Ohio Supreme Court: Attorney Fees Distinct from Punitive Damages

May 21, 2010

The Ohio Supreme Court has issued a slip opinion finding that attorney fees are distinct from punitive damages and that public policy does not prevent an insurance company from covering those fees on behalf of an insured.

In Neal-Pettit v. Lahman, Slip Opinion No. 2010-Ohio-1829, Allstate Insurance Co. had argued that the automobile policy issued to the insured in this case does not cover awards of attorney fees, according to the opinion written by Justice Lanziger.

Allstate argued that the “attorney-fee award is an element of the punitive-damages award because both are made in cases of malicious conduct.” Allstate’s policy doesn’t cover punitive damages, therefore the award for attorney fees is not covered either, the insurer reasoned.

Lanziger described the case as follows:

“Kimberly Neal-Pettit, filed suit against Linda Lahman for compensatory and punitive damages due to personal injuries sustained in an automobile accident on March 27, 2003. As alleged in the complaint, when Lahman struck Neal-Pettit’s vehicle, she was intoxicated and fleeing the scene of an earlier collision.”

At trial, a jury returned a “verdict against Lahman for compensatory damages totaling $113,800 and punitive damages totaling $75,000. In addition, the jury awarded attorney fees to Neal-Pettit based on a finding that Lahman had acted with malice. The trial court set the amount of attorney fees at $46,825, and also awarded Neal-Pettit $10,084.96 in expenses.”

Allstate, Lahman’s insurer, paid the compensatory damages, interest and expense amounts, but declined to pay punitive damages and attorney fees.

In a supplemental complaint filed by Neal-Pettit against Allstate for payment of the attorney fees, the trial court entered summary judgment in favor of the Neal-Pettit.

Allstate appealed but the “Eighth District affirmed the trial court’s decision, holding that attorney fees are ‘conceptually distinct’ from punitive damages and that attorney fees are not expressly excluded from coverage by the language of the policy,” Lanziger wrote.

After reviewing the language in Allstate’s policy, the state Supreme Court affirmed the finding of the court of appeals.

The Court rejected Allstate’s argument that the award for attorney fees is tied to the award for punitive damages and therefore not covered.

The justices found irrelevant “the fact that the awards have similar bases” and cited previous cases that established that although “an award of attorney fees may stem from an award of punitive damages, the attorney-fee award itself is not an element of the punitive-damages award.”

The Court also noted that while attorney fees resulted from a punitive damages award, “they also stem from the underlying bodily injury. The language of the policy does not limit coverage to damages solely because of bodily injury.”

Additionally, the Court said, because both parties have offered their own separate and plausible interpretations of the policy language, “we must resolve any uncertainty in favor of the insured.”

Finally, Lanziger wrote, although public policy in Ohio does prevent “insurance contracts from insuring against claims for punitive damages based upon an insured’s malicious conduct,” the applicable state statute “mentions only punitive and exemplary damages, not attorney fees.”

Justice Lundberg Stratton wrote a dissenting opinion in which he concluded the award for attorney fees is “directly tied to and dependent on” the award for punitive damages, and that Allstate should not be held responsible for paying the attorney fees in this case.

Source: Ohio Supreme Court

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