Almost all lawyer’s professional liability policies include a fee-return exclusion. The exclusion is usually wrapped into the definition of “Damages” or “Loss,” but sometimes is a stand-alone exclusion in the exclusions section of the policy.[1] The following is a basic example of the definitional form of the exclusion: “Damages does not include . . . any return, withdrawal, restitution or reduction of professional fees, profits or other charges . . . .”[2]
The purpose of the exclusion is to make crystal clear that client refunds are the insured’s responsibility.[3] Coughing up an unearned or ill-gotten fee represents a business risk, not an insurance risk. A malpractice policy does not insure a lawyer’s revenues.
The focus is on the relief requested, not the theory of recovery.[4] The question is whether the damages sought represents fees paid to the lawyer. If so, the exclusion normally applies, subject to a potential exception for a professional negligence claim where malpractice damages are calculated by reference to fees.
The exclusion often includes the additional phrase “injuries that are a consequence of any the foregoing.” Courts have held such phrase operates to exclude other damages resulting from the improper fee.[5]
If a complaint only seeks excluded fees, ordinarily the insurer will have no duty to defend. If other unrelated damages are sought, a defense is usually owed.[6]
Fee disputes
The exclusion primarily targets fee disputes.[7] A fee dispute differs from a conventional malpractice claim is two respects. First, it concerns a lawyer’s right to a fee, which is not normally implicated by a professional negligence claim. Second, it usually arises out of a business practice, specifically fee-setting, billing, collection, or the division of a fee among lawyers.
Numerous cases hold that fee disputes are not covered because they do not involve the rendering of professional services as required by the insuring clause.[8] However, there is some authority to the contrary.[9] The fee-return exclusion defeats coverage for fee disputes in a far more direct and clear way than relying on the insuring clause.
The exclusion also applies to fee disputes with other attorneys, such as a claim by a referring attorney, co-counsel or former firm for a share of a fee.[10]
Fees as malpractice damages
The most vexing issue is whether the exclusion applies to a bona fide malpractice claim where damages are measured by fees paid the lawyer. The best example is a lawyer misadvising a client to pursue meritless litigation that is dismissed, resulting in the client incurring needless fees. The fees constitute malpractice damages, recovery of which is not a refund in the usual sense. Does the exclusion apply in this context?
- Cases holding the exclusion does not apply
The majority of cases draw a distinction between return of a fee and malpractice damages measured by a fee. These cases hold the exclusion does not apply to fees as malpractice damages. The decisions view the exclusion as limited to fee disputes and focus on the nature of the claim and relief sought. Where the claim truly sounds in professional negligence and seeks consequential damages therefor, the exclusion is not triggered. A consistent theme in these decisions is insured’s reasonable expectation of coverage for damages flowing from professional negligence.
Citrus World, Inc. v. Ferraiuoli, Torres, Marchand & Rovira, P.S.C.[11] presents the most thorough analysis. The attorney negligently advised the client that it was entitled to terminate a distributor. The distributor sued, causing the client to incur substantial defense costs, initially with the attorney who gave the bad advice and later with replacement counsel. The attorney’s malpractice carrier argued such defense costs were not covered based on the fee-return exclusion. The federal district court disagreed. As to replacement counsel’s fees, “[i]t seems to us beyond argument that if Ferraiuoli’s negligence caused Florida Natural to incur legal expenses to hire other counsel to fix Ferraiuoli’s mistakes, those fees are, in fact, consequential damages covered under the policy.” [12] The court observed that “return implies an action to recover fees actually paid to the insured.”[13] Fees paid to replacement counsel do not qualify as payments to the insured. The exclusion also referred to “reimbursement.” While that term “might include fees paid to other firms[,] . . . taking the term in the context of the policy as a whole, we see no reason to conclude that it excludes from payment legal fees qua legal fees.”[14]
As to the insured attorney’s fees, the court held that “[a]t least within the facts of this case, we think the same is true.” [15] A claim for “fees and costs[] for having had to engage in needless litigation is . . . is one for consequential damages arising from the underlying negligence.” [16]
The court distinguished between fees as damages and fee-shifting. The policy obligated the insurer to pay “damages,” but not “sums that, traditionally, would not be compensatory damages, awarded as a result of a judgment or settlement: fines, penalties, criminal sanctions, taxes, costs, and legal fees.” [17] The court construed the exclusion as merely recognizing the common law principle that a fee-shifting award is not formally damages. The alternative view that the exclusion applies to fees as malpractice damages “would make little sense” because “in many malpractice cases attorneys’ fees may be the only damages sustained.”[18]
