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May 01, 2012 Articles

Insurance Coverage for Attorney Fee-Shifting Awards

Insureds may seek to recover an attorney fee award from their insurers, either as part of the indemnity obligation to pay damages or from the supplementary payments coverage to pay costs

by Nick Nierengarten

The familiar American rule holds that each party bears its own attorney fees in litigation. The only exceptions are a statute or contract authorizing the shifting of legal fees from the prevailing party to the losing party. Any number of federal and state statutes have fee-shifting provisions in them. These generally relate to civil rights, consumer protection, employment, and environmental suits. In addition, many contracts have prevailing party provisions that likewise shift attorney fees.[1] In many contexts (class actions, for example), the attorney-fee award can be substantial, often representing a large percentage of the overall recovery.

Where the prevailing party is awarded attorney fees, the inevitable question is whether the fees are covered by the losing party’s liability insurance. There are two primary avenues by which an attorney-fee award may be recovered from the insurer. The first is the indemnity provision in the policy. Here, the question is whether the attorney-fee award constitutes damages within the particular coverage grant. The second is under the supplementary payments coverage of the policy, which obligates the insurer to pay for expenses, costs of bonds, interest, and costs taxed against the insured. Here, the question is whether an attorney-fee award constitutes a cost.

I. Attorney Fees as Recoverable Damages

The typical comprehensive general liability (CGL) policy provides that the insurer will pay damages because of bodily injury, property damage, and personal and advertising injury. For example, the current Insurance Services Office (ISO) CGL insuring agreement for bodily injury and property damage liability (Coverage A) provides as follows:

We will pay those sums that the insured becomes legally obligated to as damages because of “bodily injury” or “property damage” to which this insurance applies.[2]

The personal and advertising injury liability grant (Coverage B) likewise obligates the insurer to “pay those sums that the insured becomes legally obligated to pay as damages.” The policy does not define the word “damages,” and neither coverage grant excludes attorney fees.

A. Interpretation of the Undefined Word “Damages”

Because of the historically broad interpretation given to coverage under a CGL policy, a number of courts have held that fee-shifting awards are covered damages. For example, in American Family Mutual Insurance Co. v. Spectre West Builders Corp.,[3] the underlying arbitration involved a construction defect claim by a homeowners’ association against the contractor relating to a condominium complex in Arizona. As part of the award, the arbitrator found that the association was entitled to $300,000 in attorney fees pursuant to contract and Arizona fee-shifting statutes.[4] In the coverage litigation, the insurer sought a declaration that there was no coverage under the CGL policy for the construction defect claims and that the policy did not provide coverage for the attorney-fee award and non-taxable costs. The court rejected both contentions:

[T]he insuring language is broad enough to encompass coverage for the Arbitrator’s award of attorneys’ fees and costs to the Association. The Court already has held that property damage occurred under the policies, and Spectre became legally obligated to pay attorneys’ fees and costs as a result of that property damage. The Court therefore finds that the attorneys’ fees and costs awarded at the arbitration are damages that fall under the insuring clause of the policies.[5]

The court also rejected the insurer’s argument that the attorney-fee award was barred by the exclusion for contractual liability. Here, the court concluded that the award was not the result of “assumption of liability in a contract or agreement” but rather “because of” covered property damage.[6] Alternatively, the court found that the fees were imposed by statute and thus covered.

In Neal-Pettit v. Lahman,[7] the Ohio Supreme Court likewise found that a fee-shifting award was covered as damages under the indemnity provision in an automobile policy.[8] The underlying litigation involved an automobile accident in which the plaintiff alleged that when the policyholder struck plaintiff’s vehicle she was intoxicated and fleeing the scene of an earlier collision. The jury awarded both compensatory and punitive damages as well as attorney fees based on a finding that the policyholder had acted with malice.

Unlike the traditional CGL policy, the automobile policy at issue contained an exclusion for “punitive or exemplary damages, fines or penalties.”[9] The insurer argued that the attorney-fee award was derivative of punitive damages and thus not awarded as a result of bodily injury. The court rejected this argument:

We have recognized that attorney-fee awards and punitive-damages awards are distinct: “In an action to recover damages for a tort which involves ingredients of fraud, malice, or insult, a jury may go beyond the rule of mere compensation to the party aggrieved, and award exemplary or punitive damages . . . . In such a case, the jury may, in their estimate of compensatory damages, take into consideration and include reasonable fees of counsel employed by the plaintiff in the prosecution of his action.”[10]

The insurer also argued that the attorney-fee award was not covered by the policy because it was not damages. The court again rejected the insurer’s argument:

Although, in this case, attorney fees were awarded as a result of an award of punitive damages, they also stem from the underlying bodily injury. The policy does not limit coverage to damages solely because of bodily injury. In addition, insofar as the parties have offered their own separate interpretations of the language of the policy, both of them plausible, we must resolve any uncertainty in favor of the insured.

