S
ETTLEMENT
S
TRATEGIES AND
R
EMEDIES
C
ODE
C
HAPTER
42:
W
P
A
’
F
C
?
B Y R ANDALL L. S MITH AND F RED A. S IMPSON
Introduction.
A first reading of the new provisions for the Texas Civil Practice and Remedies Code leaves an impression that the 2003 Texas Legislature gave insurers an unintended bonus.
However, a closer examination reveals a “mixed bag” of expenses and benefits.
New Chapter 42, as implemented by new Rule 167,
1
penalizes parties who reject reasonable settlement offers. One commentator explains that the offer of settlement rule
“provides for the shifting of costs upon an offeree who fails to accept an offer of judgment from their adversary when the ultimate judgment in the case is less favorable than that offered.”
2
In the insurance context, the question is, who pays the price of attorney’s fees and costs if settlement offers are rejected? Must insurance companies or the insureds pay the punitive “litigation costs” defined in the statute? Conversely, if insurers make settlement offers that plaintiffs reject, won’t plaintiffs be saddled with a certain portion of defense costs that insurers have traditionally carried?
This article reviews the new law and applies it to contemporary liability insurance policy language, particularly the “supplementary payments” provision. We predict that, under their contracts, insurers will carry a new burden of cost, supplemental to their policy limits, but that those insurers will also harvest some monetary benefits from changes in their settlement strategies.
-1-

New Provisions of the Remedies Code.
Generally, the new Remedies Code provisions speak to a judgment to be rendered that is “significantly less favorable” to the party who previously rejected a settlement offer.
The term “significantly less favorable” is defined with a variation, or tolerance, of 20%. For example, if a plaintiff rejects a $100,000 offer to settle and the judgment turns out to be less than $80,000, the defendant recovers litigation costs incurred by that defendant after the date the $100,000 offer was rejected. Conversely, if a defendant rejects plaintiff’s demand of
$100,000, and the judgment turns out to be more than $120,000, the defendant pays the litigation costs incurred by the plaintiff after the date the $100,000 demand was rejected by the defendant.
There is a limit on the amount of recoverable litigation costs, however. That “cap” is generally equal to 50% of economic damages, 100% of noneconomic damages, and 100% of exemplary or additional damages. Of most import is the definition of “litigation costs.” The new provision contains this language at Section 42.001:
(5) “Litigation costs” means money actually spent and obligations actually incurred that are directly related to the case in which a settlement offer is made. The term includes:
(A) court costs;
(B) reasonable fees for not more than two testifying expert witnesses; and
(C) reasonable attorney’s fees.
Insurance Policy Language and “Attorney’s Fees.”
To apply the offer of settlement rule to the insurance questions raised, we must first examine existing contractual rights and obligations of insurers under provisions of their
-2-

liability policies sold in Texas. Although insurers must pay the price for defending their insureds, policy provisions do not clearly define all of the expenses or costs are intended to be included in that defense obligation. That lack of clarity is best illustrated by looking at two sections in the typical liability policy sold in Texas: the insuring agreement, and the
“supplementary payments” provision.
The insuring agreement of a liability insurance policy usually includes wording, such as the following, to describe an insurer’s separate and dissimilar indemnity and defense obligations:
We will pay those sums that the insured becomes legally
obligated to pay as damages because of “bodily injury” or
“property damage” to which this insurance applies. We will have the right and duty to defend any “suit” seeking those damages. We may at our discretion investigate any
“occurrence” and settle any claim or “suit” that may result.
(Emphasis added).
The words “duty to defend,” suggest the payment of expenses and costs, in contrast to the phrases “damages because of bodily injury” or “property damage”
3
which compel insurers to indemnify their insureds for liability. The quoted wording above gives no visible clue of how opposing parties’ “litigation costs” fit into the equation of insurers’ payment obligations.