Building on Citrus World, the court in Procentury Insurance Co. v. Cuk [19] likewise found the exclusion inapplicable to fees as malpractice damages. The lawyer misadvised his client to pursue a claim to nullify a marriage that was dismissed as frivolous, prompting the client to sue the lawyer. Damages included fees paid the lawyer to prosecute the doomed claim. The court held such fees were covered because “Mr. Cuk sought the fees and costs at issue as consequential damages caused by Burch Coulsten’s allegedly negligent advice and representation.”[20] Quoting Citrus World, the court explained that “[i]n a legal malpractice case, fees paid in the underlying action can take on a different character; they are compensable damages flowing directly from the malpractice defendant’s negligence.”[21]
Continental Casualty Co. v. Law Offices of Melvin James Kaplan[22] involved a debtor’s bankruptcy attorney who engaged in post-petition collection of pre-petition fees. One of his clients filed a class action for violation of the automatic stay, negligence, and contempt. The attorney’s insurer refused to defend. The court agreed no defense was owed on the stay-violation and contempt claims because they involved collection activities, not the rendering of professional services. The negligence claims, however, triggered a defense notwithstanding the fee-return exclusion:
“The fact that the damages sought by Chubko in count II may well be measured by the sums paid to Kaplan, post-discharge, for legal services rendered prior to the filing of Chubko’s petition in bankruptcy does not mean that the injury suffered is a consequence of the fees charged. Rather, the injury suffered is a consequence of Kaplan’s alleged negligent failure to secure a discharge of Chubko’s obligation to pay those fees.”[23]
A mixed fee dispute and malpractice claim presented in Continental Casualty Company v. Feingerts & Kelly, A.P.L.C.[24] The alleged malpractice was the lawyer failing to adequately update the client about the litigation, especially the opportunity to settle. The client incurred unnecessary fees if the case could have been settled. The court held the fee-return exclusion did not apply because “[t]his claim cannot be construed as a legal fee dispute or a claim for damages as a result of injuries incurred as a consequence of a legal fee dispute.”[25]
In Edwards v. Continental Casualty Company[26], the court held a claim “that may be quantified with reference to fees” does not necessarily trigger the exclusion. The attorney and his client were sued by a settling defendant’s insurer to claw back a settlement payment that the carrier alleged had been obtained through the client’s fraud; the attorney was not alleged to have done anything wrong. The court rejected the insurer’s characterization of the claim as a “run of the mill” fee dispute.[27]
Courts have struggled with the same issue in the context of the premium-return exclusion in an insurance broker’s professional liability policy. Numerous cases hold the exclusion does not apply to a broker negligence claim where damages are calculated by reference to premiums.[28]
- Cases holding the exclusion applies
A minority of cases go the other way, holding or strongly suggesting in dicta that the fee-return exclusion applies whenever damages are measured by fees paid the insured, regardless of whether they represent malpractice damages.
In Hofing v. CNA Insurance Companies[29] the client sued the law firm for mismanaging litigation by not properly updating it about the progress of the case, including an adverse summary judgment ruling. The client contended it would have steered the case towards settlement had it known of the unfavorable law and developments in the case, thereby avoiding unnecessary fees. The court held the fee-return exclusion applied. “Thus, although the policy covers negligent conduct, when the negligent conduct is alleged in order to recoup fees paid, the exclusion applies by excepting this category of claims.”[30] The court chided the law firm because “as attorneys, [they] would certainly be expected to realize that a claim for return of fees was not covered by the insurance policy.”[31]
Citing Hofing, the court in Norman Shabel, P.C. v. National Union Fire Insurance Company[32] held no defense was owed for a negligence claim to recover an excessive contingency fee because “this court is required to consider the nature of the damage claim.”[33] The complaint’s allegations “indicate clearly that relief is limited to the return of excessive attorney’s fees.”[34]
In Tana v. Professionals Prototype 1 Insurance Company,[35] the California Court of Appeals stated that “[f]ee disputes do not become covered damages merely because the damages are called ‘compensatory’ or are sought under a claim of ‘negligence’ or ‘breach of fiduciary duty.’”[36] “A common sense reading of the complaint reveals that it was entirely s fee dispute, not a malpractice claim.”[37] However, because Tana was a fee dispute, the court did not actually confront the issue of whether malpractice damages measured by the insured’s fees trigger the fee-return exclusion.