Attorney fees may therefore fall under the insurance policy’s general coverage of “damages which an insured person is legally obligated to pay” because of “bodily injury.”[11]

Thus, because the award was compensatory in nature and flowed from a covered event and because the policy was ambiguous, the court held it to be damages within the indemnity portion of the policy.

Similarly, in Hyatt Corp. v. Occidental Fire & Casualty Co. of N.C.,[12] the court held that an award of attorney fees as part of a federal class action settlement of claims arising out of the collapse of two skywalks at the Kansas City Hyatt Regency constituted damages under a CGL policy:

The principal amounts at issue with respect to the federal class action are not the settlements paid to plaintiffs but Columbia’s share of attorney’s fees awarded in the federal class action as part of the settlement of the case. Such an award of attorneys’ fees is indistinguishable from a damages award for coverage purposes.[13]

Numerous cases have found that a fee-shifting award is considered damages under the indemnity provisions of a liability policy.[14] These cases apply time-honored rules of insurance contract interpretation in concluding that CGL coverage is broad in nature, that the word “damages” is broad enough to include an award of attorney fees, and that, in the absence of a definition, the word “damages” is at least ambiguous and therefore must be construed against the insurer.

B. Reasonable Expectations of the Insured

Some courts have held that an award of attorney fees constituting damages is consistent with the reasonable expectations of the insured. In Ypsilanti v. Appalachian Insurance Co.,[15] for example, the court held that coverage for an award of attorney fees is encompassed within the meaning of damages on grounds of reasonable expectations. The plaintiffs in the underlying litigation asserted civil rights claims and requested, among other things, attorney fees. The defendants tendered the claims to their insurer under a comprehensive professional liability policy. Ultimately, the parties in the underlying civil rights action entered into a consent judgment, after which the court awarded attorney fees to the plaintiffs. In the coverage litigation, the court applied the traditional rules of interpretation with respect to the word “damages.” Finding that the word “damages” did not include or exclude attorney fees, the court concluded that the word was ambiguous and construed that ambiguity against the insurer.[16] Specifically, the court held that “a reasonable person in the position of the insured would believe that the words ‘all sums which the Insured shall become legally obligated to pay as damages’ would provide coverage for all forms of civil liability, including attorneys’ fees.”[17]

C. Absence of Exclusion for Attorney-Fee Award

As noted above, the typical CGL policy does not expressly exclude fee-shifting awards from indemnity coverage. Where the policy expressly excludes costs or expenses that an insured may become obligated to pay as a result of an adverse judgment, however, an award of attorney fees may be barred. For example, in Scottsdale Insurance Co. v. City of Hazelton,[18] the claimants in the underlying litigation challenged the validity of certain ordinances adopted by city officials and exclusively sought declaratory and injunctive relief (not damages). The court permanently enjoined the city from enforcing the ordinances. The plaintiffs sought an award of attorney fees pursuant to a civil rights statute that allows for an award of attorney fees (42 U.S.C. § 1988). The public entity policy at issue expressly excluded “any fees, costs or expenses which the insured may become obligated to pay as a result of any adverse judgment for declaratory relief or injunctive relief.” Based on this exclusion, the court held that the award of attorney fees for pursuit of nonmonetary claims was a cost expressly excluded by the policy.[19]

D. Fee Award as Compensation

Coverage for a fee-shifting award may also be supported by the underlying rationale for the award. Clearly, the purpose of liability insurance is to compensate the injured party. Many fee-shifting statutes are likewise grounded on the concept of compensating an injured party. One scholar notes as follows:

Another argument for fee shifting that has a strong intuitive appeal is that refusing to award fees denies a wronged party full compensation for his injury . . . . Undeniably, the American rule’s effect of reducing a successful plaintiff’s recovery by the amount of his lawyer’s fee conflicts with the make-whole idea underlying much of the law of remedies.[20]

That policy may be implied or expressly indicated in the statute itself. For example, an Arizona statute that permits recovery of attorney fees for breach of contract provides that an “award of reasonable attorney fees . . . should be made to mitigate the burden of the expense of litigation to establish a just claim or a just defense.”[21] Indeed, under many fee-shifting statutes, the award is to the “prevailing party,” not the attorney. As the court noted in Neal-Pettit,[22] “the jury may, in their estimate of compensatory damages, take into consideration and include reasonable fees of counsel employed by the plaintiff in the prosecution of his action.”

