyer's professional
independence. If acceptance of the payment from any other source presents a significant risk that
the lawyer's representation of the client will be materially limited by the lawyer's own interest in
accommodating the person paying the lawyer's fee or by the lawyer's responsibilities to a payer
who is also a co-client, then the lawyer must comply with the requirements of paragraph (b)
before accepting the representation, including determining whether the conflict is consentable
and, if so, that the client has adequate information about the material risks of the representation.



Rule 1.8. Conflict of interest: current clients: specific rule

(a) A lawyer shall not enter into a business transaction with a client or knowingly acquire
an ownership, possessory, security or other pecuniary interest adverse to a client
unless:
(1) the transaction and terms on which the lawyer acquires the interest are
fair and reasonable to the client and are fully disclosed and transmitted in
writing in a manner that can be reasonably understood by the client;
(2) the client is advised in writing of the desirability of seeking and is given
a reasonable opportunity to seek the advice of independent legal counsel
in the transaction; and
(3) the client gives informed consent, in a writing signed by the client, to
the essential terms of the transaction and the lawyer's role in the
transaction, including whether the lawyer is representing the client in the
transaction.
(b) A lawyer shall not use information relating to representation of a client to the
disadvantage of the client unless the client gives informed consent, in a writing signed
by the client, except as permitted or required by these Rules.
(c) A lawyer shall not solicit any substantial gift from a client, including a testamentary
gift, or prepare on behalf of a client an instrument giving the lawyer or a person related to
the lawyer any substantial gift unless the lawyer or other recipient of the gift is related to
the client. For purposes of this paragraph, related persons include a person within the
third degree of relationship to the lawyer or the client. The following persons are
relatives with the third degree of relationship: great-grandparent, grandparent, parent,
uncle, aunt, brother, sister, child, grand child, great-grand child, nephew or niece.
(d) Prior to the conclusion of representation of a client, a lawyer shall not make or
negotiate an agreement giving the lawyer literary or media rights to a portrayal or
account based in substantial part on information relating to the representation.
(e) A lawyer shall not provide financial assistance to a client in connection with pending
or contemplated litigation, except that:
(1) a lawyer may advance court costs and expenses of litigation, the
repayment of which may be contingent on the outcome of the matter; and
(2) a lawyer representing an indigent client may pay court costs and
expenses of litigation on behalf of the client.
(f) A lawyer shall not accept compensation for representing a client from one other than
the client unless:
(1) the client gives informed consent;
(2) there is no interference with the lawyer's independence of professional
judgment or with the client-lawyer relationship; and
(3) information relating to representation of a client is protected as required
by Rule 1.6.
(g) A lawyer who represents two or more clients shall not participate in making an
aggregate settlement of the claims of or against the clients, or in a criminal case an
aggregated agreement as to guilty or nolo contendere pleas, unless each client gives
informed consent, in a writing signed by the client. The lawyer's disclosure shall include
the existence and nature of all the claims or pleas involved and of the participation of
each person in the settlement.
(h) A lawyer shall not:
(1) make an agreement prospectively limiting the lawyer's liability to a
client for malpractice unless the client is represented by independent legal
counsel, or
(2) settle a claim or potential claim for such liability with an unrepresented
client or former client unless that person is advised in writing of the
desirability of seeking and is given a reasonable opportunity to seek the
advice of independent legal counsel in connection therewith.
(i) A lawyer shall not acquire a proprietary interest in the cause of action or subject
matter of litigation the lawyer is conducting for a client, except that the lawyer may:
(1) acquire a lien granted by law to secure the lawyer's fee or expenses;
and
(2) contract with a client for a reasonable contingent fee in a civil case.
(j) A lawyer shall not have sexual relations with a client unless a consensual sexual
relationship existed between them when the client-lawyer relationship commenced.
(k) While lawyers are associated in a firm, a prohibition in the foregoing paragraphs (a)
through (i) that applies to any one of them shall apply to all of them,
(l) A lawyer related to another lawyer as parent, child, sibling or spouse shall not
represent a client in a representation directly adverse to a person whom the lawyer
knows is represented by the other lawyer except upon informed consent by the client,
confirmed in writing.

