Most states follow the “American Rule” when it comes to litigation. In other words, absent a specific statute or contractual provision to the contrary, each party pays their own legal costs and fees. However, the Oklahoma legislature passed, and on May 10, 2017, the governor signed into law, a bill which, in essence, abolished the “American Rule” in all civil cases. While it appears that this was the unintended consequence of House Bill 1470, the law will require the losing party in civil lawsuits to pay all court costs to the winning party, and can also place the losing party on the hook for the winning party’s legal fees. The law will take effect November 1.
It is important to note, however, that with or without House Bill 1470, Oklahoma has a fee shifting statute in place applicable to insurance losses.1 In relevant part, it provides as follows:
It shall be the duty of the insurer, receiving a proof of loss, to submit a written offer of settlement or rejection of the claim to the insured within ninety (90) days of receipt of that proof of loss. Upon a judgment rendered to either party, costs and attorney fees shall be allowable to the prevailing party. For purposes of this section, the prevailing party is the insurer in those cases where judgment does not exceed written offer of settlement. In other judgments the insured shall be the prevailing party. If the insured is the prevailing party, the court in rendering judgment shall add interest on the verdict at the rate of fifteen percent (15%) per year from the date the loss was payable pursuant to the provisions of the contract to the date of the verdict. The provision shall not apply to uninsured motorist coverage.
Section 3629(B) has been upheld in various cases, finding both an award of attorney’s fees and costs for insureds as well as insurers. Courts have found that the purpose of the Oklahoma statute is to encourage the prompt settlement of claims, in part by offering the prevailing party attorney fees.2 Litigants beware, however, an award of attorney fees for the insurer has even been upheld where no proof of loss was requested or provided.3
1 36 Okla. Stat. Ann. § 3629(B).
2 AG Equipment CO. v. AIG Life Ins. Co., 691 F.Supp.2d 1295 (N.D. Okla. 2010).
3 Morton v. Progressive Northern Ins Co., No. 11-6082, 2012 WL 4801110 (10th Cir. Oct. 10, 2012).