Insurers, on the other hand, may argue that where an award of attorney fees is penal in nature, such an award should not be covered. Unlike other forms of liability coverage, however, CGL policies do not typically exclude fines, penalties, or punitive damages. Moreover, under the law of many jurisdictions, punitive damages may be insurable.[23] Even when a policy contains an exclusion for fines, penalties, or punitive damages, there may still be coverage for a fee award. In Neal-Pettit,[24] the Ohio Supreme Court held that an exclusion in an automobile policy for “punitive or exemplary damages, fines or penalties” did not “clearly and unambiguously encompass an award of attorney fees.” The court therefore construed the policy in favor of coverage.[25]      

Where, however, the policy excludes punitive or exemplary damages and the award of attorney fees is considered penal in nature, recovery may be barred. For example, in Indian Harbor Insurance Co. v. Bestcomp, Inc.,[26] the policyholder sought coverage for an award of attorney fees under a professional errors and omissions policy. The underlying litigation involved a putative class action against the policyholder for failure to comply with the notice requirements of a Louisiana statute when applying discounts to workers’ compensation bills. The putative class sought statutory damages in the form of “double the fair market value of the medical services provided . . . together with attorney fees to be determined by the court.”[27]

Unlike many CGL policies, the errors and omissions policy defined damages as “any compensatory sum and includes a judgment, award, or settlement.” [28] Significantly, the policy also expressly excluded punitive and exemplary amounts.[29] The insured argued that the policy covered attorney fees because such fees are compensatory in nature and were not expressly excluded from coverage. Because the policy specifically provided coverage for “compensatory sums,” the court analyzed whether an award of attorney fees under the statute was penal in nature. Because the award of attorney fees was predicated on a violation of a penal statute, the court held that the award was likewise penal in nature and thus excluded by the policy.

II. Where Attorney Fees May Not Be Covered

Other courts have concluded that attorney fees are not damages. These cases generally fall into two narrow categories. The first relates to statutory or common-law treatment of certain types of attorney-fee awards as costs. The second relates to whether a boilerplate demand for attorney fees triggers the defense obligation where the underlying claim is not otherwise covered by the policy.

A. Statutory or Common-Law Treatment

Some courts have determined that an attorney fee-award does not qualify as damages because the statute on which it is based expressly categorizes the award as a cost.[30] A number of cases here concern a fee-shifting provision for vindication of civil rights, 42 U.S.C. § 1988(b), which provides for an award of attorney fees “as part of the costs.” For example, in Sullivan County v. Home Indemnity Co.,[31] the Sixth Circuit Court of Appeals drew a distinction between attorney fees recoverable as “costs” under 42 U.S.C. § 1988 and attorney fees recoverable as damages under 18 U.S.C. § 2520. Given this statutory categorization, the court held that attorney fees awarded under section 1988 were therefore costs and not recoverable as damages. Similarly, in American Safety Casualty Insurance Co. v. City of Waukegan,[32] the court held that an award of over $1 million in attorney fees to the claimant in the underlying litigation under 42 U.S.C. § 1988 was better characterized as an award of costs rather than damages. Thus, because the statute expressly characterized the attorney fees as costs, the court concluded that they were not damages.[33] In contrast, some statutes provide that a fee award is an element of damages.[34]

In some situations, a fee award may not be considered damages because the common law treats certain types of awards as costs. In Alea London Ltd. v. American Home Services, Inc.,[35] the court rejected the policyholder’s contention that fees awarded under a Georgia statute concerning expenses of litigation were damages. The underlying litigation involved a class action under the Telephone Consumer Protection Act.[36] In the coverage litigation, the insurer argued, among other things, that its CGL policy did not cover any attorney fees awarded against the insured in the underlying litigation. The attorney fee-award at issue in the coverage litigation was based on a Georgia statute permitting the recovery of “expenses of litigation” where “the defendant has acted in bad faith, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense . . . .”[37] The policyholder argued that the insurer’s obligation to cover attorney fees arose from its contractual duty to indemnify the insured for “damages.” The court rejected that argument, holding instead that under Georgia law, attorney fees are not typically included within the “ordinary species of damages.”[38] The rationale for this conclusion appears to be that such an award was “ancillary” to the plaintiff’s damage claim in that it required additional proof.[39] As noted above, however, other cases have held that attorney fees are analogous to money damages and thus fall within coverage.

