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Vol. 2, Iss. 20
October 30, 2013

How Much To Pay Independent Counsel?: Panel Rate Or Higher?

It is an issue that we’ve all addressed. It can cause really acrimonious disputes. And it comes with no clearly defined answers (except in California and Alaska). The insured is entitled to independent defense counsel. Counsel does its job and then submits its bills for payment. However, the hourly rate is double or triple the amount that the insurer would have paid to its panel firm for the same engagement. The independent counsel says that that’s not relevant. Its argument is that the panel rate is not a true “market” rate -- because panel firms agree to accept lower rates in exchange for a steady stream of business. Courts are mixed on how they resolve this dispute.

This issue was addressed, albeit briefly and in a different context, in Azar v. Farmers Ins. Exchange, No. 13-658 (D. Colo. Sept. 26, 2013). However, it is still worth mentioning here as the issue arises with so much frequency and there is not a significant amount of guidance (some, but more could be had). In Azar, the insured was entitled to recover its attorneys fees because the court ruled that Travelers improperly removed an action. The court addressed whether the time spent (37 hours) to file a motion to remand was appropriate. It concluded that, given the complexity of the matter, it was not unreasonable for a junior attorney to have spent 21 hours and two senior attorneys a combined total of seven hours (as opposed to fourteen requested) supervising the junior attorney.

Now to the hourly rate. The senior attorneys’ hourly rates were $450 and $415. The junior attorney was $315. Travelers argued that an appropriate rate would be $235 per hour, which is the blended rate that it was paying its own counsel of record. However, the court rejected this suggestion, “because the hourly rate a large, national insurance company pays on retainer is not analogous to the rates a local law firm must pay on a one-time basis to resist removal.” The court concluded that, based on its knowledge of the rates charged in the Denver metropolitan area, the attorneys’ rates, given their experience, skill, and specialization, were reasonable.

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