In Evanston Insurance Company v. Fred A. Tucker & Co., Inc.[38] the Ninth Circuit held the premium-return exclusion in an insurance broker’s professional liability policy relieved the insurer of a duty to defend:
“Hansen and Hjelle contend that the exclusion applies to claims for premiums owed as legitimate business debts, rather than to claims for negligence where the measure of damages happens to be the amount of premiums paid. We disagree.
. . .
We agree with the reasoning and conclusion of the district court order that the policy excludes unambiguously any claim for premiums, regardless of how characterized.”
The Eastern District of Pennsylvania followed Evanston in Tri-Arc Financial Services, Inc. v. Evanston Insurance Company[39], again in the context of a demand for the return of premiums under an insurance broker’s professional liability policy. However, in UnitedHealth Group Inc. v. Columbia Casualty Co.[40], the District of Minnesota distinguished Evanston on the ground that the claimant specifically sought the return of premiums, thereby bringing the claim more directly within the exclusion.
Restitution
The exclusion also applies to fee “restitution.” Black’s Law Dictionary defines restitution as the “[r]eturn or restoration of some specific thing to its rightful owner.”[41] The remedy is rooted in unjust enrichment; generally speaking, the law requires restitution when someone has been enriched at the expense of another under circumstances the law views as unjust.[42] The return of an unearned, excessive or unlawful fee sounds in restitution.[43]
A fee need not be ill-gotten for restitution, as the Ninth Circuit held in Republic Western Insurance Company v. Spierer, Woodward, Willens, Denis & Furstman.[44] The lawyer received a retainer for future work but was later disabled from performing such work by a conflict of interest that arose. The lawyer agreed to return the unearned fee by depositing it with the court and then demanded his insurer pay such amount. Coverage litigation ensued, wherein the Ninth Circuit ruled that return of the fee amounted to restitution and, under California law, “restitutionary payments such as Spierer’s are not ‘damages.’”[45] The Ninth Circuit rejected the lawyer’s argument that a fee refund was not restitutionary because restitution is limited to an ill-gotten gain. “Restitution was due, once Spierer, having received the money in advance of performing the promised legal services, became unable to earn it.” [46] “Restitution is not limited to money wrongfully acquired, as Spierer argues.”[47]
Some courts have held, as in Spierer, that public policy forecloses coverage for fee restitution to a client, even in the absence of a fee-return exclusion.[48]
Third-party fee
A recurring issue is whether the fee-return exclusion applies when a client sues his or her attorney to recover a fee that the client paid a third party, such as co-counsel, an expert, or a vendor.
Sometimes the exclusion is phrased to only apply to a fee paid the lawyer, as in the following example: “Loss does not include . . . return, withdrawal, forgiveness or reduction of any fees or receivables paid to, or charged or chargeable by, an Insured . . . .”[49] The exclusion usually does not apply to third-party payments when so phrased.
An exception was found in Edward T. Joyce & Associates, P.C. v. Professional Direct Insurance Company.[50] The contingency-fee lawyer prevailed in securities litigation for his clients. A dispute then arose over whether the lawyer was obligated to pursue collection litigation against insurers under the contingency-fee agreement or could charge separately for it. Without obtaining the clients’ informed consent, the lawyer retained separate coverage counsel on an hourly basis to pursue collection and further charged the clients on an hourly basis for consulting with coverage counsel. Coverage counsel collected $8.6 million. Afterwards the clients sued the contingency-fee lawyer to recover the hourly-fee payments. The lawyer’s insurer defended, but, when the clients won, refused to indemnify based on the exclusion. The exclusion applied to “any claim for legal fees, costs or disbursements paid or owed to you.”[51] The Seventh Circuit held the exclusion “straightforwardly” applied to the portion of the arbitration award for hourly fees paid to the insured attorney.[52] However, it found the hourly fees paid coverage counsel—a third party—“somewhat more difficult to classify.”[53] Notwithstanding the paid-to-you limitation in the exclusion, the Seventh Circuit held it applied because “substance is what matters here, and in substance this part of the arbitrator’s award reduced the fees the Joyce firm was entitled to recover from the proceeds of the settlement from EPS’s insurers.”[54] The exclusion applied because reimbursement of coverage counsel’s fees was accomplished through an adjustment of what the contingency-fee attorney was due out of the recovery. “So although it’s a closer question, we conclude that this part of the award, too, falls within exclusion (p) and is excluded from coverage.” Id.