The second important liability policy provision, “supplementary payments,” provides benefits for insureds in two ways. The first of these is the broad description of “costs.” The second benefit arises because there is no limit to the amount of the payments; they are all in addition to the policy’s stated limits of liability. The normal supplementary payments provision is typically worded as follows:
-3-

We will pay, with respect to any claim or “suit” we defend:
1.
2.
All expenses we incur.
All reasonable expenses incurred by the insured at our request to assist us in the investigation or defense of the claim or “suit,” including actual loss of earnings up to
$100 a day because of time off from work.
All costs
4
taxed against the insured in the “suit.” 3.
These payments will not reduce the limits of insurance.
Here, the words “costs taxed against the insured” come a little closer to describing the payment of “litigation costs.” Although the usual definition of “taxable court costs” does not include attorney’s fees,
5
where a statute provides for the recovery of such fees, they become the equivalent of taxable costs, almost by definition.
6
If recoverable, they also appear to be in the nature of “costs taxed against the insured.”
The Law of Other Jurisdictions.
Insurers generally maintain the exclusive right to settle lawsuits brought against their insureds, according to the terms of the related insurance contracts.
7
But must insurers pay
“litigation costs” awarded to a plaintiffs because insurers rejected offers to settle? The answer will likely have an adverse affect on Texas insurers if courts answer the question by applying law from other jurisdictions.
When courts in other jurisdictions must answer that question, the reported cases show that courts find ways to grant the insureds the benefit of the doubt. First, courts generally resort to a procedure that reviews the statutory scheme that authorized the award of attorney’s fees. Courts then compare that scheme with the language of the liability policies under review, principally the supplementary payments provision.
-4-

In Argento v. Vill. of Melrose Park,
8
Village police officers severely beat a prisoner.
At trial he was awarded attorney’s fees pursuant to a civil rights statute.
9
That federal statute explicitly provides that “the court, in its discretion, may allow the prevailing party . . . a reasonable attorney’s fee as part of the costs.” The insurer, Hartford, argued it did not owe the attorney’s fees because attorney’s fees were neither “costs” nor “damages.” The Seventh
Circuit rejected Hartford’s argument because the statute expressly stated that attorney’s fees were allowable as part of “costs.”
In the case of Mut. of Enumclaw v. Harvey,
10
the plaintiff sued the insured for intentional destruction of property. The court had no statutory support for any award of attorney’s fees, but the court considered the word “costs” in the homeowners policy’s supplementary payments provision, construing that word to include payment of plaintiff’s costs and attorney’s fees. A jury found the insured liable and assessed damages of $219,200 plus $45,444 in costs and attorney’s fees. The insurer, having defended its insured under a reservation of rights, filed for declaratory relief, claiming that, because the jury found the insured acted intentionally, the insurer had no duty to indemnify the insured. The insured countered by asking the court to rule that the insurer owed indemnity and that the insurer should also pay attorney’s fees and costs to the plaintiff in the underlying lawsuit. The policy provided for the insurer (the “Company”) to pay “all expenses incurred by Company and all costs taxed against the insured in any suit defended by Company.”
11
The insurer argued that the supplementary payments provision did not apply because the policy did not cover the type of property damage involved in the claim “which is either expected or intended from the standpoint of the Insured.”
12
The insured countered that the
-5-

insurer’s duty to pay “costs” was in a clause of the policy that was independent of the insurer’s obligation to indemnify. The insurer then argued that attorney’s fees are not included in the word “‘costs” as a legal term of art.
13
The Idaho Supreme Court rejected the insurer’s argument, ruling that the “plain, ordinary and popular meaning of ‘costs’ is the expense of litigation which includes attorney’s fees:”
14
The language of the policy says that the Company will pay all costs taxed against the insured in any suit defended by the
Company. Beyond what appears to be the clear term of the policy, it is arguable that since the Company has the right to control the defense, including the power to refuse settlement, it should also bear the consequences of its case management decisions, including the consequence that the trial court may tax the opponent’s costs against the insured.
