I’ve been following this issue for a while.  It’s a significant one.  And more and more courts seem to be addressing it -- and coming to different conclusions. 

Consider an insured that is found liable or there is a settlement and the compensatory damages award is covered.  But, of note, in addition to the compensatory damages, there is also an award for the underlying plaintiff’s attorney’s fees, say for a statutory claim that allows for the recovery of attorney’s fees, such as civil rights or consumer protection.  Or some other reason why a prevailing party is entitled to recover its attorney’s -- as an exception to the usual rule that they are not.   Here’s the issue: Regardless of whether the compensatory damages are covered, is the attorney’s fees portion of the award covered (under a policy that does not specifically address the issue one way or another)?

Courts are mixed on this issue.  It made a high-profile appearance not long ago when the top court in Massachusetts addressed it in Vermont Mutual Insurance Company v. Poirier (Mass. 2022).  An insurer paid a $700,000 award in a bodily injury case; but the court held that a separate award to the plaintiff, of $250,000 for its attorney’s fees, for the defendant’s violation of a state consumer protection statute, was not covered.   

That’s no small decision – and especially if it’s a case where the prevailing party attorney’s are even more significant relative to the compensatory damages.  

As I discussed in a recent Coverage Opinions dispatch, the Seventh Circuit went the other way in Starstone Ins. SE v. City of Chicago.  The court’s most general reason was as follows:   Despite the money going to his legal team, the attorney’s fees still served to compensate the plaintiff.

The situation arose again in National Fire & Marine Ins. Co. v. Glencrest Healthcare, No. 21-3653 (N.D. Ill. Mar. 18, 2025). At issue was coverage for a $225,000 award in a nursing home death case and $666,000 for the plaintiff’s attorney’s fees.

The insurer argued that nothing was covered and the court addressed various issues.  But it also had a lot to say on the subject of coverage for the plaintiff’s attorney’s fees.

In general, as relevant here, the liability policy provided coverage for those sums that the insured becomes legally obligated to pay as damages because of injury caused by an incident.     

Following a lengthy discussion of the issue, the court concluded that the attorney’s fees were not covered.  Its main reasons were as follows:

This first one I’ve never seen addressed before.

The court observed that the exception to the policy’s contractual liability exclusion, for “insured contracts,” states: “[s]olely, for the purposes of liability assumed in an ‘insured contract’, reasonable attorneys’ fees . . . incurred by or for a party other than an ‘insured’ are deemed to be damages because of ‘bodily injury’ or ‘property damage’,” if “(i) [l]iability to such party for, or for the cost of, that party’s defense has also been assumed in the same ‘insured contract’.”  … Thus, under the Policy's ‘insured contract’ exception, attorneys’ fees incurred by the ‘party other than the insured’ are treated as ‘damages because of ‘bodily injury’ or ‘property damage.’

“This language for NFM’s obligation to pay attorneys’ fees as ‘damages’ for bodily injury and property damage in the case of ‘insured contracts’ would have been superfluous if damages generally covered attorneys’ fees. That is, if ‘damages" had been used originally in the coverage parts in a way that already included attorneys’ fees, then the explicit coverage for the insured for attorneys’ fees as within bodily injury and property damage as part of the ‘insured contract’ exception would have been totally unnecessary.”

Second, the court had much to say about “court costs” in reaching its decision.  While the insurer agrees to pay “court costs taxed against the insured,” “court costs” does not include attorney’s fees. Moreover, an award of attorney’s fees, as part of taxable costs under a specific statute, would not qualify as “court costs” because the Policy defines “court costs” to specifically exclude attorneys’ fees. Under the Policy, covered “court costs” explicitly “do not include attorneys’ fees or attorneys’ expenses taxed against the ‘insured’.”   

Lastly – and this was a significant point made by the court in the Massachusetts high court’s decision in Poirier – under the Nursing Home Care Act, courts may award both “actual damages” and “attorney’s fees.”  Thus, as the court saw it, “[t]he provision for attorney’s fees is a separate form of relief distinct from the award of actual damages. Consequently, actual damages and attorney’s fees for pursing the Act claim are treated differently and serve different purposes.”

A significant issue, getting more and more attention and courts coming to different conclusions.  The stuff of Coverage Opinions.