Even without paid-to-you language, such limitation is arguably implicit in the words “return” and “restitution” in the exclusion Both contemplate giving back something received.[55] The insured cannot give back what is held by a third party. The same with the words “forgiveness,” “reduction” and “withdrawal” often used in the exclusion. The insured cannot forgive or reduce a debt owed to a third party, nor withdraw a third-party’s demand for payment.
In McCostis v. Home Insurance Company,[56] a prominent law firm settled a billing dispute with a client and, as part of the settlement, took assignment of the client’s claims against the individual attorneys who committed the billing fraud. The firm then sued the lawyers on the assigned claims, alleging they were jointly and severally liable for the settlement payment. One of the attorneys tendered the suit to his malpractice carrier which refused to defend based on the exclusion. The exclusion provided that “damages . . . does not include . . . the return of or restitution of legal fees, costs and expenses.”[57] The attorney sued the insurer arguing a defense was owed because he was in part being sued for payments to co-counsel, a third party. The exclusion did not include an express paid-to-you limitation. The Second Circuit held “the policy does not provide a clear answer to the question of whether the return or restitution of legal fees exclusion would be applicable for disputes concerning fees paid to third parties.”[58] The court concluded the exclusion was ambiguous:
“. . . The exclusion provision could mean, as the district court effectively concluded, that all client billing controversies are excluded from coverage. On the other hand, the use of the words “return” and “restitution” seems to indicate that the exclusion would pertain only to situations where the insured received the disputed funds and is forced to repay the monies to the client. Accordingly, we find that the return or restitution of legal fees exclusion is ambiguous as applied to McCostis in this case.”[59]
The court remanded the case to the district court to consider extrinsic evidence regarding whether the exclusion applied to third-party payments and, if extrinsic evidence did not resolve the issue, suggested the ambiguity should be resolved in insured’s favor under the “contra-insurer rule.”[60]
Payor limitation
At least one court has ruled the exclusion only applies to a claim by the payor of the fees. In Hullverson Law Firm, P.C. v. Liberty Mutual Insurance Underwriters, Inc.,[61] a competitor sued the insured for unfair competition based on its use of the “Hulverson” name, seeking disgorgement of the insured’s profits. The Eastern District of Missouri found the exclusion inapplicable because “the return or restitution of legal fees presupposes that the legal fees came from the injured party.”[62] The court grounded the ruling in dictionary definitions that “[t]o return is ‘to revert to a former owner’; restitution is the ‘act of restoring to the proper owner something taken away.’”[63] Since “James Hullverson is not seeking the return or restitution of any fees he paid the firm,” the exclusion did not apply.[64]
[1] See Edward T. Joyce & Assoc. v. Professional Direct Ins. Co., 816 F.3d 928, 930 (7th Cir. 2016) (involving fee-return exclusion in the exclusions section of a policy).
[2] Travelers LPL 1001 Ed. 11-08 at 3 § 4.E.1 (bold removed); see also XL Catlin PLLD 050 0717 at 3 § III.F.2 (“Damages do not include . . . [l]egal fees, costs and expenses previously paid by the claimant, or retained or possessed by an Insured, whether claimed by way of disgorgement of fees, restitution of specific funds, forfeiture, financial loss or otherwise.”) (bold removed); Axis LM1000 (08-11) at 3 § II.K.3 (“Loss does not include . . . return, withdrawal, forgiveness or reduction of any fees or receivables paid to, or charged or chargeable by, an Insured . . . .”) (bold removed).
[3] For convenience, the analysis herein focuses on attorneys’ fees, but everything said applies equally to the return of costs.
