Title Insurer’s Alternative to Recovery Under Insurance

Title insurance operates to protect an owner in the event of any defect in title that may prevent him or her from clearly owning the property, or from any encumbrances or liens the prior owner may have had on the property that are not disclosed. For example, in the event a lawyer makes any errors in transferring title or the transfer is found to be fraudulent, the title insurance company will typically step in and reimburse the owner for  any financial loss. However,  the discovery of such a defect in title does not render the title insurer immediately liable to pay the insured. Depending upon the title insurance contract, the insurer may have various means of satisfying its obligations to the insured.

Generally speaking, title insurance policies are contracts of indemnity. However, current views of title policies provide insurers with several different methods of satisfying their obligations. Title insurers have the ability to determine which of these methods they would prefer to utilize, though care must be taken when making the determination as any inaction can be found to be a breach in bad faith.

Most obvious is the insurer’s ability to pay the full policy amount to the insured, or pay to the insured the actual amount of loss. For example, if damages are extraordinary, the full policy amount may be in order. Where damages are smaller, the reduction in value of the owner’s property may be a more appropriate award. The insurer may also negotiate and settle directly with the insured for an agreed upon amount, or it may at its option negotiate with third parties to settle a claim. Third party negotiations may become necessary where the action proceeds to litigation. In such an instance, the insurer may not only settle with third parties, but has the option of defending the claim in court. Similarly, the insurer may pursue compensation from third parties to reduce the insured’s loss.

In addition to making efforts to settle monetarily and recompense an owner for damages, the insurer may take affirmative action to clear the defect, and thereby eliminate any damages to the owner. An insurer who successfully clears title is not thereafter liable to the insured for any monetary sums.

In a modern homeowner’s policy, the insurer typically has the ability to pay the amount of insurance then in force for a covered risk for which the policy provides maximum limits and deductibles. If a title insurer elects to pay in this manner, it also must pay the insured’s rent for a “reasonably equivalent residence” if the insured is forced to vacate while the claim against the title is being removed or being investigated and paid, together with “reasonable costs” to relocate the insured’s personal property.

Once the insurer has performed in one of the ways listed above, the insurer is not contractually obligated to do more. However, a title insurer who fails to perform in any of the methods accepted is in breach of contract and can be sued by the insured for not only amounts due under the policy, but consequential, incidental, and punitive damages as well. It has been held that an insurer has the option to investigate whether title defects can be cured, however, when it takes no action to cure the defect, it can be held liable for breach of contract in bad faith.

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Reasonable Attorneys Fees Award

What is a reasonable attorney’s fee award to a prevailing party?  That was the issue recently decided by the Court of Appeal for the First District in Syers Properties III, Inc. v. Ann Rankin et al (2014) 226 Cal.App.4th 691.

In Syers, the defendant attorneys represented plaintiff over the course of seven years in a construction defect case. Thereafter, the plaintiffs sued the defendants alleging legal malpractice and breach of fiduciary duty. Following numerous hearings and motions in limine, the empaneling of the jury, and opening statements, the trial court granted the defendants’ pending nonsuit motion. The defendants then sought their attorneys’ fees in the amount of $843,245.27 for a total of 2,324.5 hours of attorney and paralegal time spent on the case.

In support of the fees, the law firm that had represented defendants in the malpractice action filed declarations setting forth each attorney’s qualifications, experience, and hours worked. The reasonable rate of pay for these attorneys was based on the lead attorney’s 20 years of civil experience and  his understanding of the prevailing market rate in the San Francisco Bay Area. It included $300 for an attorney admitted to the bar in 2006, $250 for an attorney admitted in 2010, and $150 per hour for each paralegal. Last of all, the defendants relied upon the Laffey Matrix, an official source of attorney rates of the District of Columbia area, which, it was argued, could be adjusted to the San Francisco Bay Area using Locality Pay Tables. This formula had previously been utilized by Chief Judge Walker in In re HPL Technologies, Inc. Securities Litigation (N.D.Cal.2005) 366 F.Supp.2d 912, 922. Utilizing the Laffey Matrix, the amounts billed for each attorney was accurate.

Plaintiff opposed the attorneys’ fees on the grounds that it was unreasonable and that the hourly rate requested was significantly higher than the rate actually billed. It further argued that the declarations were inadequate to document the hours expended on the case and that the defendants had failed to provide sufficient information to determine the reasonableness of the fees. Plaintiff claimed that the defense counsel marketed itself as an insurance defense firm and that such firms typically charge a lower than market rate to insurance companies. Therefore, plaintiff contended that the award should be for attorneys’ fees actually incurred.

