The Minnesota Supreme Court ruled that the state district
court’s decision to award attorneys’ fees and costs was erroneous in the case in re: Silicone Implant Insurance Coverage Litigation.
The court’s ruling agreed with the position taken by the National Association of Independent Insurers (NAII) in its amicus brief asking the court to uphold the “American Rule” for recovery of attorneys’ fees.
A state district court decision awarded an insured full payment of court costs including attorneys’ fees based on its findings that the insurer acted unfairly and in bad faith. The Court of Appeals reversed the lower court ruling and held that, absent statutory authorization or breach of a contractual duty to defend, the insured is not entitled to payment of attorneys’ fees. The NAII brief urged the Minnesota Supreme Court to affirm the Court of Appeals’ decision on this issue.
“The NAII argued that courts in the United States have steadfastly refused to adopt a ‘loser pays’ approach on the issue of attorneys’ fees. The ‘American Rule’ is premised on the concept that attorneys’ fees do not constitute damages and that the judicial system should not be stifled by the threat that attorneys’ fees might be awarded to the prevailing party,” said Laura Kotelman, NAII counsel.
“The Minnesota Supreme Court ruling is significant because it ensures that in every ordinary coverage dispute, ranging from run of the mill automobile matters to property and health insurance, there is no incentive for claimants to include frivolous or extraneous allegations of breach of an implied covenant of good faith and fair dealing in order to gain possible recovery of attorneys’ fees,” said Kotelman.
“If any breach of contract is sufficient to give rise to the right to recover fees, it would be impossible to limit the rule to just insurance contracts,” said Kotelman.
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