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Insurance Issues - Can the indemnitor in turn tender its defense obligation to its insurer, or must it cover "Crawford fees" itself? Careful consideration must be given to the policy language in the indemnitor's insurance policy, whether the contract is an "insured contract" under the policy, whether there are any other policy exclusions, any other available coverage, and how and to what extent this affects the indemnitor's available liability coverage.
Evidence of Crawford fees - The indemnitee seeking Crawford fees will need to support such a claim that is being sought against the indemnitor.
Apportionment of the Crawford fees - The issue of to what extent the indemnitor would be responsible for the indemnitee's fee's must be considered if there are multiple potential indemnitors. It is essential to determine what portion of the indemnitee's fees and costs are or will be devoted to the defense of the work, product or services of the indemnitor. There is no law on this issue yet. Most defense counsel who have faced this issue realize that if there are two subcontractors with identical indemnity language, they should split the attorneys fees of the owner or general contractor 50/50. If there are three, than each bears 1/3, etc.
The Upshot-For Defense Counsel
Keep your eye on the defense obligation, as well as your opinion on your chances of success at trial! Without question, since Crawford, the defense obligation landscape has changed dramatically. While broad defense language has been upheld in court as triggering a defense obligation from the outset, it remains to be seen whether potential indemnitors will, in light of Crawford, negotiate different defense language going forward. Defense costs can overwhelm the case, and end up costing a carrier as much or more than the settlement of the claim, depending upon the injury and plaintiff's damages.
Many claims professionals and defense counsel continue to operate in "pre-Crawford" mode and ignore the early tender. Tactically, they hope for contribution to the settlement pot from the carrier for the general contractor or owner, and/or argue that the owner's liability is the lion's share of liability to settlement money should be contributed on a pro-rata basis according to the liability split.
The problem is that under Crawford, the subcontractor's carrier owes a defense obligation from the outset! Even a defense verdict for the little subcontractor can cost the subcontractor's carrier considerable defense costs of the general contractor or owner who is ultimately found responsible to the plaintiff! Those defense costs can mount quickly in multi-party cases, and often will exceed six figures after a full trial. On many occasions with multiple defendants, the defense costs can actually exceed the settlement value of the case.
Therefore, there are three strategies that seem to work best for defendants in this situation:
First, pick up the tender early! Once the Crawford holding is digested, it is hard to argue with this strategy if the subcontract calls for defense and indemnity for the subject claim.
Second, "pay and chase." If the general contractor or owner is sure of their cross-complaint's eventual success, and a subcontractor(s) is not "with the program" and willing to pick up the tender or offer any money to settle with the plaintiff, the carrier for the general contractor or owner can settle with plaintiff and reserve all rights against the subcontractor and try the cross complaint. While many carriers might not like this option at first blush, any trial lawyer who has seen how one of these cases tries with a good plaintiff, a good plaintiff's lawyer, and defendants fighting with one another knows it is a money saver in the long run.
Third, agree to a figure with the plaintiff, and guarantee the funding of that settlement within 90 days. Then, all defendants go to a binding arbitration, or try their cross complaint to the judge in a bench trial to determine which carrier is obligated to fund what percentage of the settlement. When all else fails, this option saves significant defense costs over a full jury trial with the plaintiff when all parties view the case has having the same settlement value.
In one recent case, in which the defendants could not agree to any of the above 3 options, the jury's verdict was about $1 million MORE than the sum asked for by plaintiff's counsel. Certainly, the plaintiff's lawyer tried a remarkable case, and deserves tremendous credit. But it is also certain that because defense counsel spent the trial fighting with one another to exonerate their individual clients helped to anger the jury and elevate the verdict amount.
The Upshot-For Plaintiff's Counsel
Be patient! These types of cases can prove very frustrating during discovery and during mediation for the plaintiff's attorney. What starts as a relatively simple case becomes complex and contentious because defense counsel normally begin exhaustive discovery, including deposing everyone under the sun, and generally do not seem to want to settle the case. It has the feel of a billing bonanza. The reason has to do with the infighting over the contractual issues and implied indemnity arguments. Most importantly, defense counsel for the owner and/or general contractor are very certain that some other carrier (normally the subcontractor's carrier) will ultimately pay their bill. It only takes one carrier (normally for the subcontractor) to bury their head in the sand on the Crawford obligation to lock up any negotiation.
For the plaintiff's counsel, it is wise to have an understanding of Crawford, and being open to a two step mediation process in which session 1 (or the first half of the day) is between defendants only to sort out the indemnity issues, and then session 2 is a conversation with plaintiff's counsel to settle the claim. This way counsel for plaintiff doesn't waste time sitting alone in mediation wondering why no one is talking to him for hours on end.
In this scenario it is critically important to have all claims people personally present! Though Crawford is now 4 years old, the dire consequences of doing business as usual (pre-Crawford denial of the tender) is not universally understood. Getting everyone in the same room, or at least the same building, gives the mediation process the best chance of success.
Finally, plaintiff's counsel must be willing to be flexible. Sometimes these cases are resolved at mediation by a settlement conditioned upon payment in 90 days, to allow the defendants to proceed with a trial of their cross complaint or a binding arbitration on the issue.
As mediators, the cases involving Crawford take on a distinctive feel. Defendants are fighting, and plaintiffs are frustrated. The negotiation takes a long time to get going, but once it gets going, can result in a fair settlement. A knowledgeable mediator can help the parties resolve all the issues and save all the parties, time, money, and headache.
Robert Tessier is a California attorney since 1986 and co-founded CEDRS, an organization committed to helping businesses succeed by preventing and resolving commercial disputes. He earned his law degree in 1986 from Pepperdine University School of Law, with honors.
Mr. Tessier is a lifelong resident of Los Angeles. He attended Loyola Marymount University, earning a B.A. degree in 1983. He earned his law degree in 1986 from Pepperdine University, School of Law, with honors. While there he served on Law Review, was published in the Pepperdine Law Review in the area of civil law, earned a place on the Dean’s List every year, and won awards for academic excellence and legal writing. While in Law School, he was employed with a law firm specializing in Writs and Appeals. He graduated in the top five percent of his class, and was admitted to practice December 1986.
In 1992, he co-founded the law firm Rowell & Tessier, and was managing partner there until 1997, at which time he formed the Law Offices of Robert M. Tessier, P.C. with his wife, Terri, also a practicing attorney who has significant experience in medical malpractice litigation. He earned an AV rating from Martindale Hubbell reflecting the respect garnered from the bench and adversaries in the field of civil litigation. During this time, he volunteered as a mediator in the Los Angeles County alternative dispute resolution program. Having discovered passion and talent in this sub-specialty, he chose to pursue ADR full time both as mediator, and teacher.
In 2005, he co-founded the Centres for Excellence in Dispute Resolution. He brings vast experience in the civil arena to assist parties and their lawyers achieve optimum settlements in claims involving negligence (including construction accidents, automobile and truck accidents, and premises liability), product defect (vehicles and consumer products), wrongful death, elder abuse, and professional negligence. He has developed particular expertise in orthopedic and neurological injuries, with continuing education focused on spinal injuries, knee injuries, and brain injuries.
Sean Judge has been a litigator since 1989. Since 2010, he has devoted his practice to mediation and arbitration. He primarily handles cases in the areas of personal injury/wrongful death, business litigation, real estate and construction.
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