Insurance Coverage – Reasonableness of Defense Costs: Northern District Denies Insured’s Motion for Injunction to Compel Insurer to Pay Underlying Defense Costs


April 9, 2018

360Heros, Inc. v. Main Street America Assurance Co. (N.D.N.Y.)

Jessica L. Foscolo, Esq. and Ashlyn M. Capote, Esq.

 

In 360Heros, an insured sought a preliminary injunction compelling its insurer to pay all costs and fees billed to the insurer for the insured’s defense in an underlying action pending in California.  The insurer disputed the reasonableness of the fees charged by defense counsel selected by the insured.  The insurer opposed the motion seeking a preliminary injunction on several bases, including that an insurer cannot be compelled to pay 100% of all defense costs billed to an insurer where there is a question as to the reasonableness of those defense costs, and particularly where the defense invoices are not made available to the court for review in connection with the motion.

 

The court agreed with the insurer and denied the insured’s motion seeking a preliminary injunction, explaining that injunctive relief is not warranted where the insurer acknowledged its duty to defend and already paid a substantial amount of defense costs for the insured’s benefit.  The court acknowledged that an insurer is obligated only to pay reasonable defense costs and found that the insurer cannot be compelled to pay defense invoices that are not before the court for review.  The court found defense counsel failed to provide (and the court was also unable to find) any authority to support defense counsel’s request that the insurer essentially first pay any amount claimed regardless of reasonableness and then later try to recoup any unreasonable fees paid from defense counsel or the insured.  The decision states, “courts are generally reluctant to permit recovery of more than reasonable costs, with good reason:  lawyers are ethically bound to charge only reasonable fees to their clients.”