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Allstate Insurance Company v. Huizar6/10/2002
idity of the trial de novo provision and an additional $4,850 for successfully litigating the attorney fees issue. While the trial court characterized Allstate's actions as attempting to avoid its policy obligations and noted the irony that would result from disallowing an award of attorney fees incurred in winning "this public policy fight," the trial court concluded only that Huizar was entitled to fees by the express provisions of the policy obligating Allstate to defend an insured person and pay reasonable expenses incurred at Allstate's request.
On direct appeal, the court of appeals affirmed, not only agreeing with the trial court's construction of the contract but also holding that the public policy considerations articulated by this court in Huizar I "should be interpreted to authorize the award of fees under the limited circumstances of this case." See Huizar II, 32 P.3d at 548. Allstate sought further review of that decision by this court.
II.
In the absence of an express statute, court rule, or private contract to the contrary, attorney fees generally are not recoverable by the prevailing party in a contract or tort action. Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247 (1975); Bernhard v. Farmers Ins. Exch., 915 P.2d 1285, 1287 (Colo. 1996); Bunnett v. Smallwood, 793 P.2d 157, 160 (Colo. 1990). This reasoning is based on the so-called American Rule, which requires each party in a lawsuit to bear its own legal expenses. Bernhard, 915 P.2d at 1287.
The rationale supporting the rule includes a number of broad policy considerations. First, since litigation is at best uncertain, one should not be penalized for merely defending or prosecuting a lawsuit. Second, requiring each party to be responsible for its own fees is thought to encourage settlement. Moreover, the poor might be unjustly discouraged from instituting actions to vindicate their rights if the penalty for losing included the fees of their opponents' counsel. Cf. Farmer v. Arabian Am. Oil Co., 379 U.S. 227, 235, 236-39 (1964) (Goldberg, J., concurring). Additionally, the litigation and proof of what constitutes reasonable attorney's fees would pose a substantial burden for judicial administration. Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 718 (1967); Oelrichs v. Spain, 82 U.S. (15 Wall.) 211 (1872); Bernhard, 915 P.2d at 1287.
A.
Even the general rule requiring each party in a contract action to bear its own legal expenses permits the parties to agree otherwise by express provision in the contract. Agritrack, Inc. v. DeJohn Housemoving, Inc., 25 P.3d 1187, 1191 (Colo. 2001). Both the trial court and the court of appeals found such an express provision for the recovery by Huizar of attorney fees in language of the policy obligating the insurance company to "defend an insured person sued as the result of a covered auto accident" and to pay as part of that defense any "other reasonable expenses incurred at [the insurance company's] request." The court of appeals analogized Allstate's exercise of its trial de novo right under the uninsured motorist provisions of the policy to a suit against Huizar for declaratory judgment. It therefore found that Allstate was obligated by the terms of the policy to defend Huizar against its own "suit" and to pay her attorney fees as reasonable expenses incurred at Allstate's request.
The interpretation of an insurance policy is a matter of law, which an appellate court reviews de novo. See Union Ins. Co. v. Houtz, 883 P.2d 1057, 1061 (Colo. 1994). An insurance policy is a contract, which should be interpreted consistently with the well-settled principles of contractual interpretation. Cha
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