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Category: Coverage of Fees / Duty to Defend

Eleventh Circuit: Insurer Owes $1.2M in Attorney Fees in Coverage Matter

September 11, 2018

A recent Law 360 story by Anne Cullen, “Insurer Owes $1.2M Atty Fees in Construction Suit: 11th Circ,” reports that the Eleventh Circuit affirmed that Houston Specialty Insurance Co. will have to shell out $1.2 million in attorneys' fees to a construction firm and two of its employees after the insurer lost its coverage suit at trial over a contractor's injury.  The three-judge panel rejected the insurer’s argument that the district court shouldn't have awarded fees to All Florida Weatherproofing & Construction, the company's president and a sales representative while a separate suit Houston brought against the three was ongoing.

In its second suit, Houston claims the construction company and its employees forfeited their coverage when they rejected the insurer's defense in the underlying case, which was brought by a contractor who said he was paralyzed after falling through the roof of a mobile home that an All Florida sales representative had allegedly failed to inspect.  The ruling found that the outcome of the insurer's forfeiture suit doesn't matter.  The panel said that because the firm and its employees won the suit over coverage, which was affirmed on appeal, they are entitled to fees.

"Even if Houston Specialty ultimately wins in the forfeiture case, it would not negate the defendants' attorney's entitlement to fees for prosecuting and prevailing in the coverage case," the unpublished opinion said.  The panel also was not persuaded by the insurer's assertion that the lower court erred when it doubled the fees awarded to the attorneys representing All Florida — bringing the $565,000 award up to $1.13 million.  The appeals court found the construction company's poor financial condition and its low chance of winning the case meant it couldn't have secured competent defense in Houston's suit unless there was a possibility of a multiplier.

Houston appealed the fee award in June, a few months after the Eleventh Circuit upheld an earlier decision in the case backing a jury's finding that Houston had a duty to defend and indemnify All Florida and the two employees from the underlying action.  Houston's forfeiture suit is pending before a separate Eleventh Circuit panel, after the insurer appealed a district court ruling in late 2017 in favor of the All Florida defendants.

The case is Houston Specialty Insurance Co. v. Enoch Vaughn et al., case number 18-10635, in the U.S. Court of Appeals for the Eleventh Circuit.

Appeals Court Upholds Multiplier in Insurance Coverage Fee Award

August 24, 2018

A recent Law 360 story by Nathan Hale, “Fla. Insurer Loses Appeal of Multiplier of Atty Fees Award,” reports that a Florida appeals court rejected Citizens Property Insurance’s appeal of an order applying a multiplier to an attorneys' fees award for a homeowner who obtained a favorable settlement in a coverage dispute, finding the insurer's argument relied on a decision recently rejected by the Florida Supreme Court.  The Third District Court of Appeal concluded that the trial judge had not abused his discretion in applying a 2.0 contingency fee multiplier, which resulted in a fee award of $120,250 for homeowner Agosta Laguerre.

Citizens Property Insurance Co., which is Florida's insurer of last resort, did not dispute that state law entitled Laguerre to collect attorneys' fees after they settled the underlying suit, in which she contested an $8,400.77 coverage payment she argued significantly undervalued her December 2005 claim for wind damage caused by Hurricane Wilma.  Citizens argued against the multiplier based on the Third District's 2015 decision in State Farm Ins. Co. v. Alvarez, which held that courts can apply contingency fee multipliers “only in 'rare' and 'exceptional' circumstances,” according to the opinion.

The appeals panel pointed out, however, that it had held the Laguerre case in abeyance after hearing oral arguments to await the Florida Supreme Court's ruling in Joyce v. Federated National Insurance Co., an appeal of a decision by the Fifth District that had relied on the Alvarez decision.  In its ruling last year, the Florida Supreme Court rejected the idea that contingency fee multipliers are appropriate only in rare and exceptional circumstances, disapproving of that element of the Alvarez decision, the opinion said.