NOTES: COMMENT

Use of Information Related to Representation
[5] Use of information relating to the representation to the disadvantage of the client violates the
lawyer's duty of loyalty. Paragraph (b) applies when the information is used to benefit either the
lawyer or a third person, such as another client or business associate of the lawyer. For example,
if a lawyer learns that a client intends to purchase and develop several parcels of land, the lawyer
may not use that information to purchase one of the parcels in competition with the client or to
recommend that another client make such a purchase. The Rule does not prohibit uses that do
not disadvantage the client. For example, a lawyer who learns a government agency's
interpretation of trade legislation during the representation of one client may properly use that
information to benefit other clients. Paragraph (b) prohibits disadvantageous use of client
information unless the client gives informed consent, except as permitted or required by these
Rules. See Rules 1.2(d), 1.6, 1.9(c), 3.3, 4.1(b), 8.1 and 8.3.


Person Paying for a Lawyer's Services
[11] Lawyers are frequently asked to represent a client under circumstances in which a third
person will compensate the lawyer, in whole or in part. The third person might be a relative or
friend, an indemnitor (such as a liability insurance company) or a co-client (such as a corporation
sued along with one or more of its employees). Because third-party payers frequently have
interests that differ from those of the client, including interests in minimizing the amount spent on
the representation and in learning how the representation is progressing, lawyers are prohibited
from accepting or continuing such representations unless the lawyer determines that there will be
no interference with the lawyer's independent professional judgment and there is informed
consent from the client. See also Rule 5.4(c) (prohibiting interference with a lawyer's professional
judgment by one who recommends, employs or pays the lawyer to render legal services for
another).
[12] Sometimes, it will be sufficient for the lawyer to obtain the client's informed consent regarding
the fact of the payment and the identity of the third-party payer. If, however, the fee arrangement
creates a conflict of interest for the lawyer, then the lawyer must comply with Rule. 1.7. The
lawyer must also conform to the requirements of Rule 1.6 concerning confidentiality. Under Rule
1.7(a), a conflict of interest exists if there is significant risk that the lawyer's representation of the
client will be materially limited by the lawyer's own interest in the fee arrangement or by the
lawyer's responsibilities to the third-party payer (for example, when the third-party payer is a co-
client). Under Rule 1.7(b), the lawyer may accept or continue the representation with the informed
consent of each affected client, unless the conflict is nonconsentable under that paragraph.
Under Rule 1.7(b), the informed consent must be confirmed in writing.

I didnt make all of this hypothetical up. There is a Nevada Ethics opinion about the fact
situation in which a brother permanently lends his brother his car because his record for
getting DWIs makes him uninsurable. State Bar of Nevada Standing Committee On Ethics And
Professional Responsibility Formal Opinion No. 9 (originally issued on 4/21/88, conclusion
amended 9/24/07). The brothers confess to their lawyer that the arrangement essentially is
fraudulent as to the insurer. The State Bar of Nevada Standing Committee on Ethics and
Professional Responsibility determined that the lawyer could not disclose the fraud to the
insurance company, was not obliged to withdraw on the ground that the fraud was complete, not
continuing, and that he was not required to, but probably should counsel Guillermo about the
adverse consequences of this fraudulent activity to the extent any further warning might be
necessary. I made up a few extra details. The names have been changedwell, you are free to
guess why I changed the names.
In First American Carriers, Inc. v. Kroger Co., 302 Ark. 86, 787 S.W.2d 669 (1990)
there was an eleven vehicle accident involving, among other vehicles, some tractor trailers. An
insurer for one tractor trailer, First American Carriers, called an attorney in a large law firm. He
did extensive work on the case. An insurer for another tractor trailer, owned by Kroger, called
another attorney in the same firm and asked him a question. He did a minimal amount of work
on the case, unaware that his partner was heavily involved in the case. The second lawyer both
worked the case for about a day until they found out they were both working the same case, at
which point the one who had done the minimal amount of work withdrew. He had never actually
talked to a client, but had dealt exclusively with the adjustor. No confidential information had
yet been conveyed. Nonetheless, new counsel for Kroger moved to disqualify the firm as First
Americans lawyer due to conflict of interest. The trial court granted the motion. The Supreme
Court affirmed.
An attorney hired by an insurance company to represent an insured is, of course, the
attorney for the insured, not the insurer, even if the attorney never so much as talks to the
insured. The case is a good illustration of just how seriously the Arkansas Supreme Court takes
this rule.

