A recent Connecticut Law Tribune story, “Bill Would Grant Attorney Fees in Insurance Disputes,” reports that Connecticut lawmakers are considering several pieces of legislation that would change state laws governing homeowners’ insurance policies, including a bill that would award reasonable attorney fees and lawsuit costs to plaintiffs who won their cases against insurers.  The legislation is supported by trial attorneys, but opposed by the insurance industry.

When policyholders report damage claims to their insurers and when those claims have been denied to some extent, the policyholders have the burden of hiring an attorney and paying for that attorney out of any recovery they obtain, State Rep. Robert W. Megna, D-New Haven said.  The proposed legislation would remove that burden.  As it stands, attorney fees are “going to come off the property damage settlement,” Megna said.  “Even if the homeowner prevails, they’re at a disadvantage when it comes to fixing their home.

If the legislation is passed, there may be a decrease in litigation alleging bad faith by insurers of alleging that insurers violated the Connecticut Unfair Trade Practices Act and the Connecticut Unfair Insurance Practices Act, Ryan Suerth, a Hartford-based solo practitioner who represents policyholders said.  Attorney fees can be obtained in those types of lawsuits but not in breach of contract actions prosecuted against insurers.

The Property Casualty Insurers Association of America, a trade association group, suggested that the bill could make the Connecticut insurance market tighter and more expensive.  In prepared testimony, the association said because the law does not define what it means for plaintiffs to prevail, insurers won’t want to risk Connecticut court declaring victories for plaintiffs and costing the industry “tens of thousands of dollars” in attorney fees.

Senate Majority Leader Martin M, Looney, D-New Haven, and Theresa Guertin, a policyholder attorney with Saxe Doernberger & Vita, also testified in support of the bill.  Guertin raised the concern in her testimony that the legislation could be interpreted to allow insurance companies to recoup attorney fees from policyholders.  Guertin also noted that about half of the states award attorney fees to policyholders who prevail in insurance coverage litigation. She noted that in most cases she has handled $50,000 to $100,000 in attorney fees are incurred before cases resolve.