B. Absence of a Covered Claim

Other cases that do not permit recovery of attorney fees simply are grounded on the narrow proposition that where there is no coverage whatsoever for the underlying claim, a demand for attorney fees does not trigger a duty to defend. For example, School District of Shorewood v. Wausau Insurance Co.[40] involved a discrimination action against the district seeking declaratory and injunctive relief. The insurers refused to defend or indemnify the insureds on the grounds that the underlying complaint sought declaratory and injunctive relief and thus did not constitute damages under the policies. The school districts defended themselves and ultimately settled with the plaintiffs. In the coverage litigation, the school districts argued, in part, that the insurers were obligated to defend and indemnify them because the complaint in the underlying litigation requested “‘an order pursuant to 42 U.S.C. § 1988 allowing plaintiffs their costs and reasonable attorneys’ fees.’”[41] The Wisconsin Supreme Court held that the insurers had no duty to defend or indemnify the insured for the claims for declaratory and injunctive relief. It further concluded that because attorney fees under 42 U.S.C. § 1988 are labeled “costs,” they do not constitute damages.[42] Accordingly, the “insurers did not have a duty to defend the school districts in the underlying action based solely on a request for attorney fees under 42 U.S.C. sec. 1988.”[43]

Other cases holding that attorney fee awards are not damages are largely duty-to-defend cases in which the insured contended that the boilerplate phrase “costs, attorneys’ fees and other and further relief as the court deems just and proper” in the prayer for relief was in reality a claim for damages, thus triggering the defense obligation. The courts have by and large rejected this argument.[44]

III. Supplementary Payments Coverage

As an alternative means of recovery, the policyholder may seek to recover an attorney-fee award under the policy’s supplementary payments coverage. The supplementary payments provision in the typical CGL policy provides that the insurer “will pay, with respect to any claim we investigate or settle, or any ‘suit’ against an insured we defend” certain expenses and costs, including, among other things, “[a]ll costs taxed against the insured in the ‘suit.’”[45] The 2007 modifications to the ISO standard form added a sentence behind this clause, which now reads as follows: “However, these payments do not include attorneys’ fees or attorneys’ expenses taxed against the insured.”[46] As a result of the 2007 exclusion for attorney’ fees in the supplementary payments coverage, policyholders are more likely look for coverage under the indemnity provisions of the policy. Where, however, the supplementary payments provision does not expressly exclude attorney fees, a number of courts held that attorney fees are recoverable “costs.” Indeed, the absence of such an exclusion presents a strong argument that attorney fees can be considered insured costs.

In St. Paul Fire & Marine Insurance Co. v. Hebert Construction, Inc., the underlying action involved alleged construction defects in a 78-unit condominium project.[47] The plaintiff entered into a stipulated judgment against the developer, which included $1.6 million in attorney fees. The insurer brought a declaratory judgment contending, in part, that the attorney fees were not covered by the additional payments provision in the policy.[48] This provision provided for payment of, among other things, “all costs taxed against any protected person in a suit.”[49] Noting that the phrase “costs taxed” was undefined, the court looked to the plain, ordinary, and popular meaning of the words, as defined by dictionaries.[50] Based on those dictionary definitions, the court concluded that “the plain, ordinary meaning of the ‘costs taxed’ clause in the St. Paul policies includes attorneys’ fees.”[51] Accordingly, the insured could recover the attorney fees as taxable costs.

Similarly, in Mutual of Enumclaw v. Harvey,[52] the court analyzed the supplementary coverages provision in the insured’s homeowner’s policy that provided coverage for “all costs taxed against the insured in any suit defended by the Company.”[53] The court held that the supplementary coverages are separate from and in addition to the basic policy and that, therefore, the insurer’s obligation to pay such costs was unaffected by the fact that the policy did not cover the insured’s intentionally tortious conduct.[54] The court then turned to the issue of whether attorney fees were covered under the supplementary coverage provision. Citing Webster’s definition of costs, the court stated:

Though the word “costs” as a legal term of art may be ambiguous, it is not so from the perspective of the ordinary person unfamiliar with the jargon of the legal and insurance professions standing in the position of the insured. An insurance policy must be interpreted from that perspective.[55]

Accordingly, the court held that the award of attorney fees in the underlying litigation was recoverable.