[4] See Continental Cas. Co. v. Brady, 907 P.2d 807, 810 (Idaho 1995) (explaining that the fee-return exclusion “focus[es] . . . on the relief requested” and “it is immaterial what the actual theory of recovery is since the policy flatly excludes ‘all claims’ for the return of fees”); Tana v. Professionals Prototype 1 Ins. Co., 47 Cal. App. 4th 1612, 1619, 55 Cal. Rptr. 2d 160, 164 (1996) (“Fee disputes do not become covered damages merely because the damages are called ‘compensatory’ or are sought under a claim of ‘negligence’ or ‘breach of fiduciary duty.’”); Norman Shabel, P.C. v. Nat’l Union Fire Ins. Co., 923 F. Supp. 681, 683 (D.N.J. 1996) (holding exclusion applied because “the actions were merely an attempt to recoup excessive fees paid to the attorney”); Gregg & Valby, L.L.P. v. Great Am. Ins. Co., 316 F. Supp. 2d 505, 512-13 (S.D. Tex. 2004) (“a party’s particular characterization of a claim cannot conceal its true nature” and “the only acts . . . at issue in the underlying suits were its fee-setting and billing practices”); Continental Cas. Co. v. Parnoff, 2018 WL 4356746, at *4 (D. Conn.), aff’d, 2019 WL 6999867 (2d Cir.) (“This attempt to transform the relief sought in the Yuille Action into ‘damages’ under the policy by focusing on the theory of relief, i.e., breach of fiduciary duty, rather than the factual allegations, has been squarely rejected by other courts that have considered the issue. . . . The facts alleged in the complaint in the Yuille Action make clear that Ms. Yuille and the Parnoff defendants were fighting over legal fees.”).
[5] See, e.g., Continental Cas. Co. v. Donald T. Bertucci, Ltd., 926 N.E.2d 833, 838 (Ill. App. 2010); Tana v. Professionals Prototype 1 Ins. Co., 47 Cal. App. 4th 1612, 1619, 55 Cal. Rptr. 2d 160, 164 (1996); Illinois State Bar Ass’n Mut. Ins. Co. v. Burkart, 2015 IL App (4th) 140936-U, ¶ 62 (unpublished).
[6] See Alps Prop. & Cas. Ins. Co. v. Merdes & Merdes, P.C., 2014 WL 7399105, at *9 (D. Ak.) (holding client’s request for additional damages beyond restitution of unlawful contingency fee triggered duty to defend); Hofing v. CNA Ins. Co., 588 A.2d 864, 869 (N.J. App. 1991) (“however, if the claim of North River is for damages over and above the recoupment of legal fees, then the exclusion would not apply”).
[7] See Clermont v. Continental Cas. Co., 778 F. Supp. 2d 133, 142 (D. Mass. 2011) (holding fee-return exclusion applied because “the underlying action is a fee dispute and does not allege ‘damages’ within the meaning of the policy”) (internal quotation marks omitted); Continental Cas. Co. v. Donald T. Bertucci, Ltd., 926 N.E. 2d 833, 839-40 (Ill. App. 2010) (holding fee-return exclusion applied because “the Rodriguez action alleges only noncovered, direct and consequential injuries from the excessive legal fees Bertucci charged against her assets; it does not allege ‘damages’ within the meaning of the policy”); Tana v. Professionals Prototype 1 Ins. Co., 47 Cal. App. 4th 1612, 1617, 55 Cal. Rptr. 2d 160, 162 (1996) (holding fee-return exclusion applied because “[a] commonsense reading of the complaint reveals that it was entirely a fee dispute, not a malpractice claim.”); Continental Cas. Co. v. Brady, 907 P.2d 807, 810 (Idaho 1995) (holding fee-return exclusion applied because “all of the factual allegations in the complaint center on a dispute over attorney fees”); Continental Cas. Co. v. Black & Black, P.A., 674 So.2d 163 (Fla. App. 1996) (holding fee-return exclusion applied to breach of contract claim against attorney for charging an excessive fee); Alps Prop. & Cas. Ins. Co. v. Merdes & Merdes, P.C., 2014 WL 7399105, at *9 (D. Ak.) (holding fee-return exclusion applied to portion of suit for disgorgement of contingency fee based on illegality); Procentury Ins. Co. v. Slobodan Cuk, 2014 WL 11474652 *5 (C.D.C) (“This provision is intended to exclude fee disputes from coverage.”); Pias v. Continental Cas. Ins. Co., 2013 WL 4012709, at *8 (W.D. La.) (“in light of the similarly clear definition of ‘damages’ within the Policy, the undersigned finds that the fee dispute between Lopez and Pias clearly cannot constitute covered damages under the policy”); Colony Ins. Co. v. Fladseth, 2013 WL 1365988, at *11 (N.D. Cal.) (“there is no material dispute of fact that the claims in both state court actions fall into two different exclusions contained in the policy, for disputes over fees for services and the gaining of personal profit or advantage to which the insured was not entitled”); Continental Cas. Co. v. Feingarts & Kelly, A.P.L.C., 2004 WL 737460, at *6 (E.D. La) (recognizing fee-return exclusion applied to “a legal fee dispute,” but holding defense owed based on allegation that lawyer failed to keep client informed of litigation status).
