In this several-part blog series titled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health, accidental death and dismemberment & disability claim, from navigating a claim, to handling a claim denial, through the subsequent appeal and litigation.  In Part Fourteen of this series, we discuss motions for attorneys’ fees and costs.  Under the Employee Retirement Income Security Act of 1974 (“ERISA”), a prevailing party can file a motion for “reasonable” attorneys’ fees and costs associated with the litigation process.  Whereas ERISA discusses awarding fees to either party that achieves “some degree of success on the merits,” Hardt v. Reliance Standard. Life Insurance Co., 560 U.S. 242, 244-45, 251-52 (2010), courts seldom award fees to prevailing insurers, see Operating Eng’rs Pension Trust v. Gilliam, 737 F.2d 1501, 1502 (9th Cir. 1984).  As such, this article mostly applies to prevailing beneficiaries.

When awarding attorneys’ fees, a court focuses on two key issues: (1) whether the moving party achieved some degree of success on the merits, and (2) how large of an award of fees is reasonable.  Both of these issues are addressed in a manner that is favorable to beneficiaries.

As for the first issue, success on the merits, most beneficiaries will satisfy this requirement if they receive even a portion of their benefits.  They need only achieve “some degree of success on the merits.”  Hardt, 560 U.S. 244-45, 251-52.  This is a very low standard.  For example, a beneficiary need not proceed to trial and obtain a court ruling in his or her favor.  Whereas that would certainly satisfy the requirement, it is not required.  Instead, an insurer may realize that it made a mistake and reinstate the beneficiary’s benefits in the middle of litigation.  This will still qualify as sufficient success on the merits for a beneficiary to receive an award of fees.  See, e.g., Smith v. Aetna Life Ins. Co., 2020 WL 6055147 (S.D. Cal. Oct. 14, 2020).  In fact, here at the McKennon Law Group, we often encounter that very scenario.  We sue an insurer and, rather than litigating against us, it agrees to reinstate our client’s benefits.  Afterwards, we file a motion with the court seeking attorneys’ fees and costs.  The courts have always granted our motions and have in every case awarded us attorneys’ fees.  We also often include an amount to cover our attorneys’ fees when negotiating a settlement with an insurance company.  The law is clear: When we obtain a portion, or all, of our client’s benefits, regardless of whether the court ruled on our client’s behalf, the insurer must pay our client’s reasonable attorneys’ fees and costs.

The main fight in these cases is whether the amounts of the attorneys’ fees requested are reasonable.  To calculate an award of fees, the court first “establishes a lodestar by multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate.”  Welch v. Metro. Life Ins. Co., 480 F.3d 942, 945-46 (9th Cir. 2007).  When determining the reasonable hourly rate, “the court may take into account: (1) the novelty and complexity of the issues; (2) the special skill and experience of counsel; (3) the quality of representation; and (4) the results obtained.”  See Caplan v. CNA Fin. Grp., 573 F.Supp.2d 1244, 1251 (N.D. Cal. 2008).  The court has the discretion to adjust the presumptively reasonable lodestar fee using a multiplier in “rare and exceptional cases.”  Welch, 480 F.3d at 946.

When calculating a reasonable fee, courts often look to what other courts have approved.  For some attorneys, this can be problematic if they have limited ERISA experience.  For firms such as the McKennon Law Group PC, this greatly simplifies matters.  Our firm has quite possibly been awarded attorneys’ fees more times than any other firm in the State of California over the last several years.  As such, the attorneys here can simply direct the court to a stack of cases that show previously awarded rates.  This is usually sufficient for the court to approve our hourly rates.  For an attorney without that experience, the court will often see what other courts have approved for rates of other attorneys with similar levels of experience.  The same principle applies for time worked on a case.  A court will examine the amount of time worked on each aspect of the case and determine if the time was reasonable considering the complexity of the case and what other courts have approved.  See generally Smith, 2020 WL 6055147.

Courts rarely use a multiplier on the calculated award.  However, in its discretion, the court can raise or lower the award of fees by a flat percentage if it feels that the fee award warrants a further modification.  Such changes are usually due to extraordinary circumstances such as excessive or unclear billing.  The court may also impose a modification if the attorney achieved an extraordinary result in a particularly complicated case.  Ultimately, courts rarely apply a modifier.

Even though this area of the law favors beneficiaries, it contains one very important limitation to awards of fees and costs.  A beneficiary cannot obtain fees for work done during the administrative appeals process.  See Dishman v. UNUM Life Ins. Co. of Am., 269 F.3d 974, 987‑88 (9th Cir. 2001).  For frame of reference, under almost all ERISA plans, a beneficiary must first pursue an administrative appeal if the insurer denies the claim.  Only after the insurer denies the appeal does the beneficiary obtain the right to sue.  Because ERISA fails to provide fees for the administrative appeals stage, sometimes beneficiaries financially benefit from losing their administrative appeal and then settling the matter after suing the insurer.  An award of attorneys’ fees is then available to the beneficiary.

McKennon Law Group PC has significant experience in handling ERISA and non-ERISA insurance cases in which an insurer denied a claim.  If your insurer or plan administrator has denied your claim, please contact us for a free consultation so that we may assess your matter.