$2.755 Million in Fees Was the Ultimate Result Sustained Upon Review.
Encarnacion v. 20th Century Ins. Co., Inc., Case No. B222313 (2d Dist., Div. 1 Oct. 31, 2011) (unpublished) was an arduous fight between certain parties and an insurance company over breach of contract/insurance bad faith relating to a $5.6 million wrongful death judgment. Justice Chaney, on behalf of a 3-0 decision, addressed a fee allocation verdict under Brandt v. Superior Court, 37 Cal.3d 813 (1985), which allows a jury to award as damages the attorney work attributable to obtaining contractual insurance benefits.
Earlier, the same appellate court reversed the trial court’s ruling that the Brandt fee claim was not assignable and that the assignee could not recover such fees if the assignor recovered no damages. (See our December 31, 2008 post on this prior decision.)
The matter then proceeded to a jury determination of what Brandt fees were properly awardable given that fee work is compensable for the obtaining of contract benefits but not compensable for work on the tort claims. Both sides presented interesting proof on what allocation was proper. Plaintiffs sought to obtain recovery for 85% of attorney time (even though no time records were kept), while the defense relied on a fee expert testifying that 22% of the total time was compensable. So, what did the jury do? You guessed it--close to a baby split, determining 50% of the time was allocable for fees so as to result in an award of $2,755,294.
Insurance company appealed the fee award, while plaintiff appealed an order taxing certain costs.
The appellate court affirmed.
On the appropriateness of the fee allocation made by the jury, the parties had radically different stances on appeal. Plaintiff argued there was no tort bad faith verdict so that no allocation was necessary at all. Defendant argued that the trial court erred in permitting the jury to award fees for any efforts above the $100,000 insurance policy limit. The 2/1 panel rejected both positions. Plaintiff’s argument rested on a misconception of the Brandt/Cassim duology: those cases only allow compensation for work to recover policy benefits, not the portion attributable to recovery of those benefits--meaning that the tort work was properly allocated out. Defendant’s theory was inconsistent with cases recognizing that bad faith failure to settle a claim can result in damages that are a benefit owed to the insured under the policy. One sentence with unexplained dictum in Essex v. Five Star Dye House, Inc., 38 Cal.4th 1252 (2006) did not alter the result.
Feris Greenberger, an appellate specialist, was one of the attorneys involved in the case. Blawg contributor Marc Alexander knows Feris from law school at UCLA, and sends her his best regards.
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