15
Spiegel v. Williams
16 involved medical malpractice claims under a Florida statute.
The jury awarded $300,000 in damages and statutory attorney’s fees in the amount of
$206,000. St. Paul, insuring Spiegel under a professional liability policy, paid $300,000 in damages, and the trial court supported a refusal to pay the attorney’s fees. Spiegel appealed, claiming St. Paul had a statutory duty to pay attorney’s fees. The intermediate appellate court held that Williams’ attorney’s fees constituted “costs” covered by St. Paul’s policy and reversed the district court. St. Paul’s policy provided in part as follows:
We’ll defend any suit brought against you for damages covered under this agreement. We’ll do this even if the suit is groundless or fraudulent. We have the right to investigate, negotiate and settle any suit or claim if we think that’s appropriate.
We’ll pay all costs of defending a suit, including interest on that part of any judgment that doesn’t exceed the limit of your
coverage. But we won’t defend a suit or pay any claim after the
-6-

applicable limit of your coverage has been used up paying judgments or settlements.
17
In a 5-2 decision, the Florida Supreme Court reversed the intermediate court, holding the insurer liable for plaintiff’s attorney’s fees only if those fees were taxable costs. The statute did not specify that attorney’s fees “could be taxed as costs.”
18
The dissent countered with a compelling “fairness” argument, urging ambiguity must favor the insured. This argument is consistent with those of other jurisdictions:
The policyholder who had no control over the language used in the policy and who had no control over whether the suit was settled or tried should not be left to swing in the wind for the payment of the statutory attorneys’ fee, when the policy is susceptible to being construed to cover those costs.
19
The U.S. Supreme Court construed the federal “offer of judgment” rule (Federal Rule of Civil Procedure 68) in Marek v. Chesney.
20
Plaintiff in that case sued police officers for civil rights violations.
21
The officers presented an offer of judgment for $100,000.
Although plaintiff prevailed at trial, the jury awarded the lesser sum of $60,000, and the defending officers sought recovery of their costs under Rule 68. The Marek court noted that the authors of Rule 68 knew of the various federal statutes which, as an exception to the
“American Rule,”
22
authorized attorney’s fees to be awarded to prevailing parties as part of the costs in particular cases. It found the most reasonable inference was that the Rule 68 drafter intended the term “costs” to include all costs properly awardable under the relevant statute. Therefore, if statutes define “costs” to include attorney’s fees, such fees are costs for purposes of Rule 68. Because civil rights Section 1988 expressly included attorney’s fees as
-7-

“costs” available to a prevailing plaintiff, those fees are subject to the cost-shifting provision of Rule 68.
23
Thus, the officers recovered their attorney’s fees.
In City of Ypsilanti v. Appalachian Ins. Co.,
24 another civil rights lawsuit, a Michigan federal court considered whether the insurer agreed to indemnify the insured municipality for attorney’s fees assessed against the City as the losing party. The court held that in such a lawsuit, attorney’s fees are but a form of damages which the insurer contracted to cover.
25
The court reasoned that attorney’s fees awarded to the plaintiffs in the underlying lawsuit did not constitute "costs" under the supplementary payments provision because "costs" referred to nothing but the expense of carrying on the defense of that lawsuit, not an award of another party’s attorney’s fees. The court therefore concluded that such attorney’s fees must be
"damages" payable under the basic insuring agreement. The Yypsilanti trial court’s decision was affirmed by the Sixth Circuit.
In Sch. Dist. of Shorewood v. Wausau Ins. Companies,
26 the Wisconsin Supreme
Court initially ruled that attorney’s fees were “damages.” On reconsideration, the court held that attorney’s fees awarded pursuant to 42 U.S.C. Section 1988 were not damages, and the insurers therefore did not have any duty to defend the insureds based solely on a request for attorney’s fees under the statute.
27
However, the court acknowledged that in slightly different fact situations, other courts ruled differently.