Unethical Doctors and Your Client


Dr. Dan Detroit is a chiropractor in Little Rock. In order to increase his business, Dr.
Detroit hires Roger Rabbit and his wife, Jessica Rabbit to find new patients for him. Roger and
Jessica go to the police station and gather police reports. They then contact the injured
partiesboth by telephone and in personand encourage them to see Dr. Detroit. Sometimes
Roger will make statements that arestrictly speakingnot true. Roger Rabbit frequently poses
as a former patient of Dr. Detroit, although he has never in fact had any chiropractic treatment
whatsoever. He has also made promises of success that may or may not have any basis at all in
fact. Jessica, on the other hand, has not engaged in any false or misleading statements.
Dr. Detroit treats the accident victims and bills their automobile insurance company.
Amazingly, the average course of treatment costs just under $5,000.00. Then the patient is
released as healed.
Insurers become suspicious of Dr. Detroit and stop paying his bills. At first, he begins
contacting insurers and negotiating settlements of his patients injury cases. His patients agree
to sign releases in order to get the matter resolved. Some of them even get money left over after
the chiropractic bills have been paid. He charges no fee for this service, but he does make sure
that his bill gets paid out of the proceeds. Some insurers, however, refuse to deal with him. He
contacts you about a claim against those insurers:
1. Can you represent Dr. Detroit in private suits against the insurance companies?
2. Can you represent his patients that he brings to you?
3. Can you, while youre at it, represent those patients in personal injury actions against
tortfeasors?
4. Is there any difference in how you may treat cases involving persons solicited by Roger
and those solicited by Jessica?

The first question raised by this title is what we mean by unethical doctors. The medical
profession has its own code of ethics. Clearly, the study of medical ethics is of ancient origin,
going back as far as the Hippocratic Oath. The American Medical Association has this statement
of principles of medical ethics on its webpage:

Principles of medical ethics
I. A physician shall be dedicated to providing competent medical care, with compassion and respect for
human dignity and rights.
II. A physician shall uphold the standards of professionalism, be honest in all professional interactions,
and strive to report physicians deficient in character or competence, or engaging in fraud or deception,
to appropriate entities.
III. A physician shall respect the law and also recognize a responsibility to seek changes in those
requirements which are contrary to the best interests of the patient.
IV. A physician shall respect the rights of patients, colleagues, and other health professionals, and shall
safeguard patient confidences and privacy within the constraints of the law.
V. A physician shall continue to study, apply, and advance scientific knowledge, maintain a
commitment to medical education, make relevant information available to patients, colleagues, and
the public, obtain consultation, and use the talents of other health professionals when indicated.
VI. A physician shall, in the provision of appropriate patient care, except in emergencies, be free to
choose whom to serve, with whom to associate, and the environment in which to provide medical care.
VII. A physician shall recognize a responsibility to participate in activities contributing to the
improvement of the community and the betterment of public health.
VIII. A physician shall, while caring for a patient, regard responsibility to the patient as paramount.
IX. A physician shall support access to medical care for all people.
Adopted June 1957; revised June 1980; revised June 2001.
http://www.ama-assn.org/ama/pub/physician-resources/medical-ethics/code-medical-
ethics/principles-medical-ethics.page?

