McGreevy v. Oregon Mut. Ins. Co.

• Court: Washington Court of Appeals
• Writing for the Court: BROWN; SCHULTHEIS, C.J., and SWEENEY
• Citation: McGreevy v. Oregon Mut. Ins. Co., 951 P.2d 798, 90 Wn.App. 283 (Wash. App. 1998)
• Decision Date: 13 January 1998
• Docket Number: No. 16176-5-III
• Parties: Christine A. McGREEVY, individually and as Personal Representative of the Estate of William J. McGreevy, Respondent, v. OREGON MUTUAL INSURANCE COMPANY, and Oregon corporation.

Page 283

90 Wn.App. 283

951 P.2d 798

Christine A. McGREEVY, individually and as Personal Representative of the Estate of William J McGreevy, Respondent, v. OREGON MUTUAL INSURANCE COMPANY, and Oregon corporation.

No. 16176-5-III.

Court of Appeals of Washington,

Division 3,

Panel Three.

Jan. 13, 1998.

R.D. Lindahl, Bullivant, Houser, Bailey, Pendergrass & Hoffman, Portland, for Appellant.

Richard D. Burns, Pomeroy, Darrel W. Aherin, Aherin & Rice, Lewiston, ID, for Respondent.

BROWN, Judge.

Today we decide whether a party who successfully secures denied insurance coverage must segregate the effort between the coverage and damage issues when seeking an award of attorney fees using the lodestar method of calculation. Also we decide: (1) whether this record supports the trial court § conclusion that an amount equal to the contingent fee is a reasonable fee; and (2) whether the record supports the cost bill, particularly the denial of experts fees.

We reverse and remand for further proceedings because we hold a party must segregate the time spent obtaining coverage from proving damages; the trial court misapplied the lodestar method of calculating attorney fees; and the cost bill is not supported by the record. We agree the trial court concluded correctly that the expert fees are not part of the costs.

FACTS

On April 2, 1988, Christine McGreevys husband, William McGreevy, was killed in an automobile accident within the coverage period of an insurance policy issued by Oregon Mutual Insurance Company. Mrs. McGreevy claimed the policy's uninsured motorist (UIM) coverage insured their four vehicles for a total of $400,000. The procedural history of this case shows Oregon Mutual claimed the policy insured one vehicle and the limit of coverage was $100,000. Mrs. McGreevy prevailed on this dispute at summary judgment, at a jury trial, and in a previous appeal.

Before the first appeal and according to the terms of the insurance policy, the parties arbitrated the damages. Mrs. McGreevy was awarded a net total of $455,000. In the first proceeding, Mrs. McGreevy submitted a cost bill to the trial court asking for $14,559.77, including expert witness fees and arbitration costs. The cost bill also listed attorney fees at an hourly rate totaling $45,620, but Mrs. McGreevy requested $145,000 based upon her contingent fee agreement with her attorneys. The court denied any attorney fees to Mrs. McGreevy, and limited her costs to $2,579.38.

In the first appeal, Oregon Mutual challenged the stacking issue and Mrs. McGreevy cross-appealed the trial court's denial of attorney fees and costs award. We affirmed the stacking question but reversed and remanded on the issues of attorney fees and costs. McGreevy v. Oregon Mut. Ins. Co., 74 Wash.App. 858, 876 P.2d 463 (1994). Mrs. McGreevy was awarded $5,836.25 for appellate fees and costs.

Oregon Mutual next appealed to the Washington State Supreme Court where review was accepted solely on the issues of attorney fees and costs. The Supreme Court affirmed our decision after reviewing its holding in Olympic S.S. Co. v. Centennial Ins. Co., 117 Wash.2d 37, 54, 811 P.2d 673 (1991). "An insured who is compelled to assume the burden of legal action to obtain the benefit of the insurance contract is entitled to attorney fees, regardless of whether the duty to defend is at issue...." McGreevy v. Oregon Mut. Ins. Co., 128 Wash.2d 26, 27, 904 P.2d 731 (1995). Mrs. McGreevy was awarded $10,370.57 for fees and costs at the Supreme Court and the matter was returned to the trial court on our mandate to determine the attorney fees and costs.

This brings us to the current posture of this case. The trial court on remand awarded Mrs. McGreevy $145,000 for attorney fees, an amount equal to her contingent fee, however, declined to modify the previously awarded costs. Oregon Mutual appeals contending the trial court erred when it increased the lodestar amount and decided the contingent fee was a reasonable fee. Mrs. McGreevy cross-appeals contending the costs should include experts' fees.

ANALYSIS

A. Standard of review. When reviewing an award of attorney fees, the relevant inquiry is first, whether the prevailing party was entitled to attorney fees, and second, whether the award of fees is reasonable. Public Util. Dist. 1 v. International Ins. Co., 124 Wash.2d 789, 814, 881 P.2d 1020 (1994); Gossett v. Farmers Ins. Co., 82 Wash.App. 375, 387, 917 P.2d 1124 (1996). Whether a party is entitled to attorney fees is an issue of law. Tradewell Group, Inc. v. Mavis, 71 Wash.App. 120, 126, 857 P.2d 1053(1993). Whether the amount of fees awarded was reasonable is reviewed under an abuse of discretion standard. American Nat'l Fire Ins. Co. v. B & L Trucking & Const. Co., 82 Wash.App. 646, 669, 920 P.2d 192 (1996). A trial judge is given broad discretion in determining the reasonableness of an award, and in order to reverse that award, it must be shown that the trial court manifestly abused its discretion. Scott Fetzer Co. v. Weeks, 122 Wash.2d 141, 147, 859 P.2d 1210 (1993).

