Insurance—UM Claim Arises Out of Contract—Attys’ Fees and Taxable Costs Allowable

Assyia v. State Farm Mut. Auto. Ins. Co., __Ariz. Adv. Rep. __, No. 1 CA-CV 10-0678 (App. Div. I, March 22,2012) (J. Downie)


Plaintiff was involved in an auto accident with an uninsured motorist. She made a policy limit demand against the UM coverage and when it wasn't timely paid brought suit against the carrier for breach of contract. The trial court found the action arose out of contract and awarded fees and costs. The Arizona Court of Appeals agreed and affirmed.

On appeal State Farm argued that it was the equivalent of the insurer of the uninsured motorist and this entire matter was tort in nature. The plaintiff was seeking tort damages for a tort injury. The court of appeals disagreed, stating that the underlying tort of negligent driving was merely the trigger of the contractual obligations State Farm owed the plaintiff. Attorneys' fees are not damages which the insurance company must pay the injured party due to the uninsured motorist's negligence and therefore are not part of a policy limit offer or payment compensating for injuries. The claim for UM policy limits and attorneys' fees would not exist but for the insurance contract. State Farm would have no obligation to pay plaintiff for her injury but for the insurance contract. Consequently, the UM claim arises out of contract and an award of reasonable attorneys' fees in prosecuting the breach of contract action is appropriate.

Further, the plaintiff's attorneys' hybrid fee contract allowing for a $400 an hour fee or contingency, whichever is greater was permissible and the hourly rate was reasonable for an attorney experienced as plaintiff's lawyer is.

Finally, because the plaintiff was the prevailing and successful party taxable costs were also rightfully awarded.

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