[8] See Edwards v. Continental Cas. Co., 841 F.3d 360, 363 (5th Cir. 2016) (holding insurer had no duty to defend claim by settling defendant’s insurer for restitution of plaintiff counsel’s contingency fee based on plaintiff exaggerating his injuries to induce a settlement because such claim was not premised on an error or omission by plaintiff’s counsel in the rendering of professional services to his client); Reliance Nat. Ins. Co. v. Sears, Roebuck & Co., 792 N.E.2d 145, 148 (Mass. App. 2003) (“. . . [W]e decide that the billing function of a lawyer is not a professional service. Billing for legal services does not draw on special learning acquired through rigorous intellectual training. We are not aware that courses in billing clients appear in law school curricula. The billing function is largely ministerial. There are elements of experience and judgment in billing for legal services, but the same goes for pricing shoes. As billing is not a professional service, it does not come within the coverage of a professional liability insurance policy, except in . . . exceptional circumstances . . . .”); John M. O’Quinn P.C. v. National Union Fire Ins. Co., 33 F. Supp. 3d 756, 769-73 (S.D. Tex. 2014) (holding insurer had no duty to indemnify $46 million class arbitration award against insured law firm and related settlement for overstating expenses and resulting fee disgorgement because firm’s billing practices did not involve the rendering of professional services; court also found no coverage based on restitutionary nature of award, fee-return exclusion, and improper profit/advantage exclusion); Oklahoma Attorneys Mut. Ins. Co. v. Capron, 250 P.3d 916, 918 (Okla. App. 2011) (“fee disputes between lawyers do not constitute ‘professional services to others’ and are not claims for which coverage is provided by lawyer’s professional liability policy”); Garland, Samuel & Loeb, P.C. v. Am. Safety Cas. Ins. Co., 651 S.E.2d 177, 180 (Ga. App. 2007) (holding claim by co-counsel for breach of fee-splitting agreement not covered because “the claim did not arise from Garland’s or his firm’s acts or omissions in rendering professional services as lawyers”); Continental Cas. Co. v. Law Offices of Melvin James Kaplan, 801 N.E.2d 992, 996 (Ill. App. 2004) (holding client’s claims against his bankruptcy attorney for violation of the automatic stay and contempt based on lawyer’s post-petition effort to collect pre-petition fees not covered because “[n]either of the theories pled in these counts arise out of act or omission by Kaplan in rendering, or failing to render, legal services”); Cohen v. Empire Cas. Co., 771 P.2d 29, 31 (Colo. App. 1989) (holding collection suit by contract lawyer against attorney that hired him not covered because “Cohen’s liability did not arise from his acts or omissions in rendering professional services” but rather “from Cohen’s failure to pay for the value of services rendered”); Roberts v. Fla. Lawyers Mut. Ins. Co., 839 So. 2d 843, 845 (Fla. App. 2003) (“We hold that the partners’ dispute over how to divide money received from a lawsuit was not an ‘act, error or omission in Professional Services provided’ within the meaning of the policy.”); Gregg & Valby, L.L.P. v. Great Am. Ins. Co., 316 F. Supp. 2d 505, 513-14 (S.D. Tex. 2004) (“With these criteria in mind, the court has little trouble concluding that Plaintiff’s billing and fee-setting practices are not ‘professional services’. Contrary to Plaintiff’s conclusory contentions, nothing suggests that billing or fee-setting require specialized legal skill and knowledge, nor are they acts particular to the legal profession. Simply put, they are merely administrative tasks inherent to all businesses.”) (internal citation omitted); National Union Fire Ins. Co. of Pittsburgh, Pa. v. Shane & Shane Co., L.P.A., 605 N.E.2d 1325, 1329 (Ohio App. 1992) (holding no coverage for fee-overcharge claim because “[w]e cannot readily hold . . . that a fee dispute is the same as rendering ‘professional services’”); Clermont v. Continental Cas. Co., 778 F. Supp. 2d 133, 141-42 (D. Ma. 2011) (holding no coverage for claim against attorney by his former firm for share of contingency fee because claim did not involve rendering of professional services and fee-return exclusion applied).