Texas statutes vary in their language concerning the recovery of attorney’s fees. For example, Chapter 37 of the Remedies Code, “Declaratory Judgments,” provides that a court
“may award costs and reasonable and necessary attorney’s fees,” and Chapter 81 of the
Remedies Code entitled, “Sexual Exploitation By Mental Health Services Provider,” says
-8-

nothing about recovery of “costs,” but does allow recovery of attorney’s fees. Language from these two Code chapters indicates that the Texas Legislature intended to distinguish
“costs” from attorney’s fees, which would indicate that the supplementary payments provision of a liability policy may not include attorney’s fees. However, Chapter 42 states that “litigation costs” includes “costs” and attorney’s fees. According to the wording of the supplementary payments provision of liability insurance policies discussed above, when the provisions of Chapter 42 are construed in Texas, supplementary payments likely will be found to cover “litigation costs.”
Special Situations.
The supplementary payment provisions promise to pay expenses of “any suit [the insurers] defend.” However, in certain jurisdictions that allow insureds to chose their own independent counsel when insurers offer to defend under reservations of rights, questions arise as to whether insurers actually defended those lawsuits for purposes of the supplementary payments provision, or merely funded those defenses? If the latter, insurers’ participation would fall outside the supplementary payment provisions.
In Littlefield v. McGuffey,
28
State Farm insured McGuffey. Littlefield sued McGuffey for violating the Equal Opportunity in Housing provision of the Civil Rights Act of 1866 and the Fair Housing Amendments Act of 1988. McGuffey was found liable and Littlefield was awarded attorney’s fees and expenses pursuant to the statute.
29
Littlefield filed a garnishment action against State Farm, seeking payment of $225,000 in attorney’s fees and expenses.
-9-

State Farm took the position that it was required to pay costs or attorney’s fees only for lawsuits it defended, arguing that it did not defend McGuffey, but only funded her defense.
30
The court rejected that idea, finding that State Farm actually defended McGuffey merely by paying her attorney’s fees.
State Farm’s policy stated it would pay, in addition to its limit of liability, “expenses incurred by us and costs taxed against any insured in any suit we defend.”
31
State Farm claimed that the supplementary payments provision did not apply because the intentional acts exclusion precluded coverage, and because the term “costs” did not include the payment of
Littlefield’s award of statutory attorney’s fees. The court concluded that attorney’s fees and expenses qualified as “costs” under the supplementary payments provisions when awarded pursuant to statute.
32
Other questions arise where insurers defend their insureds, but they really owed no duty to defend. Have insurers nevertheless triggered the supplementary payments provision?
Two cases addressing this issue show there is no coverage.
In Bd. of County Commissioners of Larimer County in the State of Colo. v. Guarantee
Ins. Co.,
33
plaintiffs sued the county for civil rights violations allegedly committed by the county sheriff. Guarantee insured the county under a commercial general liability policy.
The county claimed that Guarantee undertook the county’s defense through the county’s attorneys. Guarantee defended the lawsuit for approximately a year and then withdrew from the defense. The county brought this lawsuit seeking indemnification for the payment of attorney’s fees which were awarded to plaintiffs pursuant to 42 U.S.C. §1988. The underlying civil rights complaint sought only declaratory and injunctive relief for which the
-10-

insurer owed no duty to defend because of the lack of monetary damages. Guarantee’s policy covered "all sums which the insured shall become legally obligated to pay as damages because of injury."
34
The court held that attorney’s fees "awarded and costs assessed are not damages as contemplated by the [insurance] policy definition or as understood by the term's ordinary and customary meaning in civil rights actions."
35
Despite Guarantee’s temporary defense of the underlying lawsuit, the trial court ruled against coverage:
[T]he personal injury provisions [of the policy] afford neither coverage for the [] plaintiffs attorneys fees and costs taxed against the county nor for the county’s legal fees and expenses.