The Third District quoted the high court's statement that “the contingency fee multiplier provides trial courts with the flexibility to ensure that lawyers, who take a difficult case on a contingency fee basis, are adequately compensated.  Citizens had argued that Laguerre's request did not meet the “rare” and “exceptional” requirement because there was no evidence presented at the fee hearing that Laguerre had difficulty finding an attorney who would take her case, that the results she obtained were not enough to warrant a multiplier, and that a multiplier cannot be based on the complexity of the case, the Third District recounted.

The appeals panel found that while the testimony provided by Laguerre's expert fee witness was thin, Citizens' decision not to cross-examine him about the application of a multiplier and its failure to present evidence that there were competent attorneys who would have taken the case without a multiplier meant the trial judge had not abused his discretion in reaching the conclusion that the relevant market required a fee multiplier.  “Although we find that the testimony supporting the trial court’s conclusion was minimal, a trial court generally may rely on 'expert testimony that a party would have difficulty securing counsel without the opportunity for a multiplier' in support of the imposition of the multiplier,” the panel said.

The panel also rejected Citizens' argument that the “relatively small recovery” did not justify a multiplier, pointing to the difference between a $2,000 offer the insurer made and the appraisal umpire's ultimate award of $27,367.63 minus the money already paid to Laguerre.  Finally, the Third District said the Florida Supreme Court made clear in the Joyce decision that it was not wrong for the trial court to consider the complexity and difficulty of a case in weighing application of a multiplier.

“Turning to whether the complexity of the instant case warrants a contingency fee multiplier, we again note that a contingency fee multiplier analysis 'is properly analyzed through the same lens as the attorney when making the decision to take the case,'” the panel said.  “For this reason, the fact, in hindsight, that this case ultimately consisted of two summary judgment proceedings and minimal discovery and did not proceed to trial is not determinative on this issue.”

The case is Citizens Property Insurance Co. v. Laguerre, case number 3D15-2411, in the Third District Court of Appeal of Florida.

Minnesota Supreme Court Rules Employers Must Pay Attorney Fees

July 26, 2018

A recent Business Insurance story by Louise Esola, “Minn. High Court Rules Squabbling Employers Must Pay Attorney Fees,” reports that the Supreme Court of Minnesota upheld a Workers’ Compensation Court of Appeals decision that ruled both a man’s current and former employers must pay reasonable attorney fees after arguing over who is responsible for an aggravation of an earlier back injury.  Certified nursing assistant Janet Hufnagel filed a workers compensation claim in 2015 for work-related aggravations to a low-back condition that resulted from an admitted work-related injury in 2009 while working for Deer River Health Care Center in Deer River, Minnesota, according to documents in Janet Hufnagel v. Deer River Health Care Center and MHA Insurance Co., respondents, and Essentia Health-Deer River and Berkley Risk Administrators Co., relators, and Midwest Spine & Brain Institute and Essentia Health, intervenors.

In 2013, after Ms. Hufnagel recuperated and was back on the job, Deer River was acquired and became Essentia Health-Deer River, or Essentia, and also changed its workers compensation insurer, court records state.  In August 2014, while working for the newly named and acquired facility, Ms. Hufnagel experienced increased low-back pain, which required time off work and medical treatment.  When notified of this injury, Essentia denied liability, concluding that Ms. Hufnagel's "current need for medical treatment is a continuation of the prior work injury from 2009 which is under a different insurer."  Ms. Hufnagel then suffered an additional aggravation to her low-back condition in June 2015.  In July 2015, Ms. Hufnagel filed a claim petition, seeking temporary total disability and medical benefits for the 2014 and 2015 injuries, court records state.

After nearly two years of legal proceedings that included six medical examinations, a Workers’ Compensation Court of Appeals judge ruled that Essentia was liable for the 2014 and 2015 aggravated injuries.  Following the October 2016 ruling, Ms. Hufnagel and her attorney filed a motion to recover $31,120.47 in attorney fees.  A compensation judge concluded that the dispute presented by Ms. Hufnagel's 2015 claim petition was only whether the 2009 injury "continued to be a substantial contributing factor" to her later aggravations, and was not a dispute between employers.  Accordingly, the compensation judge denied the motion for fees under state law.

