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Attorney's Fees for the Insurance Co.: E.D. Ky.

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  • Attorney's Fees for the Insurance Co.: E.D. Ky.

    In a recent case out of Kentucky, the court awards reasonable attorney's fees to the Plaintiff insurance company for legal expenses incurred outside "the normal course of business."

    First, the fee award Union Security seeks is not based on actions taken within “the normal course of business.” See Kelling, 170 F. Supp. 2d at 794. To the contrary, the fees sought arise from the Hockensmiths’ repetitive, unnecessary, and manifold filings. Union Security explicitly is not seeking fees that arose in the normal course of litigating an interpleader case. The unusual fees incurred due solely to the Hockensmiths’ litigation decisions are not, in the Court’s view, “simply part of doing business.” See Am. Gen. Life Ins. Co. v. Estate of Cook, No. 3:08-CV-204-R, 2009 WL 2447937, at *1 (W.D. Ky. Aug. 7, 2009). Costs associated with defending against an onslaught of unwarranted motions and imprudent counterclaims are not costs “Plaintiff can reasonably expect to incur” in this context. See id. These circumstances, unlike those in, e.g., N.Y. Life Ins. Co. v. Terry, do “tip the equitable scales” and justify an attorney fee award. See No. 5:15-CV-353-HAI, 2017 WL 102965, at *6 (E.D. Ky. Jan. 10, 2017).
    Second, “courts have exempted insurance companies from the general rule . . . because [they], by definition, are interested stakeholders; filing the interpleader action immunizes the company from further liability under the contested policy.” See Kelling, 170 F. Supp. 2d at 794. The Court rejects, on these facts, the persuasiveness of this theory. Unthinking application of this exemption would lead to blanket insurance company ineligibility for fee awards, which is not the law. Rather, this theory, rightly understood, targets potential fee awards that merely reimburse an insurance company for expenses normally incurred as part of a typical interpleader case or due to its own litigation decisions.
    3 Union Security did not, in this case, incur the targeted fees concerning which it seeks reimbursement via the “self-serving interest” of “obtaining a court adjudication” in interpleader. See W. Life Ins. Co. v. Nanney, 290 F. Supp. 687, 688 (E.D. Tenn. 1968). Rather, Union Security incurred the fees due to the Hockensmiths’ unusual, repetitive, and multiplicative litigation strategies. The Court would not, by denying Union Security an award here, advance a general desire to avoid reaping further benefit on an insurance company via a fee award, as the company simultaneously benefits via the protections of interpleader, when the Hockensmiths’ affirmative actions—not the normal vicissitudes of litigating interpleader—particularly justify the award. These circumstances, in the Court’s view, take the scenario outside the contemplation of Kelling’s second exemption.
    Third, the policy argument that a fee award “would senselessly deplete the fund that is the subject of preservation through interpleader,” Kelling, 170 F. Supp. 2d at 795, likewise carries little weight here. The Hockensmiths have been on notice since the day the case began that Union Security would be seeking “costs and expenses incurred in bringing this action, together with reasonable attorneys’ fees.” DE #1 (Complaint), at 7. Union Security did not shy from reminding the Hockensmiths of this at nearly every step of the case progression. See, e.g., DE ##17-1, at 8 n.3 (Union Security notifying the Hockensmiths that it may “seek fees in connection with . . . defending [their] Counterclaims”); 18, at 8 n.4 (same); 27, at 9 n.2 (same); 28, at 2 n.1 (same); 31, at 5; 68, at 6 n.3 (Union Security notifying the Hockensmiths that it may seek “its fees incurred in responding to the Hockensmiths[’] repeated pleadings and motions”); 70, at 2 n.2 (Union Security notifying the Hockensmiths that it may “seek its reasonable fees and costs that have been incurred in the defense of the Hockensmiths’ litigation”); 90, at 2 (Union Security “anticipating seeking an award of fees and costs because the Hockensmith[s] unnecessarily multiplied this litigation through filing counterclaims and multiple motions to which Plaintiff was forced to respond”).
    In the end, the court reasons that its decision is purely an equitable one, concluding that the insurance company is entitled to reasonable attorney's fees based on the facts above and the prevailing case law. The full opinion is attached below.
    Attached Files
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