In a closely watched case involving a dispute over legal fees in an insurance settlement, the Oregon Court of Appeals ruled on Tuesday that a trial court improperly awarded a sizeable attorney fee based on a percentage of a policyholder's recovery, rather than basing the fee on hours worked.
The case stems from a tragic incident in which Richard and Rita Griffith, a married couple, lost their Wallowa County home to a fire. They filed a claim under their homeowners' policy with the Property and Casualty Insurance Company of Hartford, commonly known as Hartford. While Hartford acknowledged the claim and made payments, the Griffiths thought that the insurer was taking too long processing their claim, prompting them to retain attorney Kelly Vance.
The couple proceeded to sue Hartford for breach of contract, negligence, and intentional infliction of emotional distress, seeking damages, prejudgment interest, attorney fees, and costs.
The litigation against Hartford was relatively brief. Soon after the filing, the parties reached a settlement agreement that resolved the Griffiths’ insurance and contract claims and released Hartford from further liability.
However, despite the settlement, disputes continued over whether the Griffiths were entitled to prejudgment interest on their insurance payout, whether they could recover litigation costs, and—most significantly—how the attorney fee award should be calculated.
The trial court ultimately awarded the Griffiths over $221,000 in attorney fees, basing the amount on a percentage of their insurance recovery. Additionally, it denied their request to recover costs and dismissed their motion seeking prejudgment interest under Oregon law.
The Griffiths appealed the trial court’s decisions denying them prejudgment interest and costs. They argued that interest should have started accruing 30 days after they submitted their insurance claim, contending that the amount owed was ascertainable by then, triggering rights under ORS 82.010, Oregon’s statutory provision governing interest on money due.
However, the appeals court dismissed this part of the appeal. Writing for the court, Presiding Judge Tookey noted that no formal judgment had been entered against Hartford on the breach of contract claim, making the denial of summary judgment for prejudgment interest not appealable. Moreover, the court emphasized that under Oregon law, denials of summary judgment are typically not reviewable unless certain narrow exceptions apply, none of which were relevant here.
As for litigation costs, the Griffiths argued that their entitlement to attorney fees meant they should automatically be entitled to recover costs. But the appellate panel upheld the trial court’s ruling, finding that because the Griffiths had voluntarily dismissed their tort claims and reached a settlement, it was within the trial court’s discretion to determine they had not "prevailed" in a way that mandated awarding costs.
The most consequential aspect of the ruling came on Hartford’s cross-appeal challenging the attorney fee award.
Under ORS 742.061(1), Oregon law allows plaintiffs to recover reasonable attorney fees if an insurer fails to settle a claim within six months of receiving proof of loss. Hartford conceded that the Griffiths were entitled to fees under this statute because their claim had not been fully paid within six months.
However, Hartford argued that the trial court abused its discretion by calculating the fee based on a contingency percentage of the recovery rather than using the conventional lodestar method, which multiplies the attorney's reasonable hourly rate by the hours worked.
The appellate court agreed with Hartford. Judge Tookey explained that the lodestar method is the prevailing standard in statutory fee-shifting cases, ensuring transparency and fairness by tying fees to actual legal work performed. He noted that the use of a percentage-of-recovery approach might be more appropriate in class actions or cases involving a common fund, but not in a straightforward insurance dispute where liability was never contested.
To make matters worse, the plaintiffs' counsel did not provide time records, making it impossible for the trial court to meaningfully assess whether the fee was reasonable relative to the effort expended. The court found no indication of complex litigation or significant risk for the plaintiffs' attorney, further undermining the percentage-based fee.
The panel concluded that the award risked a windfall for plaintiffs' counsel and remanded the case for reconsideration, directing the lower court to recalculate fees using the lodestar method.
This decision is expected to have ripple effects in Oregon insurance litigation, particularly concerning how attorney fees are assessed post-settlement. It reaffirms that even when policyholders succeed in securing fees under fee-shifting statutes, courts must rigorously evaluate whether the requested fees are tied to actual work performed—not simply the size of the recovery.
The ruling also reinforces procedural limitations on appealing summary judgment denials, signaling that litigants seeking prejudgment interest or other remedies must first obtain a proper judgment to trigger appellate review.
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