INSURANCE CLAIMS /
BAD FAITH LITIGATION

BRANDT FEES – INSURANCE LAW

By Herman I. Kalfen
Kalfen Law Corporation

Brandt Fees – Insured can recover attorney fees “reasonably incurred to compel payment of the policy benefits”

In Brandt v. Superior Court (1985) 37 Cal.3d 813, the California Supreme Court permitted policyholders to recover as bad faith damages their attorney's fees for obtaining policy benefits. The Brandt court asked the specific question, “[w]hen an insurer tortuously withholds benefits, are attorney’s fees, reasonably incurred to compel payment of the policy benefits, recoverable as an element of the damages resulting from such tortuous conduct?”   Answering its own question the court held: (1) If the insured had to incur attorney’s fees to compel the payment of policy benefits; and (2) the attorney’s fees are reasonable, and (3) the insured proves bad faith, which is the unreasonable withholding of policy benefits, then (4) the insured can recover his attorney’s fees.

However, the Brandt court limited recovery to those fees “reasonably incurred to compel payment of the policy benefits.”  The insured cannot recover attorney’s fees incurred in proving the tort of bad faith itself.  In other words, the insured can only recover those fees attributable to the breach of contract cause of action, not the bad faith cause of action.

In Cassim v. Allstate Insurance Company, 2004 WL 1687866, the Court changed the way Brandt fees are calculated in contingency cases.  The Cassim Court held that a proper calculation of Brandt fees requires the trier of fact to determine the percentage of all fees attributable to obtaining the contract recovery.  This formula is based on the percentage of the attorney's overall efforts devoted to the contractual recovery portion of the case.  The Court directed that hours spent on the case are divided into three categories: contract claim only; bad faith claim only, and both claims.  The Court then established a formula so the fee award would equal the ratio of the contract hours plus the hours allocable to both contract and bad faith claims divided by the hours devoted to the prosecution of the case.

In addition, it was the insureds' burden to prove the existence and amount of such damages by a preponderance of the evidence.  The Court also cautioned future trial courts to exercise discretion to disregard contingency fee agreements designed to manipulate the calculation of Brandt fees to an insured's benefit.  Finally, the Cassim Court also discusses how Brandt fees may be counted as compensatory damages in justifying the amount of punitive damages allowed under the Campbell case.

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