Insurance: Insured Had Incentive To Keep Costs Reasonable When Duty To Defend Dispute Occurred And Insurer Internal Billing Guidelines Not Contained In Policy Cannot Steer Fee Reasonableness Determination

 

U.S. District Judge So Rules in N.D. Illinois Decision.

     We thank our friends at NALFA for calling the next decision to our attention (as posted on in their Attorney Fee Blog).

     In Philadelphia Indemnity Ins. Co. v. Chicago Title Ins. Co., USDC, N.D. Ill. Case No. 09 C 7063 (June 10, 2012), an insurer challenged an insured’s billings because they were not reasonable and did not comply with the insured’s internal billing guidelines. Both challenges were rebuffed.

     The district judge determined that neither argument prevailed under the circumstances before him.

     First, the insured was paying for defense efforts at a time when the insurer had contested the duty to defend, meaning that the insured had every incentive to keep defense costs reasonable. In this regard, the court followed parallel reasoning expressed in Taco Bell Corp. v. Continental Cas. Co., 388 F.3d 1069 (7th Cir. 2004)

     Second, the insured’s internal billings guidelines were not incorporated into the insurance policy such that they could not on hindsight basis be considered to drive a fee reasonableness determination by the court.