The Workers' Compensation Court of Appeals then reversed, “holding that the compensation judge failed to fully consider the extent to which each employer sought to shift liability to the other employer and that it was error to deny the motion for fees” under state law, concluding that the attorney had not been adequately compensated for the time spent providing effective representation for Ms. Hufnagel.

The state Supreme Court affirmed: “We agree with the WCCA that the efforts by each employer to shift responsibility to the other employer ‘greatly increased the burden on (Ms. Hufnagel’s) counsel to provide effective representation…  We therefore hold that (Ms.) Hufnagel was entitled to receive reasonable attorney fees.

Fees Awarded to Insurer in Dispute Among Conservative Activist Schlafly’s Family, Followers

June 13, 2018

A recent New Jersey Law Journal story by Charles Toutant, “Fees Awarded to Insurer in Dispute Among Conservative Activist Schlafly’s Family, Followers,reports that a Newark federal judge has awarded legal fees to John Hancock Insurance Co. and to Lincoln National Life Insurance Co. in connection with a battle over a $3.4 million payout from life insurance policies taken out on the late conservative activist and attorney Phyllis Schlafly. But the underlying dispute between her children and followers appears far from resolution.

Schlafly, known for her opposition to the Equal Rights Amendment, died at age 92 in 2016. Since then, a battle has been waged for control of the organization she founded, Eagle Forum, which is listed as beneficiary on the policies.

Her son Andrew, a Far Hills resident, sued the two insurance companies in Morris County Superior Court in March 2017, seeking an injunction against the distribution of policy proceeds to “anyone other than proper representatives acting in the interests of and under the direct instructions of the members of Eagle Forum.”

Other suits concerning the control of the assets of Eagle Forum are pending in federal courts in Illinois and Missouri, and in a state court in Missouri.

In the New Jersey case, Andrew Schlafly, who is pro se, claims that since his mother’s death, Eagle Forum lacks a properly functioning board of directors. He claims that the people purporting to control Eagle Forum have dissipated its assets and “are attempting to take Eagle Forum in a direction other than its mission,” U.S. Magistrate Judge Steven Mannion wrote in his May 21 report and recommendations.

U.S. District Judge Esther Salas on Wednesday issued an order adopting Mannion’s recommendations and awarding the fees.

The insurance companies brought Eagle Forum into the case as a third-party defendant, and the organization opposed the award of fees to the insurance companies, claiming that determining the beneficiary of a policy is part of an insurer’s routine course of business.

But, Mannion said, the cases that Eagle Forum provided to support its position were from other jurisdictions, and not binding in the District of New Jersey. Courts in the District of New Jersey have rejected the notion that insurance companies are never permitted to recoup attorney fees, and routinely make such awards, Mannion said.

Eagle Forum argued that the insurers’ failure to pay out the policy proceeds is a “vexatious refusal to pay,” according to Mannion, but that argument ignores the case’s “tortured procedural history,” he said. The insurers had a legitimate fear of paying the wrong person, officer or entity at Eagle Forum, Mannion said.

Mannion awarded Lincoln’s request of $41,229, finding it not excessive or redundant—and, at roughly 2 percent of the policy proceeds of $2 million, it would not seriously deplete those funds, he said. He made the same finding in connection with the $109,176 fee application for John Hancock, which came to roughly 8 percent of the $1.42 million award.

Schlafly said the insurance company fee application was a routine matter, and that resolution of the underlying dispute in the New Jersey case was “proceeding in a timely way.” He said that the Illinois and Missouri cases were still pending, but declined to comment on them otherwise.

Media reports about the dispute indicate that the rift among Phyllis Schlafly’s supporters concerned her endorsement of Donald Trump for the 2016 Republican presidential nomination before her death, with some in Eagle Forum instead favoring the candidacy of U.S. Sen. Ted Cruz. Schlafly confirmed that such is the nature of the dispute.