[9] See Lyons v. American Home Assurance Co., 354 N.W.2d 892, 895 (Minn. App. 1984) (holding claim by attorney’s former law firm alleging he improperly reduced client’s contingency fee after leaving the firm, and in which the former firm held an economic interest, arose out of rendering of professional services); Cadwallader v. New Amsterdam Cas. Co., 152 A.2d 484, 489 (Pa. 1959) (holding co-counsels’ claim against attorney for inadvertently disbursing their portion of contingency fee to client was potentially covered).
[10] See Clermont v. Continental Cas. Co., 778 F. Supp. 2d 133 (D. Mass. 2011) (holding no coverage for claim by attorney’s former law firm for share of post-departure, contingency-fee recoveries because it amounted to a fee dispute); Edwards v. Continental Cas. Co., 2015 WL 5009015, at *5 (W.D. La.) (noting that fee-return exclusion applies to “‘run of the mill’ fee disputes between a lawyer and his or her own client, co-counsel, or former law firm”).
[11] 2014 WL 1007744 (D.P.R.).
[12] Id. at *16.
[13] Id. (emphasis in original).
[14] Id.
[15] Id.
[16] Id.
[17] Id. at *15 (emphasis in original).
[18] Id. at *16 (internal quotation marks removed); see also Weisberger v. Home Ins. Co., 601 N.E.2d 660, 663 (Ohio App. 1991) (holding fee-return exclusion “simply means that damages include a judgment or settlement . . . but not . . . legal fees incurred in obtaining that judgment or settlement”);
[19] 2014 WL 11474652 (C.D. Cal.).
[20] Id. at *5.
[21] Id. (quoting Citrus World, Inc. v. Ferraiuoli, Torres, Marchand & Rovira, P.S.C, 2014 WL 1007744, at *16 (D.P.R.)).
[22] Continental Cas. Co. v. Law Offices of Melvin James Kaplan, 801 N.E.2d 992 (Ill. App. 2004).
[23] Id. at 996.
[24] Continental Cas. Co. v. Feingerts & Kelly, A.P.L.C., 2004 WL 737460 (E.D. La).
[25] Id. at *6.
[26] Edwards v. Continental Cas. Co., 2015 WL 5009015 (W.D. La.).
[27] Id. at *5.
[28] See Unitedhealth Group Inc. v. Columbia Cas. Co., 2009 WL 5559050, at *9 (D. Minn.) (“These cases do not support Columbia’s argument that it is enough that the underlying claim be ‘essentially for the recovery of premiums.’ . . . These cases demonstrate that the nature of the claim asserted and relief sought control the analysis. As in Freemont, Utica Mutual, and Gulf Coast, the claim here is for actual damages from torts, not for return of premiums.”) (and cases cited therein).
[29] 588 A.2d 864 (N.J. App. 1991).
[30] Id. at 868.
[31] Id. at 868.
[32] Norman Shabel, P.C. v. National Union Fire Ins. Co., 923 F. Supp. 681 (D.N.J. 1996).
[33] Id. at 683.
[34] Id. at 684.
[35] Tana v. Professionals Prototype 1 Ins. Co., 47 Cal. App. 4th 1612, 55 Cal. Rptr. 2d 160 (1996).
[36] Id. at 1619, 55 Cal. Rptr. 2d at 164.
[37] Id. at 1617, 55 Cal. Rptr. 2d at 163.
[38] 872 F.2d 278 (9th Cir. 1989).
