Attorney Fees – Who Pays Them in Insurance Case?

In the course of my career, I have spent about half my professional time working on cases that do not allow for the recovery of attorney fees against the defendant and half where it does. In any event, I have exclusively represented people on a “contingency fee” basis — meaning, if I am not successful (either in settlement or trial), then my clients do not owe me anything in fee or expenses. This is quite risky because in the event a case goes to trial, the expenses (not counting my time) to get to trial could be anywhere from $10,000-$200,000. In my last trial, our expenses were $84,000.00. We advance those funds — risking the money in the event of a loss. This, plus the time required, is why lawyers working like me charge 33-40 percent of the recovery. It is necessary because the defendants are spending just as much.

One comment I frequently hear is that someone elected not to pursue a legal remedy (even though they had a lawful one) because they assume they cannot afford the attorney fees. Assuming your attorney is working under the arrangement above, that should not be a factor in your decision. What these agreements enable people to do is to secure counsel with the expertise and skill to match their opponent. But, what if the law allows you to recover your attorney fees against the defendant? In the insurance context, this is the case as Texas law has several ways to support an award of attorney fees (under the Civil Practice and Remedies Code, Texas Insurance Code, as well as Deceptive Trade Practice Act). So, if your bad faith case supports attorney fees, how are those collected in settlement? In trial?

Most insurance disputes are resolved via settlement. This is one of the most confusing parts of an insurance case. Since the client hears that the insurance company can be made to pay attorney fees, they wonder what part of the settlement represents that? In my experience, in settlement attorney fees are just another aspect of the case, like property damage, personal property, etc. Insurance companies generally offer one amount for settlement, inclusive of all elements. A potential award of attorney fees is seen as a risk by the insurance company that encourages them to offer more money in settlement.

Generally, no matter what the award of attorney fees in a bad faith case, you owe your attorney the percentage you agreed on. Most fee agreements are 40% once a petition is filed. So, what happens in the event that you go all the way through trial and a fee award is greater than 40% of the gross recovery? What if it is less?

Some fee agreements have provisions addressing this issue directly. In other words, your contract and power of attorney agreement may speak to this situation directly — where the attorney can take the award rather than the fee percentage. Otherwise, the fee award is part of the gross recovery to be divided according to your agreement.

Attorney fees are generally a big question for potential clients — especially if you have not hired an attorney before. Feel free to contact Brasher Law Firm (www.brasherattorney.com) with any questions (888) 989-2889.