36
In Home Indem. Co. v. Avol,
37
Home insured the Avols whose tenants sued, alleging an uninhabitable rental unit. After the tenants were granted a series of injunctions, the tenants sought attorney’s fees under a California statute. The court ruled that attorney’s fees awarded to plaintiffs did not qualify as damages as that word is used in the policy’s insuring agreements, and neither did the supplementary payments provision cover attorney’s fees awarded to the tenants as part of their injunctive relief. The court cited Guarantee, above.
38
Conclusion.
When Texas courts decide who should pay the “litigation costs” imposed by Chapter
42, the courts will be deciding issues of first impression. Insurers doing business in Texas should be aware that if Texas courts follow the prevailing law of other jurisdictions, Chapter
42 “litigation costs” will likely be payable under their liability policies, creating a category of material expense that may have a significantly negative impact on those insurers’ bottom lines.
-11-

Insurers should also consider whether Chapter 42 demands a change in their settlement strategies and, if so, the nature of proper new procedures for any such change.
For example, well-settled Texas law does not require insurers to initiate settlement negotiations with plaintiffs.
39
However, insurers may now wish to take aggressive advantage of Chapter 42. In so doing, liability insurers will disregard existing precedents, and begin making a greater number of offers to settle claims against their insureds, an obvious objective of Chapter 42.
On a final note, as part of their duty to fully explain the risks of litigation, plaintiffs’ lawyers should tell their clients about their mutual potential exposure to “litigation costs” if they reject defendants’ settlement offers. Additionally, the practice of making Stowers demands at or within policy limits now exposes a double-edged blade if those demands provoke counter offers from insurers that prove to be more reasonable. If juries find damages in amounts less than 80% of insurers’ counteroffers to Stowers demands, plaintiffs face a form of expense they never had to consider before. It will be interesting to see how future contingency fee agreements are structured to accommodate this new financial risk.
1
To invoke potential fee-shifting, an offer of settlement must comply with both Chapter 42 and Rule
167. See T EX . C IV . P RAC . & R EM . C ODE §§ 42.001(6); 42.002(e); and T EX . R. C IV . P. 167.2(b)(2).
“An offer to settle or compromise that is not made under this chapter or an offer to settle or compromise made in an action to which this chapter does not apply does not entitle the offering party to recover litigation costs under this chapter.” T EX . C IV . P RAC . & R EM . C ODE § 42.002(e).
Charles L. Babcock, IV and Justin Goodman, Offer of Settlement, Prejudgment Interest, Appeal Bonds, and Class
Actions Under House Bill 4, L
ITIGATION
U
PDATE
I
NSTITUTE
2004, January 9 -10, 2003, Austin, Texas, Chapter 15.
2
Elaine A. Carlson, Offer of Judgment Proposal: House Bill 4, T EXAS B AR CLE, Texas Tort Reform 2003: Legislative
Changes, p. 4 (2003).
3
The court in City of Ypsilanti v. Appalachian Ins. Co., 547 F. Supp. 823, 827 (E.D. Mich. 1982), aff’d, 725 F.2d 682
(6th Cir. 1983), noted that it was unable to find any cases construing the policy term “damages,” either to include or exclude attorney’s fees assessed against an insured in litigation with the tort plaintiff. The court concluded that a
-12-

reasonable person would interpret the phrase “all sums which the Insured shall become legally obligated to pay as damages” as including all forms of civil liability, including attorney’s fees. City of Ypsilanti, 547 F. Supp. at 828.
