Published Decision Rejects Brandt Fee Claim In "Bad Faith" Suit Seeking Payment Of Judgment In Excess Of Policy Limits

In Brandt v. Superior Court, 37 Cal.3d 813, 817 (1985), the California Supreme Court recognized an insured's right to seek recovery of attorneys' fees incurred to compel the payment of policy benefits unreasonably withheld by the insurer. As the Court explained, the recovery of Brandt fees is predicated on proof of two elements: (1) the insurer's tortious or unreasonable withholding of policy benefits owed to the insured; and (2) reasonable attorneys' fees incurred by the insured to compel the payment of the benefits due under the insurance policy.

Whether a policyholder can recover Brandt fees in cases alleging the insurer unreasonably failed to accept a policy limit demand resulting in entry of an excess of policy limits judgment against the insured – so-called "bad faith failure-to-settle claims" – has been a hotly contested issue for decades. Plaintiffs have argued that even if the insurer paid its policy limits in partial satisfaction of the excess judgment, the plaintiff can still claim Brandt fees for efforts to obtain payment of the judgment above the policy limit. Insurers, on the other hand, have argued that once an insurer has indemnified up to its policy limits, any entitlement to Brandt fees is cut off. Despite the frequency with which this issue has arisen, no published decision in California directly addressed it. Until now.

In Allstate Northbrook Indemnity Company v. Tran, — F.Supp.3d –, 2025 WL 2610048 (E.D. Cal. Sept. 10, 2025), the District Court directly addressed the issue and ruled in favor of the insurer. There, Allstate declined a $250,000 policy limit demand following a car accident caused by its insured. Thereafter, the third-party claimant proceeded to trial and obtained a judgment against the insured for $3.8 million. Allstate paid its policy limit in partial satisfaction of the judgment.

Anticipating a "bad faith failure-to-settle" claim, Allstate brought a declaratory relief action against the insured and the third-party claimant, seeking a determination that it did not breach the duty to settle and had no obligation to pay the excess amount of the judgment. The insured and third-party claimant responded with a counterclaim seeking to recover the entire judgment. They also claimed a right to Brandt fees, arguing that "policy benefits" include nonmonetary benefits such as protection from an excess judgment. Thus, they argued, where an insurer refuses to settle for the policy limit, amounts owed under the policy include the amount of a resulting judgment above the policy limit.

Allstate moved for judgment on the pleadings as to the Brandt fee claim, and the District Court granted the motion. The District Court relied on "clear binding authority" limiting the recovery of Brandt fees to those fees incurred to obtain policy benefits and establishing that "attorney fees expended to obtain damages exceeding the policy limit or to recover other types of damages are not recoverable as Brandt fees." Pursuant to this authority, the court held, a bad faith claim seeking recovery of the amount of an excess judgment does not seek to recover "policy benefits" and therefore does not support a Brandt fee claim.

The District Court's published decision brings clarity to an issue in dispute between policyholders and insurers. It helps to solidify that a Brandt fee recovery must be tethered to the recovery of policy benefits, and does not include efforts to recover other damages such as the amount of a judgment in excess of policy limits.

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