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Category: Coverage of Fees / Duty to Defend

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.

Florida Supreme Court Rules on Fee Issue in Insurance Coverage Litigation

October 24, 2017

A recent FC&S Legal article by Steven Meyerowitz, “The Florida Supreme Court Just Made It Easier for Insureds’ Attorneys to get Big Fee Awards,” reports on a recent decision by the Florida Supreme Court in Joyce v. Federated National Ins. Co.  The article reads:

The Florida Supreme Court, in an insurance coverage dispute, has rejected appellate court rulings that trial courts may apply a contingency fee multiplier to an award of legal fees to a prevailing party only in “rare” and “exceptional” circumstances.

The Case

William and Judith Joyce, an elderly retired couple, filed a claim for insurance benefits with their homeowners’ insurance carrier, Federated National Insurance Company, following water damage to their home. Federated National denied coverage on the basis of alleged material misrepresentations made by the Joyces in the application process – namely, that the Joyces had failed to disclose certain losses they had with their previous carrier.

The Joyces hired an attorney on a contingency fee basis and sued Federated National, alleging that the insurer had wrongfully denied their claim. After months of litigation, Federated National finally agreed to settle.  The parties stipulated that the Joyces were entitled to recover reasonable legal fees under Florida Statutes Section 627.428.

At the fee hearing, the trial court heard testimony from the Joyces’ attorney and fee expert and Federated National’s fee expert.  The trial court also examined certain evidence exhibits, including time records for the Joyces’ attorney and a copy of the contingency fee agreement.

After the hearing, the trial court awarded the Joyces $76,300 in attorneys’ fees, using a two-step process.  First, the court calculated the “lodestar” amount – the number of hours reasonably incurred by the Joyces’ attorney, multiplied by a reasonable hourly rate – as being $38,150, or 109 hours reasonably expended at a reasonable hourly rate of $350.  Second, the trial court applied a contingency fee multiplier of 2.0 to the lodestar amount.

Federated National appealed both the trial court’s calculation of the lodestar amount and its use of the contingency fee multiplier.  The appellate court affirmed the lodestar amount but reversed the trial court’s use of a contingency fee multiplier, concluding that the lodestar approach included a “strong presumption” that the lodestar represented the “reasonable fee.”

Florida Law

Section 627.428, Florida Statutes provides:

(1) Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured’s or beneficiary’s attorney prosecuting the suit in which the recovery is had.

The Florida Supreme Court’s Decision

The court quashed the appellate court’s decision.  First, the court reviewed its precedent regarding contingency fee multipliers and declared that it was “clear” that it had “never limited the use of contingency fee multipliers to only ‘rare’ and ‘exceptional’ circumstances.”

In fact, the court said, it had recognized “the importance of contingency fee multipliers to those in need of legal counsel” and it had made clear that trial courts “could consider contingency fee multipliers any time the requirements for a multiplier were met.”

In the court’s opinion, the contingency fee multiplier provided trial courts with the “flexibility” to ensure that lawyers who took a difficult case on a contingency fee basis were “adequately compensated.”The court rejected the argument that a contingency fee multiplier encouraged “nonmeritorious claims” and said, instead, that solely because a case was “difficult” or “complicated” did not mean that the case was nonmeritorious.  “Indeed, without the option of a contingency fee multiplier, those with difficult and complicated cases will likely be unable or find it difficult to obtain counsel willing to represent them,” the court said.

The court then disagreed that the possibility of receiving a contingency fee multiplier amounted to a “windfall.”  The court concluded that there was not a “rare” and “exceptional” circumstances requirement before a contingency fee multiplier could be applied.  It decided that the trial court’s findings, “which properly considered the complexity of these types of cases and this case in particular,” were not in error, and it ordered the appellate court to reinstate the reinstate the attorneys’ fees award.

Insurer’s Fee Request Challenged by Film Producer

September 8, 2017

A recent Law 360 story by Rick Archer, “Producer Fights Insurer’s $1.9M Fee Bid in Film Accident Row,” reports that the producer of an Allman Brothers biopic objected to a demand it pay $1.9 million in attorneys’ fees for its unsuccessful attempt to win more insurance coverage for a fatal filming accident, saying it had done nothing worthy of sanction.

Film Allman LLC denied accusations by New York Marine and General Insurance Co. Inc. that the producer’s suit seeking additional coverage for the 2014 accident had been filed in bad faith, saying it had good-faith arguments for all its claims it was owed more coverage than New York Marine provided and should not be expected to pay the insurer’s claimed legal fees.

“Film Allman has a good faith belief in each of its claims, and there is evidence to support them.  Moreover, even if New York Marine is unhappy about some of the results, there is absolutely no evidence that Film Allman did anything for an improper purpose such as harass New York Marine or to cause undue delay or cost,” it said.

An Occupational Safety and Health Administration investigation showed Film Allman didn’t warn crew members working on the film “Midnight Rider” in February 2014 that they were filming on live train tracks or that CSX had denied a filming permit for the tracks prior to an accident on the first day of shooting that killed 27-year-old Sarah Jones and seriously injured several other workers.

In March 2015, the film’s director, assistant director and executive producer, respectively, pled guilty to, was found guilty of and entered an Alford plea to charges of involuntary manslaughter and criminal trespass.  A defendant entering an Alford plea acknowledges that the prosecution has the evidence necessary to prove guilt beyond a reasonable doubt, but nevertheless maintains that he is innocent.  New York Marine provided a defense to Film Allman, paid $5 million of a $6.5 million settlement to Jones' family, and then bowed out because policy limits were exhausted.

Film Allman filed suit against New York Marine in September 2014.  In May U.S. District Judge Otis Wright II ruled New York Marine was entitled to bow out under the terms of the commercial general policy, despite the fact that there are other suits remaining.  In December he had found coverage under a separate motion picture producers policy was barred by a criminal acts exclusion.  In August, New York Marine moved for more than $1.9 million in attorneys’ fees, claiming that as there was no dispute of either the criminal convictions or the policy limits, Film Allman had brought the suit in bad faith.

“As reflected by the record in this case, including in the court’s summary judgment rulings, Film Allman’s claims were fundamentally lacking any legal or evidentiary support and were, instead, based on assertions that it knew were false,” New York Marine said.

Film Allman, however, argued it did have good-faith arguments that Jones’ death did not trigger the exclusion because it had evidence there was genuine confusion over whether permission had been granted to film on the tracks and the death was not directly caused by an intentional criminal act.  It said it also had good-faith arguments that California insurance law required New York Marine to defend it from all of the suits arising from the accident, regardless of the policy limit.

“New York Marine asserts that if Film Allman had only accepted the fact that there was no coverage, it could have saved New York Marine all of its exorbitant litigation expenses.  But the same could be true of any policyholder seeking defense or coverage that an insurer denies,” it said.

The case is Film Allman LLC v. New York Marine and General Insurance Co. Inc., case number 2:14-cv-07069, in the U.S. District Court for the Central District of California.

When Someone Else Pays the Legal Bills

March 7, 2017

A recent CEBblog article by Julie Brook, “When Someone Else Is Paying Your Fees,” writes about when a third party pays some of all of your legal fees in California.  This article was posted with...

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Insurer Fights Fee Discovery in Texas

February 22, 2017

A recent Law 360 story by Michelle Casady, “Texas High Court Told to Nix Attys’ Fee Discovery Ruling,” reports that National Lloyd's Insurance Co. urged the Texas Supreme Court to upend a lower...

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