Courts in some jurisdictions have determined that in the insurance context "damages" means legal damages which are legal compensation for past wrongs or injuries and are generally pecuniary in nature. The term "damages" does not encompass the cost of complying with an injunctive decree. Florida: Aetna Cas. & Sur. Co. v. Hanna, 224 F.2d 499,
503 (5th Cir. 1955); Garden Sanctuary, Inc. v. Ins. Co. of N. Am., 292 So.2d 75, 77 (Fla. App. 1974); Illinois: Ladd
Constr. Co. v. Ins. Co. of N. Am., 73 Ill. App.3d 43, 391 N.E.2d 568, 571, 29 Ill. Dec. 305, 308 (Ill. App. 1979);
Maryland: Md. Cas. Co. v. Armco, Inc., 822 F.2d 1348, 1352 (4th Cir. 1987); Missouri: Cont’l Ins. Companies v.
Northeastern Pharm. & Chem. Co., Inc., 842 F.2d 977, 985 (8th Cir. 1988); New Hampshire: Desrochers v. N.Y. Cas.
Co., 99 N.H. 129, 106 A.2d 196, 198 (N.H. 1954); New Jersey: CPS Chem. Co., Inc. v. Cont’l Ins. Co., 222 N.J. Super.
175, 536 A.2d 311, 315 (N.J. Super. 1988); South Carolina: Cincinnati Ins. Co. v. Milliken & Co., 857 F.2d 979, 981
(4th Cir. 1988); Washington: Travelers Ins. Co. v. Ross Elec. of Wash., Inc., 685 F. Supp. 742, 745 (W.D. Wash. 1988).
The court in U.S. v. Sec. Mgmt. Co., Inc., 96 F.3d 260 (7th Cir. 1996), ruled that an award of attorney’s fees under the
Fair Housing Act, 42 U.S.C. §3616(c)(2), which classifies attorney’s fees as being separate from “costs,” did not qualify as “damages” under the insuring agreement of a Commercial General Liability policy just because the attorney’s fees did not qualify as “costs” under 42 U.S.C. §3616(c)(2). Sec. Mgmt., 96 F.3d at 270.
4
It is not clear what the word “costs” includes or excludes. According to one treatise, the word “costs” refers to court costs only. 1 J ACK P. G IBSON , M AUREEN C. M C C LENDON & W. J EFFREY W OODWARD , C OMMERCIAL L IABILITY
I
NSURANCE
, p. V.G.2. (International Risk Management Institute, Inc. 2002).
5
As a general rule, attorney’s fees are not considered to be “costs” of a lawsuit. See Equitable Gen. Ins. Co. of Tex. v.
Yates, 684 S.W.2d 669, 671 (Tex. 1984).
6
See Brad A. Allen and John D. Ellis, Jr., What are Taxable Court Costs in Texas? T HE H OUSTON L AWYER , 14
(Sept./Oct. 1998).
7
In most liability insurance policies the insurer retains the exclusive right to settle as the insurer “deems expedient.”
Courts generally find the “deems expedient” clause or its equivalent to provide the insurer express contractual authority to settle a claim or lawsuit for an amount within the policy limit. Collateral damage to the insured’s reputation, increased insurance premiums or mental anguish, do not dictate the insurer’s conduct. Jon Epstein, Annot., Liability of Insurer to
Insured for Settling Third-Party Claim Within Policy Limits Resulting in Detriment to Insured, 18 A.L.R.5th 474, 484
(1994); Alabama: Mitchum v. Hudgens, 533 So.2d 194, 196-197 (Ala. 1988); St. Paul Fire & Marine Ins. Co. v. Edge
Mem’l Hosp., 584 So.2d 1316 (Ala. 1991); California: W. Polymer Tech., Inc. v. Reliance Ins. Co., 32 Cal. App.4th 14,
38 Cal. Rptr.2d 78 (Cal. App. 1995); Florida: Shuster v. S. Broward Hosp. Dist. Physicians’ Prof’l Liab. Ins. Trust, 591
So.2d 174 (Fla. 1992); Doe on Behalf of Doe v. Allstate Ins. Co., 653 So.2d 371 (Fla. 1995); Hawaii: Dowsett v.