There are, however, some ethical issues regarding health care providers that dont fall in
any of these categories.
As with the last hypothetical, I did not make all these allegations up. There have been
similar allegations against certain chiropractors. As of yet these are only allegations. However,
for our purposes we have to discuss the ethical implications of our practice. We can certainly
deal in hypotheticals that may or may not have a factual basis.
The ethical rules for chiropractors are different from those that apply to us as lawyers. In
Culpepper v. Arkansas Board of Chiropractic Examiners 343 Ark. 467, 36 S.W.3d 335 (2001)
the Arkansas Supreme Court held that a regulation of the chiropractic board prohibiting
telephone solicitation by telemarketers hired by the chiropractor was unconstitutional as the
board failed to produce any evidence that the regulation furthered any governmental interests and
was not sufficiently narrowly tailored. As lawyers, we are presumed to be so persuasive that a
call from one of us could be intimidating. The same doesnt apply to chiropractors.
A complaint filed in Pulaski County Circuit Court by two chiropractors in November of
2011 alleges that a chiropractic clinic was engaged in solicitations of patients by means of false
and misleading statements and even paying money to patients to make and keep appointments.
There is not a whole lot of detail about the nature of the false and misleading statements in the
complaint. Johnson v. Pulaski Injury & Rehab Center, Inc., Pul. Cir. No. 60 CV 2011-5690,
filed November 28, 2011. Some of the defendants, alleged marketers have answered, denying
the allegations.
The Florida Attorney Generals office has complained about solicitation by chiropractors and
doctors. http://myfloridalegal.com/pages.nsf/Main/9ab243305303a0e085256cca005b8e2e The
activity is described as follows:
Most traffic accidents in Florida result in an accident report being filed with the local
law enforcement agency. Individuals called "runners" contact the law enforcement
agency to pick up copies of all accident reports filed with that agency. The "pickups"
occur anywhere from a daily to a weekly basis, depending on how quickly the agency
makes the reports available to the public. Most of the time the runners have made
arrangements with the local agencies to have all reports copied and ready to be picked
up. A typical law enforcement agency may have hundreds of records copied and stacked
waiting for pickup from up to a dozen runners on any given day. Because accident
reports are public records under Chapter 119, Florida Statutes, law enforcement
agencies have no choice but to comply with the requests.

The runners subsequently use the reports to personally solicit accident victims or to turn
a list of victims' names over to a third party who will solicit. These solicitations generally
take the form of either harassing or invasive telephone calls or intimidating personal visits
to the insured's home. Whether by telephone or in person, the solicitor generally
misleads the victims into thinking they are speaking to their insurance company and that
the visit to a doctor or chiropractic clinic is mandatory. The runner will often also refer
victims to an auto body shop and a lawyer, all in return for kickbacks. The biggest payoff,
though, comes from medical professionals who typically pay between $250.00 and
$500.00 to the runner per referral. Other times victims are induced to believe they will
receive large settlements for their injuries, whether real or not, but only if they visit the
specific doctor or chiropractor immediately. Some runners dispense with formalities and
offer the victims money to visit the doctor or clinic.

Some runners pick up accident reports for so-called "accident journals." These
periodicals have nothing in common with any legitimate newspapers or periodicals. They
are nothing more than a list of the names, addresses and phone numbers of people
involved in accidents which have been summarized from the accident reports. These
"journals" are then sold to chiropractors and lawyers to be used for a mail solicitation, or
to solicitors who will call or visit victims directly.

Once they appear for medical care, the victims are given a battery of diagnostic tests
which rarely vary regardless of the reported injury. Some tests are of dubious value;
others, like video fluoroscopy, we have learned, can be dangerous if not administered
correctly. Whatever the test, they all have one thing in common; they're extremely
expensive and are primarily for the purpose of draining PIP benefits.

