Legal fee dispute between AIG, car dealer returned to district court

A federal appeals court on Friday returned a dispute between an American International Group Inc. unit and a car dealership over attorneys fees back to the district court for further analysis.

Car dealership Saint Albans, West Virginia-based Moses Enterprises LLC had an insurance policy with AIG unit Lexington Insurance Co., according to Friday’s ruling by the 4th U.S. Court of Appeals in Richmond, Virginia, in Moses Enterprises LLC v. Lexington Insurance Co.; AIG Claims Inc.

Moses sold a car to someone using a fake identity, and the car was never paid for, the ruling said. AIG refused to pay the claim, stating Moses had not provided notice of it within the policy’s required period.

The ensuing claims litigation included claims for insurance contract breach and violation of the state’s unfair trade practices statute. The relief sought included attorney fees.

The day before trial, the parties settled both claims, but continued to disagree about the amount of attorneys fees to which Moses was entitled, the ruling said.

Six months later, the U.S. District Court in Huntington, West Virginia, district court awarded Moses $293,135.45 in attorneys fees representing “the entire amount for attorneys’ fees incurred until the final resolution the case.” AIG appealed the ruling.

The three-judge appeals court panel said under West Virginia law, when a claimant sues its insurer for property damage, it is liable to pay the policyholders’ reasonable attorneys fees. But the insurer is not obligated to this fee shifting for its unfair trade practices act charge.

The question remains, the panel said, as to how much in attorneys fee is recoverable. The district court “committed legal error in awarding Moses the full amount of its requested fees without determining whether any of the work was properly attributed only” to the unfair trade practices act claim.

“We conclude the district court’s analysis missed a step, and thus vacate and remand for further proceedings,” it said.

Attorneys in the case did not respond to requests for comment.