Availability of Attorneys' Fees in Coverage Litigation

As insurance coverage disputes, like all disputes, become increasingly expensive, cost continues to be an important factor in deciding whether to commence a lawsuit or arbitration in order to pursue insurance. While most states apply the 'American Rule,' which precludes recovery of attorneys' fees in litigation-coverage disputes, some jurisdictions have exceptions for prevailing insureds. This article highlights the major types of exceptions. In considering the possibility that fees may be available, practitioners should recognize that individual jurisdictions may apply exceptions that look similar but operate rather differently, and that important rights of recovery may be found in procedural rules or case law beyond the confines of insurance law. Careful analysis of conflicts of law may also be important since the right to collect fees in a case filed in a particular state or federal court may turn on its choice of law principles and whether a particular right to recovery is deemed substantive or procedural.