Some doctors or chiropractors will in turn refer the patient to a lawyer with whom they
have a business relationship. This typically does not involve a money exchange, rather
the doctor will expect referrals back from the lawyer.

Statewide Grand Jury Report, Report, Case No. 95,746, Second Interim Report of the Fifteenth
Statewide Grand Jury.
Some states regulate solicitation by chiropractors. An Ohio regulation provides:
(L) Chiropractic physicians who solicit via any telecommunication method or device shall
maintain a record of the names of the individuals called, their telephone number, and a
copy of the exact solicitation script(s) used for six months from the date of last use.
Failure to maintain the names of the individuals called, their telephone number, and a
copy of the exact solicitation script(s) used for six months from the date of last use
constitutes a violation of this rule.
(M) Chiropractic physicians who solicit via any written medium, including but not limited to
via the US mail, facsimile, or electronic mail, shall maintain a copy of the written
solicitation and a record of the name, address, electronic mail address, or other location
where the solicitation was sent, for six months from the last date of use. Failure to
maintain a copy of the written solicitation and a record of the name, address, electronic
mail address, or other location where the solicitation was sent for six months from the
date of last use constitutes a violation of this rule. When the name and information are
acquired from public documents, the written solicitation shall clearly state in at least ten
point font or its equivalent This is an advertisement. Your name and information were
acquired from public documents. You are under no obligation to respond to this
communication.
(N) Chiropractic physicians who solicit via in-person shall maintain a record of the names
of the individuals contacted, including their address and telephone number for a period of
six months. Failure to maintain a record of the names of the individuals contacted,
including their address and telephone number for a period of six months constitutes a
violation of this rule.
(O) Each of the following constitutes an act of abusive solicitation and is in violation of
this rule:
(1) Use of threats, intimidation, or profane or obscene language;
(2) Contacting an individual repeatedly or continuously, or after being advised that there
is no interest in receiving chiropractic and/or acupuncture services;
(3) Contacting an individual when that person has previously stated that he or she does
not wish to receive an outbound telephone call or in person solicitation made by or on
behalf of the seller whose goods or services are being offered. Every chiropractic
physician who solicits via telephone is to maintain a do not call list;
(4) Contacting an individual at any time other than between eight a.m. and nine p.m. local
time;
(5) Requiring an immediate response from an individual to any offer made during the
solicitation or making a one time only offer and/or not permitting the individual to consider
the offer and reply at a later time;
(6) Failure to disclose the solicitors identity and the identity of the chiropractic physician
and practice on whose behalf the solicitation is being made; the purpose of the
solicitation; and a statement of the goods or services being offered;
(7) Misrepresenting an affiliation with, or endorsement by, any government or third-party
organization;
(8) Communicating with an individual in a way that invades privacy of the individual, or
interferes with an existing doctor/patient relationship;
(9) Leaving a recorded message for the prospect that does not comply with this rule;
(10) Failing to advise the prospect how his or her name and information were acquired
and that the prospect is under no obligation to respond to the offer made during the
solicitation;
(11) Contacting a minor child under eighteen years of age;
Ohio Administrative Code, Chapter 4734-9. Section 4734-9-02.
The chiropractor himself does not have a cause of action against the insurer in his own
name. In Elsner v. Farmers Ins. Group, Inc., 220 S.W. 3d 633 (2005) the Supreme Court held
that a provider was not a third-party beneficiary of an insurance policy for purposes of a PIP
provision in the policy. The doctor was just an incidental beneficiary who did not have standing
to bring a direct action against the insurer.
Unethical Insurance Adjusters and Your Client's Claim