Cashman, 2 Haw. App. 77, 82, 625 P.2d 1064, 1068 (Haw. App. 1981); Illinois: Cas. Ins. Co. v. Town & Country Pre-
Sch. Nursery, Inc., 147 Ill. App.3d 567, 569, 498 N.E.2d 1177, 1179 (Ill. App. 1986) (under policy clause allowing the insurer to “make such investigation and settlement of any claim or suit as it deems expedient,” insurer had right to settle without insured’s consent, even though settlement figure was within insured’s per-occurrence deductible); Kansas:
Miller v. Sloan, Listrom, Eisenbarth, Sloan & Glassman, 267 Kan. 245, 978 P.2d 922 (Kan. 1999); Louisiana: U.S. Fid.
& Guar. Co. v. Sanders Drilling & Workover Co., Inc., 396 So.2d 1353 (La. App. 1981); Mississippi: Davanport v. St.
Paul Fire & Marine Ins. Co., 978 F.2d 927 (5th Cir. 1992); Missouri: La. Farm Supply Co. v. Fed. Mut. Ins. Co., 409
S.W.2d 239, 240-241 (Mo. App. 1966); New Jersey: Travelers Ins. Co. v. Hitchner, 61 N.J. Super. 283, 160 A.2d 521
(N.J. Super. 1960); Am. Home Assurance Co., Inc. v. Hermann’s Warehouse Corp., 215 N.J. Super. 260, 521 A.2d 903
(N.J. Super. 1987); New York: Commerce & Indus. Ins. Co. v. N. Shore Towers Mgmt., Inc., 162 Misc.2d 778, 617
N.Y.S.2d 632 (N.Y. App. 1994); Liberty Mut. Ins. Co. v. Thalle Constr. Co., Inc., 116 F. Supp.2d 495 (S.D. N.Y. 2000);
Ohio: Marginian v. Allstate Ins. Co., 18 Ohio St.3d 345, 349, 481 N.E.2d 600, 603 (Ohio 1985) (insurer could settle a lawsuit for an amount within the policy limit, even over the express prior objections of the insured); Am. Cas. Co. v.
Timmons, 352 F.2d 563, 568-569 (6th Cir. 1965); Oklahoma: Traders & Gen. Ins. Co. v. Rudco Oil & Gas Co., 129
F.2d 621, 626 (10th Cir. 1942)(insurance company retains “absolute control of the litigation,” including settlement free of challenge by the insured, when the potential loss is within the policy coverage limits and the insurer has accepted liability for the loss by agreeing to defend the insured); Oregon: Hartford Accident & Indem. Co. v. U.S. Natural Res.,
Inc., 897 F. Supp. 466 (D. Or. 1995); Pennsylvania: Bleday v. OUM Group, 435 Pa. Super. 395, 645 A.2d 1358 (Pa.
Super. 1994); Utah: Snyder v. Nat’l Union Indem. Co., 65 F.2d 844, 845, 847 (10th Cir. 1933), cert. denied, 291 U.S.
-13-

665 (1934); Vermont: Myers v. Ambassador Ins. Co., Inc., 146 Vt. 552, 508 A.2d 689 (Vt. 1986); Wisconsin: A.W.
Huss Co. v. Cont’l Cas. Co., 735 F.2d 246 (7th Cir. 1984).
8
838 F.2d 1483 (7th Cir. 1988).
9
42 U.S.C. §1988.
10
115 Idaho 1009, 772 P.2d 216 (Idaho 1989).
11
Harvey, 115 Idaho at 1012, 772 P.2d at 219.
12
Harvey, 115 Idaho at 1011, 772 P.2d at 218. The 1955 Standard Basic Automobile Liability Insurance Policy prefaced the supplementary payments provision in the following manner:
With respect to such insurance as is afforded by this policy for bodily injury liability and for property damage liability, the company shall:
According to commentators, this introductory language was changed to emphasize that the supplementary payments provision only applies to lawsuits covered by the policy’s insuring agreement. N ORMAN E. R ISJORD AND J UNE M.