[39] Tri-Arc Fin. Servs., Inc. v. Evanston Ins. Co., 2016 WL 7178419, at *4 (E.D. Pa. 2016).
[40] UnitedHealth Grp. Inc. v. Columbia Cas. Co., 2009 WL 5559050, at *9 (D. Minn.), report and recommendation adopted in part, 2010 WL 317521 (D. Minn.).
[41] RESTITUTION, Black’s Law Dictionary (11th ed. 2019).
[42] See Restatement (Third) of Restitution and Unjust Enrichment § 1 cmt. A (2010) (“Liability in restitution derives from the receipt of a benefit whose retention without payment would result in the unjust enrichment of the defendant at the expense of the claimant.”).
[43] See McWethy v. California Ins. Guarantee Assoc., 2006 WL 1793640, at *4 (Cal. App.) (“Although the judgment grants a monetary award, the award in essence seeks disgorgement of the benefits the Gundersons wrongfully obtained. We therefore conclude the judgment is restitution . . . .”).
[44] Republic Western Insurance Company v. Spierer, Woodward, Willens, Denis & Furstman, 68 F.3d 347 (9th Cir. 1995).
[45] Id. at 352.
[46] Id. at 351-52
[47] Id.
[48] See Shapiro v. Onebeacon Ins. Co., 34 A.D. 3d 259 (N.Y. App. 2006) (“the risk of being directed to return improperly acquired funds is not insurable and restitution of such funds does not constitute ‘damages’ or ‘loss’ as those terms are used in insurance policies”); Perl v. St. Paul Fire & Marine Ins. Co., 345 N.W.2d 209, 215-16 (Minn. 1984) (“In view of these concerns, so strongly expressed and felt by this court, we believe that insurance coverage which purports to cover a fee forfeiture by an attorney for his or her own breach of fiduciary duty, such as the one here, should not be enforceable as a matter of law.”); Friend v. Attorneys Liability Protection Society, 131 F.3d 134 (4th Cir. 1997) (unpublished) (“Although the insurance policy does not define the term ‘damages,’ we do not believe that the ordinary meaning of this word would include a court-ordered refund of excessive attorneys’ fees. Such a refund, after all, sounds not in damages, but in restitution. Nor do we discern within what is essentially a simple malpractice insurance policy any indication of an intention to extend coverage to a judgment of this sort. Neither as a matter of contract interpretation nor as a matter of common sense do we find any reason to believe the policy is meant to insure Friend’s ability to collect and keep the full amount of the fees he chooses to bill for any given matter-especially where, as here, those fees are judicially determined to be unreasonable and excessive.”).
[49] See, e.g., Axis LM1000 (08-11) at 3 § II.K.3 (“Loss does not include . . . return, withdrawal, forgiveness or reduction of any fees or receivables paid to, or charged or chargeable by, an Insured . . . .”) (bold removed and italics added).
[50] 816 F.3d 928 (7th Cir. 2016).
[51] Id. at 930 (emphasis added).
[52] Id. at 934.
[53] Id.
[54] Id.
[55] “Return” is defined as “to pass back to an earlier possessor.” https://www.merriam-webster.com/ dictionary/return (last checked on January 6, 2020). Restitution is defined as the “[r]eturn or restoration of some specific thing to its rightful owner.” RESTITUTION, Black’s Law Dictionary (11th ed. 2019). See also Citrus World, Inc. v. Ferraiuoli, Torres, Marchand & Rovira, P.S.C., 2014 WL 1007744, at *16 (D.P.R.) (“[r]eturn implies an action to recover fees actually paid to the insured”) (italics in original); Hullverson Law v. Liberty Mut. Ins. Underwriters, Inc., 25 F. Supp. 3d 1185, 1196 (E.D. Mo. 2014) (“To return is to ‘revert to a former owner’; restitution is the ‘act of restoring to the proper owner something taken away.’”) (quoting Webster’s New Riverside University Dictionary 1002, 1004 (1988)).
[56] 31 F.3d 110 (2d Cir. 1994).
[57] Id. at 112.
[58] Id.
[59] Id.
[60] Id.
[61] Hullverson Law Firm, P.C. v. Liberty Mut. Ins. Underwriters, Inc., 25 F. Supp. 3d 1185 (E.D. Mo. 2014).
[62] Id. at 1196.
[63] Id.
[64] Id.
