Behnke v. State Farm Gen. Ins
This breach of contract, insurance bad faith, and fraud action brought by plaintiff Michael C. Behnke against his residential property insurer─defendant State Farm General Insurance Company (State Farm)─arose from an attorney fees dispute between State Farm and the law firm of English & Gloven, which Behnke had selected as his independent Cumis counsel[1] to defend him against a third-party lawsuit. In his fee agreement with English & Gloven, Behnke agreed to be personally liable for the firm's fees in the event State Farm failed to make full and timely payments. After objecting that English & Gloven's fees were excessive and attempting to replace the firm as Behnke's independent counsel, State Farm allowed English & Gloven to continue representing Behnke and allegedly promised at a January 2004 meeting to pay all of English & Gloven's fees that State Farm had not paid as of the time of the meeting. State Farm eventually paid $50,000 to settle the underlying lawsuit against Behnke. By that time, English & Gloven had billed State Farm a total of about $199,000 in fees and costs. The attorney fees dispute arose when State Farm paid $140,000 to English & Gloven but refused to pay the remaining $59,000. Meanwhile, Behnke signed a promissory note in the amount of $127,000 in favor of English & Gloven secured by a deed of trust on his home. State Farm obtained an order compelling mandatory binding arbitration under Civil Code[2] section 2860, subdivision (c) (hereafter section 2860(c)), and the arbitrator reduced the disputed $59,000 attorney fees claim by $16,000 to $43,000, which the arbitrator awarded to English & Gloven with interest. English & Gloven foreclosed on the deed of trust given by Behnke, and State Farm paid English & Gloven's reduced attorney fees claim with interest.
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