Clients often ask me if it is possible to recover attorney fees when they bring an action in California against their insurance company. I let them know it is possible to recover attorney fees, if bad faith is at issue.

In California, the seminal case that allows for attorney fees and litigation costs is Brandt v. Superior Court (Standard Ins. Co.), (1985) 37 Cal.3d 813, 817. In Brandt, the California Supreme Court established an exception to the general contract rule that each party bears its own attorney fees. Brandt allows recovery of attorney fees incurred in obtaining contract benefits when the insurer’s withholding of those benefits was in bad faith.

To recover attorney fees, a policyholder must prove:

  1. Benefits were withheld in bad faith; and
  2. The fees incurred by the policyholder to recover those benefits. The fees incurred to prove the bad faith are NOT recoverable; only fees incurred to prove coverage are recoverable. (Cassim v. Allstate Ins. Co., (2004) 33 Cal.4th 780, 811)

In White v. Western Title Ins. Co., (1985) 40 Cal.3d 870, the Supreme Court extended its analysis in Brandt to recovery of litigation costs, including expert fees, incurred in proving coverage. Since coverage experts can be very expensive, this additional economic damage should not be overlooked. Attorney fee and litigation costs are normally a jury issue, but, as the Brandt court recommended, they are usually best determined by the court after the verdict.

  • Most states hold that in the third party context that if you are sued and your insurer denies a defense you can recover attorneys fees if you prove that the insurer failed to comply with its duty to defend.

    In the first party context, it becomes much more difficult to recover fees as you have to prove bad faith in most states. It often becomes a gamble as proving bad faith is expensive in its own right so you have the make the assessment, (often without seeing the claims file) on whether it is worth proceeding to bad faith. Fortunately, in Wisconsin, the fees associated with proving bad faith are recoverable.