In Employers Mutual Casualty Co. v. Philadelphia Indemnity Insurance Co.,[56] the underlying action involved claims by residents of a mobile home park under the California Mobilehome Residency Law, which provides that that the prevailing party in an action under the statute “shall be entitled to reasonable attorney’s fees and costs.”[57] The settlement of the underlying action allocated $1.8 million of the proceeds to plaintiffs’ attorney fees and costs pursuant to this statute. The insurers who paid the settlement then sought contribution from two other insurers. The court held that the $1.8 million was a taxed cost that was recoverable under the supplementary payments provision.[58] The court rejected the argument that costs taxed cannot include attorney fees paid in a settlement. Numerous other cases have held that attorney fees are covered costs under the supplementary payments provision.[59]

Other courts have held that attorney fees do not include costs. These decisions are by and large dependent on state law classifications of attorney fees as something other than taxable costs.[60] Coverage may also be precluded where there is no coverage for the underlying claims.[61] Finally, in some unique circumstances, state law may actually bar coverage for a fee award if the loss is caused by the “willful act of the insured.”[62]

IV. Conclusion

Where there is the potential for a fee-shifting award, policyholders need to carefully analyze whether such an award may be covered by their insurance. This necessarily requires a thorough understanding of the basis for a fee-shifting award (statute, rule, or contract), the policy terms and conditions, and applicable state law regarding both treatment of attorney-fee awards (damages or costs; compensatory or penal) and the interpretation of insurance policies. In light of the 2007 ISO revisions to the standard CGL form excluding attorney fees as costs under the supplementary payments coverage, the focus going forward will be on the indemnity coverage. Nevertheless, fitting the pieces together may indeed result in coverage for such awards.

Nick Nierengarten is a shareholder with Gray Plant Mooty in Minneapolis.

[1] In the absence of such a provision, attorney fees are typically not awarded in a breach of contract case. Some jurisdictions, however, permit an insured to recover attorney fees in establishing coverage where the insurer breaches the defense obligation. See Ostrager & Newman, Handbook on Insurance Coverage Disputes § 5.06[b] (15th ed. 2011). Such awards are outside of the scope of this article.

[2] Commercial General Liability Coverage Form CG 00 01 12 07, © ISO Properties, Inc., 2006.

[3] Am. Family Mut. Ins. Co. v. Spectre West Builders Corp., No. CV09-968-PHX-JAT, 2011 U.S. Dist. LEXIS 11328 (D. Ariz. Feb. 4, 2011).

[4] Spectre West, 2011 U.S. Dist. LEXIS 11328, at *2. See Ariz. Rev. Stat. § 12-1364 (Dwelling action; attorney fees, costs, and expert witness fees: “In any contested dwelling action, the court shall award the successful party reasonable attorney fees, reasonable expert witness fees and taxable costs.”); Ariz. Rev. Stat. § 12-341.01(A) (Recovery of attorney fees: “In any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees.”).

[5] Spectre West, 2011 U.S. Dist. LEXIS 11328, at *21–22 (emphasis added).

[6] Spectre West, 2011 U.S. Dist. LEXIS 11328, at *24.

[7] Neal-Pettit v. Lahman, 125 Ohio St. 3d 327, 928 N.E.2d 421 (Ohio 2010).

[8] The insuring clause at issue provided: “If a premium is shown on the Policy Declarations for Bodily Injury Liability Coverage and Property Damage Liability Coverage, Allstate will pay damages which an insured person is legally obligated to pay because of: 1. bodily injury sustained by any person, and 2. Damage to, or destruction of, property.” Neal-Pettit, 928 N.E.2d at 423.

[9] Neal-Pettit, 928 N.E.2d at 423.

[10] Neal-Pettit, 928 N.E.2d at 423 (internal citations omitted; emphasis in original).

[11] Neal-Pettit, 928 N.E.2d at 430 (internal citation omitted; emphasis in original).

[12] Hyatt Corp. v. Occidental Fire & Cas. Co. of N.C., 801 S.W.2d 382 (Mo. Ct. App. 1990).

[13] Hyatt Corp., 801 S.W.2d at 393–94 (emphasis added).

[14] See, e.g., Fair Hous. Advocates Ass’n Inc. v. Terrace Plaza Apartments, No. 2:03-cv-0563, 2006 U.S. Dist. LEXIS 55600, at *15 (S.D. Ohio Aug. 10, 2006) (holding that an attorney-fee award under the Fair Housing Act, 42 U.S.C. § 3613(c)(2), constitutes “damages” under a CGL policy because the language of the policy was ambiguous and had to be construed in favor of the insured); Church Mut. Ins. Co. v. Exec. Bd. of the Mo. Baptist Convention, No. 03-4224-CV-W-SOW, 2005 U.S. Dist. LEXIS 20479, at *27 (W.D. Mo. June 24, 2005) (quoting Hyatt Corp. and holding that an award of attorney fees and costs “‘is indistinguishable from a damages award for [insurance] coverage purposes’”); Sylvania Twp. Bd. of Trs. v. Twin City Fire Ins. Co., No. L-03-1075, 2004 Ohio App. LEXIS 420 (Ohio Ct. App. Feb. 6, 2004), appeal dismissed, 102 Ohio St. 3d 1416, 806 N.E.2d 1005 (Ohio 2004) (finding the word “damages” in an errors and omissions policy to be ambiguous and holding attorney fees pursuant to state statute to be covered by the policy); Scottsdale Ins. Co. v. Avol, No. 91-55773, 1992 U.S. App. LEXIS 17741, at *6 (9th Cir. 1992) (stating that award of attorney fees under Cal. Civ. Proc. Code § 1021.5 is “analogous to money damages and thus fall[s] within the policies’ general provision to pay all damages that [insured] is legally obligated to pay”); Kirtland v. W. World Ins. Co., 43 Ohio App. 3d 167, 169–70, 540 N.E.2d 282, 285 (Ohio Ct. App. 1988) (holding that the undefined phrase “money damages” in the policy was ambiguous and that attorney fees awarded to the claimant under 42 U.S.C. § 1988 were “costs” in the “nature of incidental damages” and therefore were money damages covered by the policy).

