In Fox v. Will County, 1:04-cv-07309, 2012 U.S. Dist. LEXIS 115255 (N.D. Ill Aug. 15, 2012), the court held that an excess insurance policy, which excluded “costs” from its definition of “Ultimate Net Loss,” provided coverage for $1.77 million in attorneys’ fees awarded to a prevailing plaintiff in a civil rights action because the excess policy provided follow form coverage and the primary policy specifically defined attorneys’ fees as “damages.”

Judge Darrah’s ruling arose out of the highly publicized case of Kevin Fox, who was falsely accused of raping and killing his 3-year old daughter in 2004.  After being exonerated by DNA evidence, Kevin Fox and his wife Melissa brought a § 1983 civil rights action against Will County and the individual officers allegedly responsible for the bungled investigation that led to Fox’s arrest.  After a jury trial, and appeal, the Foxes ultimately reached a settlement agreement with the County and its insurers for $6.8 million.

Although the County’s primary and umbrella insurers paid out their policy limits, the County’s excess insurer refused to indemnify the County for the remaining $1.8 million owed to the Foxes under the settlement agreement, which was largely comprised of the Foxes’ attorneys’ fees.  The excess insurer argued that there was no coverage for this sum because its policy excluded “costs” from its definition of “Ultimate Net Loss.”  Although the excess policy did not expressly exclude “attorneys’ fees,” the excess insurer argued that a prevailing party’s attorneys’ fees are considered “costs” in civil rights actions and, therefore, such amounts fell outside the policy’s coverage.

The County filed a third-party complaint against the excess insurer, arguing that its policy followed form to the primary policy, which expressly included attorneys’ fees as a component of “damages.”  Significantly, the primary policy provided: “We’ll consider damages to include the attorneys’ fees of the person or organization bringing the claim if such fees are awarded, or paid in settlement, for covered injury or damage.”  On this basis, the County argued that the excess policy adopted this definition by virtue of its follow form coverage.

In granting judgment on the pleadings in favor of the County, Judge Darrah held that the Foxes’ attorneys’ fees were covered under the excess policy because they were not “costs,” but “damages.”  Judge Darrah reasoned that “as a follow form policy, the [Excess] Policy incorporates the damages provision of the [Primary] Policy and covers the Foxes’ attorneys’ fees.”  Because the excess policy did not specifically define attorneys’ fees otherwise, Judge Darrah concluded that the excess insurer was bound by the primary insurer’s definition and was obligated to provide coverage.