Opinion ID: 457688
Heading Depth: 2
Heading Rank: 1

Heading: Burden of Proving Reasonableness of Incurred Fees and Expenses

Text: 8 Liberty contends that, as a matter of law, it should have recovered the attorney's fees actually incurred and that it should not have been required to establish the reasonableness of those fees. We are not persuaded by any of the grounds that Liberty advances to support this claim. 9 In the first place, Liberty suggests that Massachusetts law calls for the recovery of incurred fees, rather than reasonable fees. There is no support for this in Massachusetts case law, see Magoun v. Liberty Mutual Insurance Co., 346 Mass. 677, 684, 195 N.E.2d 514, 519 (1964) (insurer required to pay the reasonable charges of counsel hired by insured); Mandell v. Fidelity & Casualty Co., 170 Mass. 173, 178, 49 N.E. 110 (1898) (insured's duty is to take all reasonable means to reduce the amount of its liability in defending against a claim that the insurer refuses to defend). Furthermore, the standard treatises on the law of insurance establish clearly that only reasonable fees may be recovered. 7C J. Appleman, Insurance Law and Practice Sec. 4691, at 261 (1979) ([A]ttorneys' fees incurred by the insured in the defense of an action must be shown to be reasonable to allow a recovery thereof from the insurer.); 14 G. Couch, Cyclopedia on Insurance 2d (Rev. ed.) Sec. 51:61, at 539 (1982); 1 R. Long, The Law of Liability Insurance Sec. 5.15, at 5-97 (1985). To apply a lesser standard would be to invite excessive, duplicative, or outrageous charges--charges which were not originally contemplated by the parties to the policy and which, if allowed, might ultimately lead to increased premiums for many purchasers of insurance. We conclude therefore that the district court was correct in putting to the jury the question of whether all or part of the fees and expenses incurred by Robertson and Liberty were reasonable. 10 Secondly, Liberty contends that it should have been Continental's burden to prove the unreasonableness, not Liberty's to prove the reasonableness, of the fees and expenses actually charged by Goodwin, Procter & Hoar. This stands the law on its head. As we have just established, Liberty's claim was, by law, for the reasonable fees that it incurred. It is obvious that the party claiming such expenditures has the burden of proving them, including the burden of proving whether the fees were in fact reasonable. See Snow v. Mikenas, 373 Mass. 809, 812, 370 N.E.2d 1001, 1003 (1977); First National Bank of Boston v. Brink, 372 Mass. 257, 264, 361 N.E.2d 406, 410-11 (1977); Lujan v. Gonzales, 84 N.M. 229, 239, 501 P.2d 673, 683 (1972) (as an element of damages caused by breach of duty to defend, reasonable attorney's fees are to be proven by claimant); 7C J. Appleman, Insurance Law and Practice Sec. 4691, at 261-62 (1979). Here, Liberty introduced into evidence the fees actually charged and the parties thereafter disputed the reasonableness, or unreasonableness, of various aspects of those fees. The burden of production certainly shifted during the examination of witnesses that followed, but the burden of persuasion properly remained with Liberty. 11 Finally, Liberty argues that since Continental breached its agreement to defend, it was equitably estopped from contesting the reasonableness of the fees. While there might have been merit to this claim if Continental had acted in bad faith or had attempted to mislead Liberty, such was not the case here. Liberty has conceded that Continental did not act in bad faith. Continental formally articulated its refusal to defend Robertson soon after each of the two liability suits was filed, commenced its declaratory judgment action to determine the parties' rights and obligations under the policies, and was, at least in ways that need not be explained here, partially successful in that action. To bar Continental from challenging the reasonableness of the fees incurred by Robertson and Liberty in conducting Robertson's defense would be to penalize Continental for having used legitimate means to determine the limits of its obligations. Equity does not call for such a harsh result. Since policyholders in general have an interest, along with insurers, in defeating claims that are without merit, it seems unwise to ... [penalize] the useful activity of insurers in contesting claims that they reasonably conclude they should contest. R. Keeton, Basic Text on Insurance Law Sec. 7.4(b), at 458 (1971). Accordingly, we have been shown no basis in equity for barring Continental from challenging the reasonableness of the fees incurred by Robertson and Liberty. 4