The Expert Podcast

If you're a business owner or an insurance company, this is a very important factor to keep in mind when being liable for attorney's fees. If you have a case where there's damages or liability and you sue another party, if you have insurance that would cover that potential loss, that insurance will kick in for attorney's fees. However, if the other party makes an offer to you to settle and you don't accept that offer, any attorney's fees that are needed over and above that settlement amount may be something that has to be adjudicated by the court. If the insured prevails in that trial, the insurance company can get attorney's fees, but only after they prove first of all that they did not accept that settlement, and the attorney's fees have to be reasonable. They can't just be some arbitrary, made-up number. This kicks in a lot with lawsuits.

So let's say you sue somebody for fifty thousand dollars and they make an offer to you of thirty thousand, and you deny the offer, and you go to trial, and you spend attorney's fees, and the other side spends attorney's fees, and maybe there's a judgment issued for forty thousand dollars. Well, the other side and also your insurance company can say, "Look, if you accepted that thirty thousand dollars, you wouldn't have had all these attorney's fees." So the other side can request those attorney's fees; your insurance company, if they provided you with defense coverage, can also make a claim for you for those attorney's fees, and vice versa. The insurance company might be required to pay them on the other side.

Be aware that you want to get good legal advice from an attorney—yyou know, we're not attorneys—aabout this type of scenario and liability, but also make sure that your insurance coverage in your policy for your commercial policy has the right language for defense coverage and what the liability limits are. You want to make sure that you have no limitations that's going to put you out of business if you have to pay a certain amount; that you can afford that might be something you want to have extra coverage for. And if you're entering into settlement negotiations, you want to make sure that you know what you're rejecting. That is not just that initial offering; you're maybe also waiving some rights to attorney's fees that you have to pay later.