[15] Ypsilanti v. Appalachian Ins. Co., 547 F. Supp. 823 (E.D. Mich. 1982), aff’d mem., 725 F.2d 682 (6th Cir. 1983).

[16] Ypsilanti, 547 F. Supp. at 828.

[17] Ypsilanti, 547 F. Supp. at 828. In California Insurance Co. v. Oregon Insurance Guaranty Ass’n, No. 01-514-HA, 2005 U.S. Dist. LEXIS 4621, at *24 (D. Or. Mar. 17, 2005), aff’d in part, rev’d in part, remanded in part, California Insurance Co. v. Stimson Lumber Co., 325 F. App’x 496 (9th Cir. 2009), the court cited Ypsilanti and Hyatt Corp. as persuasive that an insured’s obligation to pay attorney fees is equivalent to damages. However, because the underlying claims were not covered by the policy, the court held that neither were the attorney fees.

[18] Hazelton, No. 3:07-CV-1704, 2009 U.S. Dist. LEXIS 44861 (M.D. Pa. May 28, 2009), aff’d, 400 F. App’x 626 (3d Cir. 2010).

[19] Hazelton, 2009 U.S. Dist. LEXIS 44861, at *7.

[20] See Thomas D. Rowe, Jr., “The Legal Theory of Attorney Fee Shifting: A Critical Overview,” 1982 Duke L.J. 651, 657; see also Shuette v. Beazer Homes Holdings Corp., 121 Nev. 837, 124 P.3d 530, 547 (Nev. 2005) (holding that recovery of attorney fees is “intended to compensate the claimant for legal fees incurred when he or she is forced to institute a court action to resolve a valid constructional defect claim by shifting the fees to the defendant”); Pennsylvania v. Del. Valley Citizens’ Council for Clean Air, 478 U.S. 546, 106 S. Ct. 3088, 92 L. Ed. 439 (1986) (“[T]he aim of such statutes was to enable private parties to obtain legal help in seeking redress for injuries resulting from the actual or threatened violation of specific federal laws.”); Delgadillo v. Astrue, 601 F. Supp. 2d 1241, 1246 (D. Colo. 2007) (“The purpose of fee-shifting statutes is to free the litigant from burdensome expenses that might chill assertion of valid claims.”).

[21] Ariz. Rev. Stat. § 12-341.01(B).

[22] Neal-Pettit, 928 N.E.2d at 423 (emphasis in original; citation and quotations omitted).

[23] See 1 Punitive Damages: Law and Prac. 2d ch. 7.

[24] Neal-Pettit, 928 N.E.2d at 424–25.

[25] Neal-Pettit, 928 N.E.2d at 425. The court also rejected the argument that the attorney-fee award violates public policy.

[26] Indian Harbor Ins. Co. v. Bestcomp, Inc., No. 09-7327, 2010 U.S. Dist. LEXIS 139252, at *19 (E.D. La. Nov. 15, 2010), aff’d on other grounds, 2011 U.S. App. LEXIS 24396 (5th Cir. Dec. 7, 2011).

[27] La. Rev. Stat. § 40:2203.1(G).

[28] Bestcomp, 2010 U.S. Dist. LEXIS 139252, at *2.

[29] Bestcomp, 2010 U.S. Dist. LEXIS 139252, at *2.

[30] See Marek v. Chesny, 473 U.S. 1, 44–51 (1985) (Brennan, J., dissenting); Hutto v. Finney, 437 U.S. 678, 697 n.28 (1978) (listing those federal provisions which refer to attorney fees as “costs” and those which do not).

[31] Sullivan Cnty. v. Home Indem. Co., 925 F.2d 152, 153 (6th Cir. 1991).