A USTIN , A UTOMOBILE L IABILITY I NSURANCE C ASES , p. 17 (1964).
13
Harvey, 115 Idaho at 1013, 772 P.2d at 220.
14
Harvey, 115 Idaho at 1012, 772 P.2d at 219. See Tri-State Ins. Co. of Minn. v. Fitzgerald, 593 So.2d 1118 (Fla. App.
1992).
15
Harvey, 115 Idaho at 1012, 772 P.2d at 219.
16
545 So.2d 1360 (Fla. 1989).
17
Williams, 545 So.2d at 1362.
18
F LA . S TAT . A NN . §768.56 (1981). Prejudgment interest is not “costs” within the supplementary payments provision’s “all costs taxed against the insured” language. Massachusetts: Mayer v. Med. Malpractice Joint
Underwriting Ass’n of Mass., 40 Mass. App. Ct. 266, 271, 663 N.E.2d 274, 278 (Mass. App. Ct. 1995); Rhode
Island: Factory Mut. Liab. Ins. Co. of Am. v. Cooper, 106 R.I. 632, 638, 262 A.2d 370, 373 (R.I. 1970); Texas:
Embrey v. Royal Indem. Co., 986 S.W.2d 729, 731 (Tex. App. -- Dallas 1999), aff’d, 22 S.W.3d 414 (Tex. 2000).
19
Williams, 545 So.2d at 1363.
20
473 U.S.1, 105 S.Ct. 3012, 87 L. Ed.2d 1 (1985).
21
42 U.S.C.A. § 1983.
22
According to the “American Rule,” each party to a lawsuit pays its own attorney’s fees, win or lose. See Ashland
Chem. Inc. v. Barco Inc., 123 F.3d 261, 263 (5th Cir. 1997). Exceptions to the American Rule include contracts with terms providing for attorney’s fees, or situations where statutes prescribe the award of attorney’s fees for either contract or tort claims. Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 717-718, 87 S. Ct. 1404, 1407, 18
L.Ed.2 475 (1967).
23
Marek, 473 U.S. at 7-12, 105 S.Ct. at 3016-3018, 87 L.Ed.2d at 4-11. See appendix to Justices William S. Brennan,
Jr.’s, Thurgood Marshall’s and Harry A. Blackman’s dissent, which lists more than 100 federal statutes authorizing awards of attorney’s fees. Marek, 473 U.S. at 44-50, 105 S.Ct. at 3035-3038, 87 L.Ed.2d at 32-37.
24
547 F.Supp. 823 (E.D.Mich.1982), aff'd, 725 F.2d 682 (6th Cir.1983).
25
Ypsilanti, 547 F.Supp. at 828.
26
168 Wis.2d 390, 484 N.W.2d 314 (Wis.), opinion withdrawn and superseded on reconsideration, 170 Wis.2d 347,
488 N.W.2d 87 (Wis. 1992).
27
Shorewood, 170 Wis.2d at 378, 488 N.W.2d at 93.
28
Littlefield v. Mack, 789 F. Supp. 909 (N.D. Ill.), aff’d sub nom., Littlefield v. McGuffey, 979 F.2d 101 (7th Cir. 1992).
29
42 U.S.C. §1988(b).
-14-

30
Littlefield, 979 F.2d at 105.
31
Littlefield, 979 F.2d at 103.
32
Littlefield, 979 F.2d at 104.
33
90 F.R.D. 405 (D.Colo.1981).
34
Guarantee Ins., 90 F.R.D. at 408.
35
Guarantee Ins., 90 F.R.D. at 407.
36
Guarantee Ins., 90 F.R.D. at 408.
37
706 F. Supp. 728 (C.D. Cal. 1989), aff’d, 912F.2d 469 (9th Cir. 1990).
38
Avol, 706 F. Supp. at 729 n. 2.
39
Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842 (Tex. 1994).
3430569v1
-15-