Edward Butkovitz of Kleinbard in Philadelphia. who represents the Eagle Forum, did not return a call about the case.

Valerie Pennacchio of Saul Ewing in Newark, who represented Lincoln National, and Darren Goldstein of Flaster/Greenberg in Cherry Hill, who represent John Hancock, also did not return calls about the case.

Minnesota Supreme Court Rules Attorney Fees are Capped by Policy Limit

November 14, 2017

A recent Claims Journal article by Steven Plitt, “Minnesota Supreme Court Rules that Statutory Attorney’s Fees are Capped by the Policy Limit,” writes about the recent Minnesota Supreme Court decision in Wilbur v. State Farm Mutual Automobile Insurance Co.  This article was posted with permission.  The article reads:

The question of whether attorney’s fees awarded under Minnesota’s insurance unreasonable denial statute could exceed the policy limits of the policy was recently addressed by the Minnesota Supreme Court in Wilbur v. State Farm Mutual Automobile Insurance Co., 892 NW2d 521 (2017).  Under Minnesota statute, Minn. Stat. §604.18 (2016) courts were authorized to award “taxable costs” when an insurance company denies insurance benefits without a reasonable basis.  The issue of whether the taxable cost award was kept by the insurance policy limit recently came before the Minnesota Supreme Court.  The court in Wilbur concluded that §604.18 unambiguously capped “proceeds awarded” at the amount recoverable under the insurance policy and were therefore capped by the policy limit.

The issue turned on whether the phrase “proceeds awarded” referenced in §604.18 referred to an amount capped by the insurance policy limit or not.  The insured claimant argued that no policy limit cap was contemplated by the statute.  The court began its analysis of §604.18 by noting that the statute provided a remedy for an insured when an insurer denied a first party claim without a reasonable basis.  Under the statute, courts in Minnesota were authorized to award taxable costs to an insured who could demonstrate that there was an absence of a reasonable basis for denying the benefits together with proof that the insured knew of the lack of a reasonable basis or active and reckless disregard.  If the insured was able to establish that proof, the court was authorized to award under the statute as taxable costs an amount equal to one-half of the proceeds awarded on coverage that were in excess of the amount offered by the insurer at least ten days before the trial began or $250,000, whichever was less.  For three reasons, the Minnesota Supreme Court held that §604.18 referred to an amount that was capped by the insurance policy limit.

First, the court noted that the statute’s use of the word “proceeds” to refer to insurance policies in two other subdivisions of the statute demonstrated that the phrase “proceeds awarded” was constrained by the defined limits of the insurance policy.  Second, the court noted that subdivision 3(a)(1) of the statute contemplated a capped settlement offer, which indicated to the court that the phrase “proceeds awarded” was capped by the insurance policy limit.  The connection between the phrase “proceeds awarded” and the “amount offered by an insurer” before trial was telling to the court.  Insurance companies’ settlement offers before trial were almost always capped by the insurance policy’s limit according to the observation of the Minnesota Supreme Court.

Third, the court found that the timing of the §604.18 proceeding suggested to the court that the phrase “proceeds awarded” were capped by the insurance policy limit.  Under the statute, subdivision 4(b) states “an award of taxable costs under this section shall be determined by the court in a proceeding subsequent to any determination by a factfinder of the amount an insured is entitled to under the insurance policy . . .” Minn. Stat. §604.18, subdivision 4(b).  Thus, proceeds could be awarded under §604.18 only “subsequent to” a jury’s determination of the benefits to be paid “under the insurance policy.”  The benefits paid under the insurance policy were capped by the insurance policy’s limits.  This provided a link in establishing that “taxable costs” awarded under §604.18 could not exceed the policy’s limit.

Mr Plitt is the current author of Couch On Insurance 3d and is a nationally recognized insurance expert.  See www.insuranceexpertplitt.com for more information.