[32] Am. Safety Cas. Ins. Co. v. City of Waukegan, 776 F. Supp. 2d 670, 725 (N.D. Ill. 2011).

[33] Similarly, in Cutler-Orosi Unified School District v. Tulare County School Districts Liability/Property Self-Insurance Authority, 31 Cal. App. 4th 617, 631, 37 Cal. Rptr. 2d 106, 114 (Cal. Ct. App. 5th Dist. 1994), the court held that a claim for attorney fees under the Voting Rights Act, 42 U.S.C. § 1973, was not one for damages. The court noted that the Voting Rights Act permits the court to award “a reasonable attorney’s fee as part of the costs.” Cutler-Orosi, 37 Cal. Rptr. 2d at 114 (citing 42 U.S.C. § 1973l(e)). Accordingly, the court concluded that “to treat attorney fees as damages in such circumstances would ignore the evident intent of the policies to differentiate between costs and damages and would render the supplementary payments provision superfluous.” Cutler-Orosi, 37 Cal. Rptr. 2d at 114.

[34] See, e.g., Shuette v. Beazer Homes Holdings Corp., 121 Nev. 837, 124 P.3d 530, 547 (Nev. 2005) (holding that in construction defects cases, claimants may recover attorney fees as an item of damages pursuant to Nev. Rev. Stat. § 40.655(1)(a)).

[35] Alea London Ltd. v. Am. Home Servs., Inc., 638 F.3d 768 (11th Cir. 2011), cert. denied, 132 S. Ct. 553, 181 L. Ed. 2d 397 (2011).

[36] 47 U.S.C. § 227.

[37] Alea, 638 F.3d at 780 (quoting O.C.G.A. § 13-6-11).

[38] Alea, 638 F.3d at 780. In support of this finding, the court cited a number of Georgia cases for the proposition that, where no damages or other relief are awarded on the underlying claim, attorney fees are not recoverable under O.C.G.A. section 13-6-11.

[39] See also First Specialty Ins. Co. v. Caliber One Indem. Co., 988 So. 2d 708, 714 (Fla. Dist. Ct. App. 2008) (holding that under Florida law, attorney fees are “ancillary to damages”). In Kirtland, 540 N.E.2d at 285, the court appears to have accepted the insured’s argument that a fee award under 42 U.S.C. § 1988 was a form of money damages because it was in the nature of incidental damages. Thus, whether attorney fees are considered “incidental damages” is not necessarily dispositive of the issue.

[40] Sch. Dist. of Shorewood v. Wausau Ins. Co., 170 Wis. 2d 347, 488 N.W.2d 82 (Wis. 1992).

[41] Shorewood, 170 Wis. 2d at 361.

[42] Shorewood, 170 Wis. 2d at 378.

[43] Shorewood, 170 Wis. 2d at 378. This decision was issued following withdrawal of an earlier decision by the Wisconsin Supreme Court, which decided that attorney fees were damages. Sch. Dist. of Shorewood v. Wausau Ins. Co., 168 Wis. 2d 390, 484 N.W.2d 314, 423 (Wis. 1992) (“The term ‘damages,’ according to its ordinary usage, includes all forms of civil liability, including attorney fees . . . . We conclude that attorney fees paid to an opposing party in a discrimination case . . . falls under the term ‘damages.’”). The final Shorewood opinion’s treatment of “damages” was subsequently rejected in Johnson Controls, Inc. v. Employers Insurance, 264 Wis. 2d 60, 136, 665 N.W.2d 257, 295 (Wis. 2003), cert. denied, 541 U.S. 1027 (2004) (“[W]e . . . reject the too narrowly stated definition of damages in Shorewood.”). Johnson Controls also calls into question the decision in United States v. Security Management Co. Inc., 96 F.3d 260, 269 (7th Cir. 1996), which applied Wisconsin law and cited Shorewood for the proposition that “[w]here the obtaining of attorneys’ fees is expressly provided for by statute, a request for attorneys’ fees is not a request for damages.”

[44] See Pa. Cnty. Risk Pool v. Northland Ins., No. 1:07-cv-00898, 2009 U.S. Dist. LEXIS 15547, at *31 (M.D. Pa. Feb. 27, 2009) (holding that there was no duty to defend notwithstanding the inclusion of a prayer for costs and attorney fees in the complaint because the underlying lawsuit was an equitable action for declaratory and injunctive relief, which fell outside the scope of coverage); City of Sandusky v. Coregis Ins. Co., 192 F. App’x 355, 359 (6th Cir. 2006) (holding that where the policy expressly excluded “all forms of injunctive relief and declaratory judgments,” an award under 42 U.S.C. § 1988 based on the success of the class plaintiffs on equitable claims was not covered, but expressing “no opinion as to whether a § 1988 award given to a prevailing party that depended, at least in part, on the success of claims that were affirmatively covered by the insurance agreement, could be considered a claim for ‘damages’ under the language of this policy”). 

