Insured Not Required To Ask For Attorney Fees In The Complaint

In Riordan v. State Farm Mut. Auto. Ins. Co., __ F.3d __, 2009 WL 4674139 (9th Cir. 2009), the insured made a claim for benefits based on injuries he and his wife sustained during a motor vehicle accident. His insurer, State Farm, did not dispute the claim and agreed to pay benefits totaling $30,586.59. However, the insured believed his damages exceeded that amount and he sued State Farm in federal court. Negotiations continued throughout the course of the litigation and the case was settled on the eve of trial for the maximum policy limits of $150,000. At issue on appeal was whether the insured was entitled to attorney fees. In both state and federal court, each party to a civil action generally pays their own attorney fees. There are a number of exceptions to this rule, particularly in the insurance context, where there is a duty to defend or when the insurer forces the insured to engage in legal action to obtain the full benefit of an insurance contract. In Riordan, State Farm argued that it suffered prejudice because the insured failed to include a claim for attorney fees in his complaint. Instead, Riordan waited until the eve of trial to request the attorney fees associated with his claim for benefits. This delay, asserted State Farm, failed to comply with the notice and pleading requirements of Federal Rule of Civil Procedure 8(a) (requiring the pleader to make a demand for judgment for the relief the pleader seeks) and Rule 9(g) (requiring special damages to be specifically pleaded in the complaint). However, these arguments did not persuade the 9th Circuit Court of Appeals. Instead, the court specifically rejected the argument that a claim for attorney fees must be raised in the pleadings. Here, the court cited Federal Rule of Civil Procedure 54(d) which provides that “[c]laims for attorneys’ fees and related nontaxable expenses shall be made by motion unless the substantive law governing the action provides for the recovery of such fees as an element of damages to be proved at trial.” The court also relied on Port of Stockton v. W. Bulk Carrier KS, 371 F.3d 1119, 1120-21 (9th Cir. 2004) which explained that pleadings and motions are distinct. This lead to the conclusion by the court that there is no requirement that a claim for attorney fees must first be raised in the complaint and then again by motion. The 9th Ciruit also dismissed State Farm’s claim that it was prejudiced by the delay or lack of notice. Here, the court noted that the attorney fees claim was fully briefed by the parities and argued before the magistrate judge. Further, State Farm was allowed to conduct an evidentiary hearing and cross examine witnesses on the value of the legal services Riordan received. Therefore, the court reasoned, State Farm had an opportunity to challenge Riordan’s claims and was not prejudiced by Riordan’s decision not to include a claim for attorney fees in its complaint