Category Archives: Reimbursement of Legal Fees

Court: Insurers Have Right To Seek Reimbursement Of Settlement Amounts Paid For Uncovered Claims

We’ve discussed an insurer’s potential right to reimbursement of defense costs recently on this blog.  Here is a case that discusses an insurer’s potential right to get back amounts paid in settlement of liability claims — Travelers Property Casualty Co. of America v. Hillerich & Bradsby Co., Inc., 2006 WL 2524145 (W.D. Kentucky August 28, 2006). 

Travelers funded the defense of Hillerich & Bradsby, (which if you have ever played baseball or softball you may remember as the name on the trademark of your bat) in a lawsuit alleging claims ranging from anti-trust violations to interference with business relationships in the aluminum bat market.  Travelers agreed to pay the lawyers picked by H&B and also agreed to fund a settlement negotiated by H&B, while reserving the right to seek reimbursement of settlement amounts attributable to uncovered claims.  H&B denied that Travelers had the right to seek reimbursement, and Travelers brought a declaratory action to clarify the issue.

In the declaratory action, Travelers was seeking only reimbursement of uncovered settlement amounts, not reimbursement of legal fees.  The court decided insurers have the right to seek such reimbursement when: 1) they have expressly reserved the right to do so; 2) they have notified the insured of their intent to accept a proposed settlement offer; and 3) the insured either has control of the defense, or the insurer makes an express offer to allow the insured to assume the defense when the insurer and insured disagree over the proposed settlement.  This was the court’s decision under general legal principles.  The court left until another day whether Travelers’ insurance contract gave it the right to seek reimbursement.

Two asides about this case. 

First, the pdf of this case I linked to is one I obtained via the ECF/PACER electronic filing system for federal courts.  It did not cost anything, but it is not otherwise available on the website of the U.S. District Court for the Western District of Kentucky.  As you may be aware, a few years back Congress directed that federal courts provide electronic "access to the substance of all written opinions . . . in a text searchable format" in the e-Government Act of 2002.  As you can see from the website of the Western District of Kentucky, many courts interpret this to mean it’s enough for them to provide opinions through ECF/PACER, not on the website itself, and not available to the common person.  Here is a link to the e-Government Act of 2002.  Read the preamble of the act and Section 205, about the duty of federal courts, and see if you think supplying cases through a data port inaccessible to most people complies with the spirit of Congress’ directive.

Second, this case begins with a device I see a lot in both briefs and court opinions and really dislike: "This is an insurance coverage dispute."  I call this type of opening sentence the "modified Gettysburg Address," because I like to imagine how it would have sounded if Abe Lincoln had gotten up after three hours of speaking by Edward Everett, pulled that paper from his pocket, looked at the words he had written and rewritten on the train to Gettysburg, and started off in that high voice of his: "This is a speech about some dead people." 

I realize not every piece of writing is the Gettysburg Address, and I imagine those who use this device see it as a utilitarian information delivery system.  But let me point out that the essence of utilitarianism is functionality and efficiency, not standing hesitantly with one foot halfway forward like the folks at the county courthouse who seem terrified to walk through the metal detector.  Maybe taking the time to come up with a more meaningful and helpful topic sentence would help concentrate the writer to the task at hand, plus show regard for the time of the reader.  Just sayin’.

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Filed under Duty to Indemnify, Liability Policies, Reimbursement of Legal Fees

“As Soon As Possible” Means Sooner Than Eight Years

When the insurance policy says the insured must request reimbursement for litigation fees “as soon as possible,” waiting eight years to ask is too long, a judge ruled in Schwartz v. CNA Ins. Co., 2005 WL 3556679 (N.D. Ohio Dec. 27, 2005). The case is about a heart surgeon who was involved in a series of lawsuits against and involving his alcoholic physician partner.
The surgeon, who at one point during his extensive history of litigation was evicted from his hospital office for allegedly threatening to blow the building up, failed in his lawsuit against his insurers to collect under two policies: the “as soon as possible” policy and one requiring the request for reimbursement be made within two years. There also was no coverage for a host of other reasons, including the business pursuits exclusion, although the surgeon tried to sidestep that exclusion by arguing “these cases did not arise out of my business pursuits, but rather out of alleged interference with my business pursuits.”

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Filed under Reimbursement of Legal Fees