The trial court found that regardless of what was billed to the insurance company by the law firm, that was not the standard. The standard for an attorney’s fee award is a reasonable fee. Finding the fee to be reasonable, the court granted the motion for attorneys’ fees in the entire amount requested. The plaintiffs thereafter appealed.

On appeal, the Court reviewed the standard methods for determining attorney compensation. Under the lodestar method, “attorney fees are calculated by first multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate of compensation.” The California Supreme Court has recognized that this computation should be based upon a basic fee for comparable legal services in the area, and may be adjusted to provide for other factors, such as the risk involved and the legal skill needed. Therefore, the Court found that the method utilized to compute the award was correct.

In reviewing the actual computation of hours, the Court found that the trial court did not abuse its discretion in accepting the defendant’s computation of attorney hours as set forth in the declarations. It stated that it is well established that “California courts do not require detailed time records, and trial courts have discretion to award fees based on declarations of counsel describing the work they have done and the court’s own view of the number of hours reasonably spent.” Furthermore, because time records are not required in California, there is no required level of detail that must be achieved.  It has been previously held that the purpose of this is to prevent trial courts from completing a meticulous analysis of professional representation, and rather, focus on what a reasonable fee is. The categorical breakdown of time by each attorney, such as that provided in this case, was specifically approved by former Chief Judge Vaughn Walker of the United States District Court for the Northern District of California. The Hon. Walker stated that such a breakdown was “an especially helpful compromise between reporting hours in the aggregate (which is easy to review, but lacks informative detail) and generating a complete line-by-line billing report (which offers great detail, but tends to obscure the forest for the trees).” (In Re HPL Technologies, supra, 366 F.Supp.2d 912, 920.)

On the issue of what constitutes a reasonable rate, the Court considered the plaintiff’s contention that the “market rate” should be that rate actually charged in insurance defense cases, where typically that amount charged is below other market amounts, in effect creating a new market. Here, the Court noted that “[t]he determination of the ‘market rate’ is generally based on the rates prevalent in the community where the court is located.” Furthermore, there is no requirement that the reasonable market rate mirror the actual rate billed. As previously stated by this Court, the reasonable market value of the attorney’s services is the measure of a reasonable hourly rate, and will apply regardless of what the attorneys actually billed for their services, whether a discount rate, contingency fee, or nothing at all.

In the instant case, the trial court’s rate determination was supported not only by the adjusted Laffey Matrix (which it was not required to follow), but also by the defense counsel, with more than twenty years of experience in the area. Furthermore, the trial judge, utilizing his experience in the area, noted that the rates charged in this case were not the highest he had seen. The Court pointed out that the trial court is in the best position to value the services provided by the attorneys. Unless the judge was clearly in error, there can be no abuse of discretion.

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Architect Liability for Cost Estimates

Architects drafting plans for clients and estimating costs can find themselves liable to clients for incorrect estimates. When construction costs far exceed an architect’s estimate, he or she can be found liable for damages, as well as fraud and misrepresentation based on various grounds. Continue reading

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Statute of Limitations Tolling in Elder Abuse Claims

As with all legal claims, regardless of the merits of a case it must be filed within the statutory period. In the context of nursing homes facing elder abuse claims, understanding which statute of limitations applies to the situation is especially important in successfully defending such claims. Furthermore, understanding the tolling of the statute of limitations period is important in assessing potential risk. Continue reading

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California Supreme Court Rules Employee Commissions Cannot be Reassigned to Earlier Pay Periods

In Peabody v. Time Warner Cable, the California Supreme Court considered the issue of whether the employer, Time Warner, could attribute commission wages paid in one period to other pay periods in order to satisfy California’s compensation requirements. Peabody was a commissioned salesperson for Time Warner receiving biweekly paychecks that included her hourly wages, plus her commissions every other pay period. Her biweekly wages totaled $769.23, or the equivalent of $9.61 for a 40 hour work week. In her class action suit, Peabody alleged that though she worked in excess of 40 hours per week, she was never paid overtime. Additionally, for those weeks when she worked in excess of 48 hours per week, she was paid less than minimum wage. Continue reading

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Title Insurance Policies: Rules of Construction

Like all contracts, title insurance policies are subject to rules of construction when a controversy arises between the insurer and insured. While many of the common rules of contract and insurance construction will apply, the unique nature of title insurance policies brings with it its own set of special rules. Continue reading

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The Architect-Client Agreement

As with many professional services, when an architect is entering into an agreement to provide services to a client, a written contract is required by law. The law is specific regarding what elements the contract must contain, and it is important that architects entering into such contracts be aware of these elements and ensure compliance. Furthermore, drafting a sound contract that can be enforced in court is of utmost importance to avoid client disputes and ensure an architect’s legal interests are protected.  Continue reading

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