Opinion ID: 1172467
Heading Depth: 1
Heading Rank: 6

Heading: Measure of Damages Propriety of Instruction re Allocation of Attorney Fees

Text: (11) Instruction 59, [9] dealing with the recoverability of attorney fees incurred in the prior action, was a misstatement of the law and the facts. When an action maliciously prosecuted is a cross-action, there are two levels of allocation of attorney fees possible. In the first, the legal costs plaintiff incurred in presenting his affirmative case may be differentiated from those incurred in meeting the thrust of any affirmative defenses and the cross-action. The second allocation differentiates between the cost of meeting the affirmative defenses and the cost incurred in litigating the cross-action. The instruction fails to recognize that first there was an apportionment to be made prior to the allocation of the remaining portion of attorney fees and court costs to which the instruction addresses itself. As read to the jury, instruction 59 thus permits the recovery of all attorney fees Bertero had incurred in the absence of undeniable evidence that a legitimate allocation could be made. It appears of record that Bertero had contracted to pay his counsel 10 percent of the amount recovered as lost salary prior to the filing of any answer or cross-pleading and, based on the award for unpaid salary in that action, his attorney was entitled to a fee of $25,000 for prosecuting the action. This portion of the overall attorney fees was not allocable to defending against the prosecution of the malicious cross-action and Bertero was not entitled to recover any portion of it. The instruction also purports to provide for allocation between the cost of meeting the thrust of the answer and the cost of defending against the cross-action maliciously prosecuted. Such allocation may have been difficult for the defendants to establish. Nevertheless, as with the allocation of other compensatory damages caused by the dual services performed by counsel in responding to the pleadings filed by defendants, this burden, as the instruction provides, must fall to the defendants. To impose such a burden on the plaintiff would foreclose recovery for a harm admittedly done. (See Singleton v. Perry, supra, 45 Cal.2d 489, 498.) Defendants correctly challenge instruction 59 on the further ground that it required proof of allocation by an unlawfully high standard of proof. No reason appears why the degree of proof by which plaintiff must establish an allocation of litigation expenses between meeting the thrust of the answer and defending the cross-action should be greater than that generally required in civil actions, that is, by a preponderance of the evidence. In Hogan v. Midland National Ins. Co. (1970) 3 Cal.3d 553, 564 [91 Cal. Rptr. 153, 476 P.2d 825], we held that an insurer was required to establish by undeniable evidence the apportionment of litigation expenses incurred by an insured between those attributable to the defense against specific claims for which the insurer was held not to be liable under the policy and those for which it was liable to the insured and had failed to provide a defense. We recognized in that case, however, that an insurer is under a duty to defend a claim whenever the allegations of a complaint would support a recovery upon a risk covered by the policy ( id., at p. 563), and that the allegations of the complaint, although not proof of all facts asserted, brought the action within the policy's coverage. We stated that the insurer having breached its contract to defend should be charged with a heavy burden of proof of allocability. ( Id., at p. 564.) Hogan is thus inapposite. The insurer had a preexisting duty at least to initiate a defense, and, because of its breach it was required to assume the heavier burden of establishing a proper allocation between litigation expenses incurred by the insured in defending against claims which were covered by the policy and those which were not. Defendants in the instant circumstances had no preexisting responsibility for Bertero's attorney fees. The jury is presumed to have followed the challenged instruction and, accordingly, to have awarded Bertero $25,000 in excess of what he was entitled to as attorney fees in the award for compensatory damages. No purpose would be served by remanding the cause for an allocation which the record establishes as a matter of law must be made. We accordingly modify the judgment by deleting $25,000 from Bertero's recovery of compensatory damages. [10]