Yesterday, I attended an interesting legal education seminar on the ability to get insurance on a California litigation involving an attorney fee dispute. As background, in California many contracts, like the California Association of Realtor’s standardized Purchase and Sale Agreement and most commercial leases in California, contain prevailing party attorneys’ fees clauses. These clauses essentially provide that the winning party (whoever wins the case) has a right to get reimbursed their attorneys’ fees and costs from the losing party. These clauses require the prevailing party to make a motion to the court for an award of attorneys’ fees and costs after the matter has been resolved. These clauses are important because often times the amount of the attorneys’ fees involved in the dispute can exceed or become a significant part of a party’s damages.
The insurance available is available to both plaintiffs and defendants. Essentially, the insurance allows a party to insure against a negative attorney fee award – an attorney fee award in favor of the opposing party. The insurer claims that this is a way to insure against a big loss, based on a large attorney fee award, in litigation with an attorney fee provision. While this is true, the cost of these policies can be very expensive. According to one insurance company representative the cost to obtain coverage up to $100,000 can be between $6,500 and $7500. Of course, this coverage must assume that there is no underlying insurance coverage in the lawsuit already.
In the end, it is good to know this type of coverage exists. Whether or not it makes financial sense to ever buy this coverage is a complicated issue that involves, among other things, an analysis of a party’s risk tolerance, ability to absorb a loss and cash on hand at the outset of the litigation.
For help with Los Angeles litigation involving attorney fee disputes contact Schorr Law, APC, 12100 Wilshire Boulevard, Suite 1050, Los Angeles, California, 310-954-1877, firstname.lastname@example.org, www.schorr-law.com.
Essentially, either party can go out and buy insurance on the prevailing party fee determination that accompanies