By Paul Elias
The Recorder
January 31, 1997
Regardless of how the jury comes back in the O.J. Simpson case, one thing is certain: His attorneys will get paid.
That's because a simple extension of his homeowner's insurance policy is providing at least part of Simpson's legal defense in the wrongful death suits brought by the families of Nicole Brown Simpson and Ronald Goldman.
But Simpson's policy -- by law -- won't cover damages if jurors find that Simpson was responsible for the June 12, 1994, deaths of his ex-wife and her friend. California Insurance Code 533 provides that "an insurer is not liable for a loss caused by the willful conduct of the insured."
Clearly, the killings of Brown and Goldman were intentional, and would bar indemnification.
So why would an insurer spring for a policyholder's defense if the acts that landed him in court aren't covered?
One reason is that California law recognizes a narrow but significant distinction between a carrier's duty to defend and indemnification. What's more, "an insurance carrier's duty to defend is broadly interpreted in California," said Susan Popik, a name partner with Chapman, Popik & White and a veteran insurance litigator.
Indeed, in 1993 the state Supreme Court concluded that "an insurer will be required to defend a suit where the evidence suggests, but does not conclusively establish, that the loss is not covered."
In that case, Montrose Chemical Corp. of California v. Los Angeles County Superior Court (Canadian Universal Insurance Co. Inc.), 10 Cal.4th 645, Montrose's insurers were required to pay its legal fees even though the pesticide manufacturer was expected to be hit with damages not covered by its policy.
"It is well established . . . that the duty to defend is broader than the duty to indemnify," then-Justice Edward Panelli wrote for the unanimous court.
Still, some insurance defense attorneys said they would still argue that Simpson does not deserve coverage.
"If there ever was a case where intentional conduct is to blame for the damage, this is the one," said Dennis Campos of Sacramento's Diepenbrock, Wulff, Plant & Hannegan.
Indeed, sources close to Simpson told the Associated Press that Simpson's insurance carrier initially balked at picking up the defense tab.
The sources told AP that Simpson's lawyers in the civil case threatened to quit before the carrier agreed to pay their fees. One industry source said Simpson's insurer demanded that its name be kept secret as part of the deal to pay for the defense.
INSURER'S POTENTIAL LIABILITY
Insurance experts suggested that another factor motivating the insurance company to pay Simpson's legal bills is the company's fear of being sued.
"They're on the hook for punitive damages if it is found they did not extend coverage when they should have," said Popik.
Others speculated that the plaintiffs in the Simpson case may have included language in their complaints that triggered coverage for Simpson's defense.
Aside from wrongful death, Simpson is also on trial for battery. It is common, according to Long Beach plaintiffs attorney Raphael Metzger, to extend a homeowner's policy by including language covering legal fees to defend civil charges of battery, invasion of privacy, slander and the like.
"If you are accused and deny those type of accusations, the insurance carrier has a duty to defend," said Metzger, a Los Angeles solo practitioner.
During Simpson's civil trial, evidence about his finances has been sealed, so it's unclear how much insurance he had or who provided it. If the trial reaches a penalty phase, jurors will get a look a Simpson's finances.
But the ex-football star apparently holds a personal liability umbrella policy.
Standard home policies insure against "slip-and-fall" injuries and other personal injury and property damage claims, typically up to $250,000. Umbrella coverage extends to areas such as defamation and wrongful detainer and costs only $200 or $300 a year more for each extra $1 million of coverage.
"For somebody that's high-profile like O.J. Simpson [premiums] might be a little higher," said Bill Sirola, a spokesman for State Farm Insurance. "Celebrities get sued a lot."
Sirola said State Farm isn't Simpson's carrier. But it is one of two insurers that sold President Bill Clinton umbrella coverage, and it is paying to defend him against defamation charges that are part of Paula Jones' sexual harassment suit.
PAYING TOP DOLLAR
In defending policyholders, insurers have the right to pick the lawyer, and they generally do. Typically, they will pay between $90 and $125 an hour.
But in extraordinary cases, that right may be waived and the defendant chooses his counsel.
Clinton, for example, was permitted to hire Robert Bennett at $475 an hour because of the one-of-a-kind constitutional issues involved. Likewise, Simpson hired the high-profile -- and expensive -- Robert C. Baker to handle his tangled and high-profile case, which the plaintiffs were unwilling to settle out of court.
It is unknown how much Baker charges on an hourly basis, but sources have estimated the case cost about $2 million to defend.
"Many people have this coverage, but they're not aware of it," said Steven Goldstein, vice president of the Insurance Information Institute in Washington, D.C.
"What's unusual is to have an individual using his own attorney," said Goldstein. "But we will allow that in certain cases where the lawsuit raises questions of precedent or other special situations."
Simpson's insurer is believed to have insisted on a "reservation of rights," putting Simpson on notice that it might stop paying if he's found to have acted intentionally, but fulfilling its duty to defend him.
"It is my understanding that the civil complaint filed by the plaintiffs would trigger at least the defense costs under a reservation of rights. We've heard that from industry and other sources," Goldstein said.
In cases such as this, there are several possibilities, depending on what was negotiated, Goldstein said.
The deal may allow the insurer to try to recoup its money if Simpson loses. In that case, he could file for bankruptcy protection from creditors.
Or, Goldstein said, Simpson could win and the insurer could contend after reviewing the evidence that it had not been obliged to defend him after all, "and say, 'We would like our money back.'
"Of course, demanding it back and getting it are two different things," Goldstein said.
--Reporter Paul Elias' e-mail address is pelias@counsel.com. An Associated Press report was used in compiling this article.
The Recorder is an affiliate of Court TV.
Copyright © 1997 American Lawyer Media
