Insurance Case And Attorney Fees

Insurance lawyers know that in a first pary insurance claim lawsuit, a claim for attorney fees can be made.  When the insurance company challenges the attorney fees claim of the insured, a natural response by the lawyer is to seek to get the information related to what the insurance company paid their lawyers in attorney fees.

Can that be done?  The question was answered by the Texas Supreme Court in this recent 2017, opinion.  It is styled, In Re National Lloyds Insurance Company, Wardlaw Claims Service, Inc., And Ideal Adjusting, Inc. Relators.

The discovery dispute in this mandamus proceeding arises in the context of multi-district litigation involving allegations of underpaid homeowner insurance claims.  The issue is whether a party’s attorney billing information is discoverable when the party challenges an opposing party’s attorney fee request as unreasonable or unnecessary but neither uses its own attorney fees as a comparator nor seeks to recover any portion of its own fees.  This Court held that under such circumstances, (1) compelling en masse production of a party’s billing records invades the attorney work product privilege; the privilege is not waived merely because the party resisting discovery has challenged the opponent’s attorney fee request; and (3) such information is ordinarily not discoverable.

To the extent factual information about hourly rates and aggregate attorney fees is not privileged, that information is generally irrelevant and non-discoverable because it does not establish the reasonableness and necessity of the attorney fees an opposing party has incurred.  A party’s litigation expenditures reflect only the value that party has assigned to litigating the matter, which may be influenced by myriad party specific interests.  Absent a fee shifting claim, a party’s attorney fee expenditures need not be reasonable or necessary for the particular case.  Barring unusual circumstances, allowing discovery of such information would spawn unnecessary case within a case litigation devoted to determining the reasonableness and necessity of attorney fee expenditures that are not at issue in the litigation.  This is not a proper discovery objective.  The Court therefore conditionally granted mandamus relief and directed the trial court to vacate it’s order for the insurance company and its agents to produce information about its attorney fee arrangements.

This case is a 33 page opinion that needs to be read by insurance lawyers since almost all insurance lawsuits are going to involve claims for attorney fees.  The opinion involves lengthy discussions about attorney-client privilege and attorney work-product privilege.  Plus, the opinion offers a lengthy discussion on relevance.