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Zurich Insurance Company v. Knotts8/23/2001
As amended August 29, 2001
TO BE PUBLISHED
Affirming.
An attorney who handles a personal injury action is not necessarily disqualified as an advocate in an action for bad faith in the insurance claims process merely because he files a personal affidavit in opposition to a motion for summary judgment. The limited and specialized use of an affidavit by an attorney, who does not testify at trial for his clients, provides an insufficient justification to allow opposing counsel to deprive a party of its right to counsel of its choice. Being hearsay, affidavits are generally inadmissible in evidence; however, where the judge is the trier of fact, affidavits serve the important purpose of being a ready and economical vehicle to expedite the disposition of motions for summary judgment. The use of an affidavit in opposition to a motion for summary judgment does not make the affiant a likely necessary witness absent a showing that the information contained therein is unobtainable from other sources.
Appellee, Lloyd Knotts, has brought this bad faith action based on the handling of an insurance claim for personal injuries resulting from an accident on November 10, 1992. Knotts was working as a business invitee at the Lawson Mardon Flexible Packaging Company, Inc. ("Lawson Mardon") when he was injured in a thirty-foot fall to a concrete floor. Lawson Mardon was insured by Appellant/Real Party in Interest, Zurich Insurance Company ("Zurich"). Shortly after the accident, Knotts and his wife, Jackie, hired Attorney Larry Franklin to represent them in the personal injury action.
Throughout the litigation, Franklin handled all settlement negotiations. Following a trial in August 1994, the jury awarded total damages in the amount of $1,202,104.29.
In August 1997, the Knottses filed a bad faith action against Lawson Mardon and Zurich, alleging that both had violated the Unfair Claims Settlement Practices Act (UCSPA) and the Consumer Protection Act (CPA). The Knottses were again represented by Franklin, however, attorney Lee Sitlinger was also retained as co- counsel. In their complaint, the Knottses alleged that Zurich acted in bad faith by: (1) failing to acknowledge and act reasonably promptly upon communications; (2) failing to adopt and implement reasonable standards for investigations; (3) refusing to pay claims without conducting reasonable investigations; and (4) not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability is reasonably clear. See KRS 304.12~230(2), (3) (4) and (6).
While the case was pending in federal court, Zurich filed a motion for summary judgment. In response, Attorney Franklin filed a personal affidavit referring to his settlement negotiations with Zurich and its representatives. In the affidavit, Franklin stated that there were genuine issues of material fact within his personal knowledge, as a result of his acting as the primary negotiator for the Knottses.
Shortly thereafter, Zurich filed a motion to disqualify Franklin on the grounds that he made himself a necessary witness by filing his personal affidavit with the response to motion for summary judgment. Zurich pointed out that the Knottses had already deposed several of the defense attorneys who participated in the underlying case, and stated that it intended to depose Franklin regarding his knowledge of the settlement negotiations. The Knottses responded that Franklin was not, in fact, a necessary witness and that they had no intention of calling him at trial. Nonetheless, the trial court granted Zurich's motion to disqualify Franklin, concluding that he was a necessary witness and that his
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