In the world of litigation, recovery of attorney fees it is often a driving factor in whether an attorney will represent a plaintiff. Insurance carriers, which have limited exposure for covered damages under the duty to indemnify, may nonetheless face very significant exposure if their policy provides for reimbursement of all costs taxed against their insured and if attorney fees are allowable as costs.

Traditionally, if the carrier had a duty to defend and the policy had a supplemental payments provision, the carrier often had to pay all of the attorney fees recoverable as costs despite significant coverage defense on the duty to indemnify. More recent case law has clarified this duty and limited the obligation of the carrier. Although the carrier’s cost to defend a claim and a carrier’s potential obligation to reimburse its insured for fees awarded remain driving factors in litigation, recent California decisions have clarified and linked this obligation to pay attorney fees to claims actually covered under the policy.

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