[45] See Commercial General Liability Coverage Form CG 00 01 12 04, © ISO Properties, Inc., 2003; Commercial General Liability Coverage Form CG 00 01 10 01, © ISO Properties, Inc., 2000.

[46] Commercial General Liability Form CG 00 01 12 07, © ISO Properties, Inc., 2006.

[47] St. Paul Fire & Marine Ins. Co. v. Hebert Constr., Inc., 450 F. Supp. 2d 1214 (W.D. Wash. 2006).

[48] Hebert Construction, 450 F. Supp. 2d at 1229.

[49] Hebert Construction, 450 F. Supp. 2d at 1229.

[50] Hebert Construction, 450 F. Supp. 2d at 1229.

[51] Hebert Construction, 450 F. Supp. 2d at 1235.

[52] Mut. of Enumclaw v. Harvey, 115 Idaho 1009, 772 P.2d 216 (Idaho 1989).

[53] Enumclaw, 772 P.2d at 218.

[54] Enumclaw, 772 P.2d at 219.

[55] Enumclaw, 772 P.2d at 220.

[56] Emp’rs Mut. Cas. Co. v. Phila. Indem. Ins. Co., 169 Cal. App. 4th 340, 86 Cal. Rptr. 3d 383 (Cal. Ct. App. 2d Dist. 2008).

[57] Cal. Civ. Code § 798.85.

[58] Employers Mutual, 169 Cal. App. 4th at 348.

[59] See Prichard v. Liberty Mut. Ins. Co., 84 Cal. App. 4th 890, 912, 101 Cal. Rptr. 2d 298, 313 (Cal. Ct. App. 4th Dist. 2000) (holding that insured was entitled to recover attorney fees assessed under a prevailing party clause as part of the insurer’s defense obligation); Ins. Co. of N. Am. v. Nat’l Am. Ins. Co., 37 Cal. App. 4th 195, 206–7, 43 Cal. Rptr. 2d 518, 525 (Cal. Ct. App. 4th Dist. 1995) (holding that costs awarded against the insured under a prevailing party fee clause applicable in the underlying litigation were covered under the supplementary payments section); Tri-State Ins. Co. v. Fitzgerald, 593 So.2d 1118, 1119 (Fla. Dist. Ct. App. 3d Dist. 1992) (holding that attorney fees as part of sanctions award under Fla. R. Civ. Proc. § 1.380(a)(4) were covered by the supplementary payments coverage, “[p]articularly since the policy emphasizes that the carriers are required to pay ‘all [such] costs’. . .”); Littlefield v. McGuffey, 979 F.2d 101 (7th Cir. 1992) (interpreting a building owner’s policy and holding that where the insurer defended the claim, attorney fees assessed under 42 U.S.C. § 1988(b) were “costs taxed” against the insured); Argento v. Vill. of Melrose Park, 838 F.2d 1483, 1499 (7th Cir. 1988) (holding that fees under 42 U.S.C. § 1988 are costs covered by the policy).

[60] See, e.g., Polygon Nw. Co. v. Am. Nat’l Fire Ins., 143 Wash. App. 753, 189 P.3d 777, 788 (Wash. Ct. App. 2008) (stating that the Washington cost statute, Wash. Rev. Code § 4.84.010, “lists the costs that may be taxed in a suit in Washington” and “does not include an award of reasonable attorney fees”).

[61] See Golden Eagle Ins. Corp. v. Cen-Fed, Ltd., 148 Cal. App. 4th 976, 56 Cal. Rptr. 3d 279 (Cal. Ct. App. 2d Dist. 2007) (holding that an award of attorney fees pursuant to the attorney-fee clause in a lease was not covered under the supplementary payments provision because that provision is a function of the defense obligation, not the indemnity obligation, and where none of the claims were potentially covered, the insurer had no defense obligation and thus was not liable to pay costs and attorney fees).

[62] See Combs v. State Farm Fire & Cas. Co., 143 Cal. App. 4th 1338, 1344 n.5, 49 Cal. Rptr. 3d 917, 924 n.5 (Cal. Ct. App. 1st Dist. 2006) (holding that “the reason for which State Farm need not reimburse Combs for attorney fees he was required to pay the prevailing party is not that the explicit terms of the policy do not call for such reimbursement, but that [Cal. Ins. Code] section 533 prohibits it”).

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