B. Entitlement to attorney fees. "Washington follows the American rule in awarding attorney fees." Dayton v. Farmers Ins. Group, 124 Wash.2d 277, 280, 876 P.2d 896 (1994). Under the American rule, a court may award fees "only if authorized by contract, statute, or recognized ground in equity." Bowles v. Department of Retirement Sys., 121 Wash.2d 52, 70, 847 P.2d 440 (1993) (quoting Painting & Decorating Contractors, Inc. v. Ellensburg Sch. Dist., 96 Wash.2d 806, 815, 638 P.2d 1220 (1982)). A narrow exception to that rule is carved out in Olympic S.S. where the court held that insureds are entitled to attorney fees after they are compelled to assume the burden of legal action to obtain the benefit of their insurance contract. Olympic S.S., 117 Wash.2d at 54, 811 P.2d 673. SeeMcGreevy, 128 Wash.2d at 26, 904 P.2d 731; Public Util. Dist., 124 Wash.2d at 815, 881 P.2d 1020; Estate of Jordan v. Hartford Acc. & Indem. Co., 120 Wash.2d 490, 507-08, 844 P.2d 403(1993).

The rule articulated in Olympic S.S. authorizes attorney fees only when the insurer denies coverage and not when it denies a claim or disputes the value of the claim. Dayton, 124 Wash.2d at 280-81, 876 P.2d 896; Gossett, 82 Wash.App. at 388, 917 P.2d 1124; Kroeger v. First Natl. Ins. Co., 80 Wash.App. 207, 209, 908 P.2d 371 (1995), review denied, 129 Wash.2d 1002, 914 P.2d 66 (1996); Mailloux v. State Farm Mut. Auto. Ins. Co., 76 Wash.App. 507, 518-19, 887 P.2d 449(1995). A dispute over the extent of damages is not a question of coverage. Gossett, 82 Wash.App. at 386, 917 P.2d 1124; McGreevy, 128 Wash.2d at 33 n. 4, 904 P.2d 731.

In this case, there were two stages of litigation. The summary judgment and jury trial decided the issue of UIM coverage under the Oregon Mutual policy. After the coverage issue was decided, the parties then submitted to arbitration to determine the amount of damages. Mrs. McGreevy is entitled to attorney fees for work performed to obtain coverage. Olympic S.S., 117 Wash.2d at 54, 811 P.2d 673. She is not entitled to attorney fees for the work performed to obtain damages. Dayton, 124 Wash.2d at 281, 876 P.2d 896. The law does not allow recovery of fees for both. "[W]hen a number of actions are argued and only some of those allow for recovery of attorney fees, it would give the prevailing party an unfair benefit to award attorney fees for the entire case. Rather, attorney fees should be awarded only for those services related to the causes of action which allow for fees." Boeing Co. v. Sierracin Corp., 108 Wash.2d 38, 66, 738 P.2d 665 (1987) (citing Nordstrom, Inc. v. Tampourlos, 107 Wash.2d 735, 743, 733 P.2d 208 (1987)).

We conclude the trial court erred by not requiring the segregation of the attorney fees attributable to the legal coverage issue resolved by the courts from the factual damage issue resolved by the arbitration. Therefore, Mrs McGreevy is entitled solely to fees related to resolving the coverage question. Because the record does not show segregation of the fees took place, we must remand again to the trial court for further proceedings. We will next discuss the reasonableness of an attorney fees award to assist the trial court's decisionmaking and in response to Oregon Mutuals further contentions.

C. Reasonableness of attorney fees. In addition to establishing entitlement to attorney fees, the party requesting them must also establish they are reasonable. Absher Constr. Co. v. Kent Sch. Dist., 79 Wash.App. 841, 847, 917 P.2d 1086 (1995); Scott Fetzer, 122 Wash.2d at 151, 859 P.2d 1210. "Whether or not a fee is reasonable is an independent determination to be made by the awarding court." Absher, 79 Wash.App. at 847, 917 P.2d 1086. The "lodestar method" is the accepted starting point in those cases involving insureds that assume the burden of legal action to obtain the benefit of insurance. Ross v. State Farm Mut. Auto. Ins. Co., 82 Wash.App. 787, 799, 919 P.2d 1268 (1996), reversed on other grounds, 132 Wash.2d 507, 940 P.2d 252 (1997).

"The lodestar award is arrived at by multiplying a reasonable hourly rate by the number of hours reasonably expended on the matter." Scott Fetzer, 122 Wash.2d at 149, 859 P.2d 1210; Bowers v. Transamerica Title Ins. Co., 100 Wash.2d 581, 597, 675 P.2d 193 (1983). The first step is to look to the number of hours expended. The second step is to determine if the hourly fee charged was reasonable--the third step is to multiply the two to reach the lodestar fee. Finally, "After calculating a lodestar fee, the court should consider whether it needs adjustment either upward or downward to reflect factors not already taken into consideration." Ross, 82 Wash.App. at 800, 919 P.2d 1268; Bowers, 100 Wash.2d at 598-99, 675 P.2d 193.

There are two broad categories of factors to consider when adjusting the fee, one for contingent risk and the other for quality of work. Most important here, "the (cont...