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Court Upholds $1.7M Fee Award in Insurance Dispute

July 1, 2015 | Posted in : Coverage of Fees, Defense Fees / Costs, Expenses / Costs, Fee Entitlement / Recoverability, Fee Issues on Appeal, Fee Request

A recent New Jersey Law Journal story, “Court Upholds $1.7M Fee Awards in Title Insurance Dispute,” reports that a New Jersey appeals court has upheld a $1.7 million attorney fee award against a title insurance company, finding that the work billed in the underlying title dispute fell within the insurance policies’ defense coverage provisions.  The appeals court also ruled that the plaintiffs may be entitled to attorney fees and expenses related to the title insurance dispute, as well as prejudgment interest.

In an unpublished decision in 212 Marin Boulevard v. Chicago Title Insurance, a three-judge Appellate Division panel upheld a Hudson Country trial judge’s ruling that defendant Chicago Title Insurance Co. had a duty to defend the plaintiffs; title and was obligated to the plaintiffs about $1.7 million in attorney fees incurred in the underlying title actions.

The plaintiffs sued Chicago Title in 2009, seeking a declaration that the insurer had a duty to defend their title in the rail use cases and, in 2011, a trial judge agreed, according to the opinion.  In 2012, the plaintiffs filed a fee application for approximately $1.7 million, which the trial judge approved.

The trial judge did, however, deny the plaintiffs’ request for attorney fees and costs incurred in the coverage dispute, as well as prejudgment interest.  Chicago Title and the plaintiffs both appealed.

The Appellate Division panel, composed of Judges Clarkson Fisher Jr., Allison Accurso and Thomas Manahan, first determined that Chicago Title had a duty to defend and indemnify the plaintiffs in the rail use cases, finding that the cases fell within the scope of the policies and that none of the policies’ exclusions applied.

Turning to the fee award, the appeals court rejected all of Chicago Title’s arguments, including that certain counsel fees, such as those for attending public meetings, lobbying efforts and tax issues, were unrelated to the defense of the plaintiffs’ title in the rail use cases.

“There is nothing about the policy language to suggest that the promise to pay costs incurred in the defense of title would be strictly limited to the particular confines of the underlying lawsuits and would not extend to other efforts to vindicate the title conveyed,” the court said.

The appeals panel also disagreed with Chicago Title’s argument that it should not have to cover legal fees incurred in the plaintiffs’ pursuit of claims that ultimately failed.

“An insured abandoned by an insurer, which had promised to defend its insured’s title, should not necessarily be deprived of fees and expenses incurred in pursuing a theory that proved unsuccessful,” the court said.  “The matter rested within the judge’s discretion to determine the reasonableness of the insured’s failed theory.”

The appeals court also sided with the plaintiffs with regard to attorney fees and costs incurred in the title insurance dispute.  The panel said the trial judge improperly denied the plaintiffs’ request on the basis that the title insurance suit was “‘akin to direct actions brought by an insured against the carrier to enforce coverage,’” making Rule 4:42-9(a)(6) inapplicable.

Counsel for the plaintiffs, Lynda A. Bennett of Lowenstein Sandler in Roseland, said the appeals court’s ruling made clear that title insurers who shirk their duty to defend risk having to pay not only the insured’s defense costs, but also the costs associated with litigating the coverage dispute.