In an insurance coverage dispute between two insurance carriers, a federal district court in New York was asked to determine whether to value one insurer's in-house counsels' services based on their annual salaries or based on the hourly rate that would be paid to outside counsel for similar legal services.
The Case
In an action brought by Liberty Insurance Corporation alleging that Admiral Insurance Company had violated its liability insurance coverage obligations in actions entitled Harrington v. State University Construction Fund, No. 244917/13, pending in a trial court in upstate New York, and Harrington v. State of New York, No. 13-155, pending in the N.Y. State Court of Claims (together, the “state court actions”), the U.S. District Court for the Northern District of New York ruled in favor of Liberty, finding that Admiral's was the primary policy applicable to the insureds in the state court actions.
Liberty subsequently advised Admiral that it had incurred total expenses of $22,959.86 in defending the state court actions and requested payment for this cost pursuant to the district court's order. Liberty included copies of invoices detailing the amount of time spent on the state court actions and other costs and disbursements. Thereafter, Liberty provided additional information detailing that it had incurred $22,403.14 in defense costs and disbursements.
After the insurers failed to settle the issues regarding the total amount that Admiral owed Liberty, Liberty filed a motion to enforce the judgment it had obtained.
Admiral did not dispute that the services for which Liberty sought reimbursement were “reasonable and necessary in the defense” of the insureds in the state court actions or that Liberty was entitled to some reimbursement for those actions. Rather, Admiral argued that Liberty failed to provide adequate proof of payment for the reimbursement it sought because it only produced invoices detailing the amount of time spent on the state court actions without proof that those costs actually had been paid by Liberty.
Central to Admiral's opposition was its assertion that Liberty's in-house attorneys only should be reimbursed for their time based on their actual individual salaries, rather than by the rates that Liberty attributed to their legal work in its invoices.
The Court's Decision
The court rejected Admiral's argument that the time that Liberty's staff attorneys spent defending the state court actions should be reimbursed for their actual hourly wage as reflected by their salary, rather than at an hourly wage that would be paid to outside counsel for similar legal services.
In its decision, the court first found that Liberty's production of the invoices for the legal services rendered in defense of the insureds for the state court actions was sufficient to warrant recovery of those costs without submitting additional proof of actual payment.
The court then observed that the “reasonable hourly rate” standard was the “rate a paying client would be willing to pay” – an analysis that focused “on the prevailing rates of attorneys in a given geographic area to determine what a paying client would pay for representation, rather than relying solely on the rate that the attorney may receive from an in-house position.”
In the court's view, the individual rates charged by Liberty's in-house counsel were “reasonable at approximately $150 per hour” charged for one attorney “and approximately $77 per hour” for a second. The average hourly rate billed by Liberty for its 51.5 hours of in-house legal work was $133.6 per hour, the court calculated, ruling that this hourly rate was “well within the reasonable rate for attorneys in the Northern District [of New York].”
Accordingly, the court concluded that the invoices submitted by Liberty sufficiently established that it incurred the $22,403.14 in defending the state court actions that it sought to recover from Admiral.
The case is Liberty Ins. Corp. v. Admiral Ins. Co., No. 3:14-cv-00949 (N.D.N.Y. June 7, 2016). Attorneys involved include: JAFFE, ASHER LAW FIRM, 600 Third Avenue, 9th Floor, OF COUNSEL: DAVID R. SHYER, ESQ., MARSHALL T. POTASHNER, ESQ., New York, New York 10016, Attorneys for Plaintiff; KINNEY LISOVICZ REILY & WOLFF PC, 11 Broadway, Suite 615, OF COUNSEL: JUSTIN N. KINNEY, ESQ., New York, New York 10004, Attorneys for Defendant.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].