In the United States, bad faith refers to dishonest dealings in law. Bad faith may refer to an untruthful belief or intention, negligence in the execution of responsibilities, a violation of fair dealing rules, or a fraudulent aim.

Regarding the punitive damages award, California supreme court determines who pays bad faith attorney’s fees with compensatory damages.

They call these fees “Brandt fees.” The term came from a popular jury verdict in 1985.

Brandt Fees California Law

In the trial court case of Brandt v. Superior Court (1985), the California Supreme Court held the plaintiff responsible for an insurance bad faith action. The parties recover attorney fees incurred to obtain an award of contractual benefits within the constitutional limits.

In Brandt, supra, at p. 815, the citing states that when insurers withhold benefits in a tort and result in bad faith, the reasonable attorney’s fees the case incurs to pursue the punitive damages verdict, as well as the insurers’ policy benefits, are recoverable as part of punitive and compensatory damages resulting from such conduct.

Hence, Brandt fees mean attorney fees that the suit in obtaining policy benefits or compensation in the course of a bad faith lawsuit incurs, and it derives its name from the Brandt v. Superior Court case from 1985. Brandt fees are on the premise that insurers should not reduce policy benefits by the costs of a legal representation required to obtain them in a bad faith action, including punitive damages awards.

Punitive Damages Award and Brandt Fees

In California law, each side in a legal proceeding is liable to pay for its own attorney. Still, in some cases, the California Supreme Court and some federal agencies may order the losing party to pay the bad faith attorneys’ fees for the other party with the jury’s verdict.

The California Supreme Court appropriately included Brandt fees as compensatory damages where the jury awards the fees but excluded it when it is a trial court post-verdict, which means the court grants them after the jury has rendered its verdict in deciding if a punitive damages award is unconstitutionally excessive in light of compensatory damages. In the Nickerson v. Stonebridge Life Insurance Company case, the California Supreme Court held that Brandt fees are part of compensatory damages in either event.

Deciding Brandt Fees

In Nickerson v. Stonebridge Life Insurance Company, a policyholder sued the insurer for allegedly refusing to pay all benefits owed under an indemnity benefit policy for medical expenses in bad faith. Nickerson reviewed a jury’s punitive damages award of $92 million after the compensation claim of $35,000 for Stonebridge Life Insurance’s fraudulent handling of Thomas Nickerson’s claims.

The trial court awarded the insured $31,500 in unpaid insurance benefits through a directed verdict after the punitive damages award. Then the jury ruled that the insurer’s action was in bad faith, awarded the policyholder $35,000 for pain and suffering, and added a $19 million punitive damages verdict.

Before the trial, both parties stipulated that the trial court would determine any Brandt fees, and the parties presented no evidence relating to the stipulated amount to the jury. The insurance company moved for a new trial to reduce the punitive damages award. The California Supreme Court reversed the punitive damages to $350,000 while determining that the ruling should not include Brandt fees in the analysis.

What Trial Courts Consider

There are many statutory exceptions where punitive damages awards follow with Brandt fees. These cases are where the trial court generally enacted the ruling to encourage private litigation to implement public policy. Attorney’s fees are awarded to help equalize disputes between individual plaintiffs and corporate or governmental defendants.

The Equal Access to Justice Act (EAJA) makes the United States liable for attorneys’ fees per hour up to $125 for every hour in many court cases and lost proceedings (and some that it wins). Let us understand how Supreme Courts decisions involving Brandt fees interpret civil rights statutes and award Brandt fees.

Statutes For Brandt Fees

Due to the peculiar nature of insurance contracts, the unreasonable delay or rejection of policy rights can constitute a tort claim for insurance bad faith under California law. In contrast to a breach of contract action, a tort claim for insurance bad faith provides extra-contractual costs, such as attorney’s fees and punitive damages awards which cannot survive appellate scrutiny under the due process clause.

However, the question arises as to whether the jury can award Brandt fees in the losses to determine the proper ratio for punitive damages and compensatory claims in cases where the court sets the amount following a jury decision on punitive damages. On June 9, 2016, the California Supreme Court resolved that in Nickerson v. Stonebridge Life Insurance Co. (2016) 63 Cal.4th 363.

It decided that the jury can include Brandt fees in determining the ratio of punitive to compensatory damages, regardless of when they award Brandt fees, whether the Brandt fees ordinarily qualify or whether the court or a jury reached the judgment. (Ibid., p. 368.)

Nickerson stated that “Brandt fees are frequently considered compensatory damages” for purposes of calculating the punitive damage ratio. According to Nickerson, the appropriate compensatory to punitive damages ratio is a “question directed at reviewing courts, not juries.” (Ibid., p. 375.)

Thus, Nickerson concluded that there was “no reason to remove Brandt fees” from the appropriate ratio of punitive damages computation, even if the civil court imposes Brandt fees following a jury finding of bad faith. (See id., p. 376.)

Nickerson is a significant judgment because it establishes that the court should always include Brandt fees when determining the appropriate ratio of compensatory to punitive damages in a bad faith case.

Insureds pursuing a bad faith claim may now be confident that they will retain the right to utilize the amount of Brandt fees to support a punitive damages award merely because the parties decided to have the amount determined by the judge rather than the jury.

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We are ready to help you at Ehline Law Firm because we invest our time in a free initial consultation with you and evaluate your potential case. We are interested in representing you in your legal claim. Contact our Los Angeles injury lawyers at (213) 596-9642 to get legal advice on how you can claim maximum compensatory damages today.