Parsons v. Mutual of Enumclaw Insurance

JONES, J.,

CONCURRING in part and DISSENTING in part.

I concur with the Court’s opinion, with the exception of that portion of Part IIIC upholding the amount of the fee award and Part HID awarding fees on appeal. I would vacate the district court’s fee award and remand for a determination of the amount of fees necessitated by the suit against Mutual of Enumclaw.

I agree with that portion of Part IIIC wherein the Court holds that Parsons was entitled to an award of a reasonable attorney fee under I.C. § 41-1839. This Court made clear in Martin v. State Farm Mutual Automobile Insurance Co., 138 Idaho 244, 248, 61 P.3d 601, 605 (2002) that “if the insurance company makes no tender within thirty days ... [it] is liable for a reasonable amount of the insured’s attorney fees, as compensation to make the insured whole.” Here, rather than making a tender less than the $100,000 policy limits demanded by Parsons or advising Parsons that the proof of loss was insufficient, Mutual of Enumclaw chose to remain silent for more than thirty days following the demand, making itself liable for an attorney fee under I.C. § 41-1839.

In my view, the district court erred in failing to narrow the focus of its fee inquiry. I.C. § 41-1839(1) provides that an insurer which fails to pay the amount justly due under a policy within thirty days after receiving proof of loss “shall in any action thereafter brought against the insurer ... pay such further amount as the court shall adjudge reasonable as attorney’s fees in such action. This provision does not provide that the insured can collect the fee for the entire claim but, rather, for the fees occasioned by the action to prompt payment of the amount owing by the insurer.

The problem with the district court’s determination of the fee award is that it focused on the factors related to work done by Parsons’ attorney on the entire claim. That is, the work expended from the time the attorney first took the ease, through the time expended on the settlement with the tortfeasor’s insurance carrier, to the time the suit was concluded against Mutual of Enumclaw. This larger focus was primarily the result of the fee affidavit submitted by Parsons’ attorney which related to work done from the day Parsons engaged him. The affidavit did not contain a breakdown of the I.R.C.P. 54(e)(3) factors as they pertained to the action against Mutual of Enumclaw. I believe the district court erred in failing to limit the focus of its inquiry to the additional fees that may have been a result of this action.

This Court noted in Wolfe v. Farm Bureau Ins. Co., 128 Idaho 398, 405, 913 P.2d 1168, 1175 (1996) that operation of I.C. § 41-1839 requires an action to be filed in court and that an action is commenced with the filing of a complaint. While a fee award can certainly include preparatory work, such as the letter Parsons’ attorney sent to Mutual of Enumclaw on September 21, 2004, along with the proof of loss information, it would not encompass her attorney’s work on the entire matter from the time she first retained him in July of 2004.

I.R.C.P. 54(e)(3) requires that the trial court, in setting the amount of the fee award, consider all eleven factors stated therein, plus any additional factor the court deems appropriate. Lettunich v. Lettunich, 141 Idaho 425, 435, 111 P.3d 110, 120 (2005). The focus of this inquiry must also be confined to the action at hand, not some larger controversy involving the parties. By failing to confine its examination of the factors within the context of the suit against Mutual of Enumclaw, the district court erred.

In analogous situations, we have held that statutory attorney fees are to be confined to the dispute covered by the particular statute. Under I.C. § 7-911, we have allowed attorney fees for an action to confirm or enforce an arbitration award but not for the underlying arbitration. Driver v. SI Corp., 139 Idaho 423, 430, 80 P.3d 1024, 1031 (2003). In a suit to enforce a performance or payment bond, we have allowed attorney fees under I.C. § 54-1929 but not for the defense of a counterclaim brought for breach of contract in the same action. Oldcastle Precast, Inc. v. Parktowne Const. Inc., 142 Idaho 376, 378, 128 P.3d 913, 915 (2005).

The purpose of I.C. § 41-1839 is not furthered by awarding Parsons the full amount of the contingency fee that was agreed upon between herself and her lawyer for the entire claim. I.C. § 41-1839 is “not a penalty but is an additional sum rendered as compensation when the insured is entitled to recover under the insurance policy, ‘to prevent the sum therein provided from being diminished by expenditures for the services of an attorney ... ’ ” Martin, 138 Idaho at 247, 61 P.3d at 604. The evidence before the district court was that Parsons had agreed to pay her attorney a one-third contingency fee for amounts recovered for the entire claim. Thus, with respect to the uninsured motorist claim, Parsons was to pay her attorney one third of the amount “justly due”. Although Parsons demanded the policy limit of $100,000, she settled for $60,000 as the amount being justly due. Thus, her attorney fee was to be in the amount of $20,000. On the other hand, her recovery would be $40,000. The purpose of I.C. § 41-1839 would be served by insuring that attorney fees incurred in the suit against Mutual of Enumclaw would not eat into this recovery.

However, the district court saw it somewhat differently. According to the court, “it seems to me that this statute is intended to make this client whole, to give her the 20 grand back.” In other words, the district court believed that the statute was intended to cover her entire attorney fee for the claim, rather than the incremental amount required for preparing and filing the suit against Mutual of Enumclaw to bring about the payment.

As it turns out, both Parsons and her attorney profited by virtue of the full fee award. After the hearing on the fee matter, Parsons’ attorney submitted an additional affidavit, indicating how the additional $20,000 would be divided between them. According to the attorney, the $20,000 would be aggregated with the $60,000 and the one-third contingency fee would be applied against the combined sum. Thus, instead of getting the $40,000 that she would have received if Mutual of Enumclaw had been 22 days earlier in making its tender, she would receive $53,336. Her attorney would get $26,664, instead of $20,000.

It is not clear from the record whether the district court considered this factor in its determination. This factor came to light after the hearing, where the court had recited that it had considered the Rule 54 factors, but no mention was made in the eventual written decision. Nor, was there mention made in either instance whether the court had considered the fact that a demand had been made in the amount of $100,000 but the amount justly due was later determined to be $40,000 less. This would obviously be another relevant factor to consider.

In my estimation, the district court’s fee award was excessive because the court did not confine its inquiry to the amount of fees necessitated by the lawsuit against Mutual of Enumclaw. I would vacate the award and remand back to the district court for determination of the amount of fees that the court finds to be reasonable with respect to the section 41-1839 suit against Mutual of Enumclaw. I would not determine Parsons to be the prevailing party and would not award attorney fees on appeal.