Ark. Code Ann 23-66-206. Unfair methods of competition and unfair or deceptive
acts or practices defined.
(13) Unfair claims settlement practices means committing or
performing with such frequency as to indicate a general business practice any of
the following:
(A) Misrepresenting pertinent facts or insurance policy provisions
relating to coverages at issue;
(B) Failing to acknowledge and act reasonably and promptly upon
communications with respect to claims arising under insurance policies;
(C) Failing to adopt and implement reasonable standards for the
prompt investigation of claims arising under insurance policies;
(D) Refusing to pay claims without conducting a reasonable
investigation based upon all available information;
(E) Failing to affirm or deny coverage of claims within a
reasonable time after proof of loss statements have been completed;
(F) Not attempting in good faith to effectuate prompt, fair, and
equitable settlements of claims in which liability has become reasonably clear;
(G) Attempting to settle claims on the basis of an application that
was altered without notice to, or knowledge or consent of, the insured;
(H) Making claim payments to policyholders or beneficiaries not
accompanied by a statement setting forth the coverage under which payments are
being made;
(I) Delaying the investigation or payment of claims by requiring
an insured or claimant, or the physician of either, to submit a preliminary claim
report and then requiring the subsequent submission of formal proof of loss
forms, both of which submissions contain substantially the same information;
(J) Failing to promptly provide a reasonable explanation of the
basis in the insurance policy in relation to the facts of applicable law for denial of
a claim or for the offer of a compromise settlement;
(K) Compelling insureds to institute litigation to recover amounts
due under an insurance policy by offering substantially less than the amounts
ultimately recovered in actions brought by those insureds;
(L) Attempting to settle a claim for less than the amount to which
a reasonable person would have believed he or she was entitled by reference to
written or printed advertising material accompanying or made part of an
application;
(M) Making known to insureds or claimants a policy of appealing
from arbitration awards in favor of insureds or claimants for the purpose of
compelling them to accept settlements or compromises less than the amount
awarded in arbitration;
(N) Failing to promptly settle claims, when liability has become
reasonably clear, under one (1) portion of the insurance policy coverage in order
to influence settlements under other portions of the insurance policy coverage;
and
(O) Requiring as a condition of payment of a claim that repairs
must be made by a particular contractor, supplier, or repair shop;

An important thing to remember about the statutory grounds is that a single violation will
not ordinarily serve to be an unfair practice. The statute requires committing or performing the
unfair practice with such frequency as to indicate a general business practice.
Arkansas law provides for penalty and attorneys fees when an insured has to bring a
lawsuit to collect insurance benefits and recovers within twenty percent (thirty percent in
homeowners cases) of the amount demanded in the suit. Ark. Code Ann. 23-79-208. Further,
in addition to the statutory penalty and attorneys fees, an insurance company may incur liability
for the first party tort of bad faith when it affirmatively engages in dishonest, malicious, or
oppressive conduct in order to avoid a just obligation to its insured. Aetna Casualty and Surety
Company v. Broadway Arms Corporation, 281 Ark. 128, 664 S.W.3d 463 (1984); Employers
Equitable Life Ins. Co. v. Williams, 282 Ark. 29, 30, 665 S.W.2d 873, 873-74 (1984). Mere
refusal to pay insurance cannot constitute wanton or malicious conduct when, as here, an actual
controversy exists with respect to liability on the policy. Findley v. Time Ins. Co., 264 Ark. 647,
651, 573 S.W.2d 908, 910 (1979). Tweedle v. State Farm Fire & Cas. Co., 4:04-CV-
608(RSW), 2005 WL 2149261 (E.D. Ark. Sept. 6, 2005).
Proof of first party bad faith in Arkansas has traditionally been difficult. [AMI 2304]. A
recent law review article defines the Arkansas approach as a Quasi-Criminal Standard. Sharon
Tennyson & William J. Warfel, The Law and Economics of First-Party Insurance Bad Faith
Liability, 16 Conn. Ins. L.J. 203, 212 (2009). This requires only slightly more rigorous proof
than an intentional tort, according to the classification by the authors.
The existence of two separate remedies, one being the statutory penalty and attorneys
fees and the other being the bad faith remedy for extreme violations makes our course rather
easy. When dealing with the unethical activity of adjustors, the solution is to sue. In egregious
cases, a report to the Insurance Department would not be out of order.