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Insurance Coverage for Awards of Attorneys' Fees

By Kirk A. Pasich
July 28, 2005

Almost all class actions that are resolved involve an award of attorneys' fees to plaintiffs' counsel. In some instances, the fee awards are specified by agreement and are paid from the overall settlement. In other instances, the fees are determined in a separate hearing and may be awarded in addition to the settlement payment. These awards of attorneys' fees often reach millions of dollars and may, in some circumstances, be one of the most significant components of a settlement or judgment.

However, insurance carriers often resist paying such awards. They contend that the awards constitute penalties or do not constitute insured compensatory damages. They also sometimes contend that the awards are not covered because they are derivative of uncovered claims. These carrier arguments should not be readily accepted. As explained below, many, if not most, attorneys' fee awards in class action cases probably will be covered by insurance policies.

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