Stipulated Amount of Fees Found To Be “Taxed Costs” Under Insurance Policy, Second District Holds, in Affirming Fee Awards Against Co-Insurer.
We welcome insurance coverage practitioners to our site through our review of a Second District unpublished decision involving a co-insurer’s contribution for defense fees/costs and payment of a portion of the fees paid out to mobilehome plaintiffs under a settlement of litigation brought under Mobilehome Residency Law (Civil Code section 798 et seq.) Lest we forget the fee authorization link, section 798.85 entitles a prevailing party under the Mobilehome Residency Law to recover reasonable attorney’s fees and costs. Also, most insurance policies are structured in a way that the insurer must pay the costs of retained defense and Cumis counsel once a tender of defense is accepted or adjudged if the matter of defense entitlement is litigated in a declaratory relief brought by the insured.
In Employers Mutual Cas. Co. v. Philadelphia Indemnity Ins. Co., Çase No. B204550 (2d Dist., Div. 2 Nov. 18, 2008) (unpublished), co-insurer Philadelphia Indemnity was ordered to contribute to co-insurer Employer (who took an assignment of rights from yet another insurer) two things: $164,613.15 in defense fees/costs for the defense of an insured in a case alleging violation of the Mobilehome Residency Law and $400,000 of the $1.8 million in fees paid out to plaintiffs’ attorneys as part of the settlement of the case against the insured (with the fees being designated as section 798.85 fees).
Discontented with the orders, Philadelphia Indemnity appealed but obtained no reversal, with many of its argument rebuffed for an inadequate record or being raised too late in the appellate process.
Philadelphia Indemnity’s main argument was that the $1.8 million settlement payment of section 798.85 fees did not constitute “taxed costs” under its supplementary payment coverage policy. It contended this was so because no court had entered an order of taxation. Both the trial and appellate courts did not buy this rigid interpretation, construing the term more broadly. “The dictionary defines the verb ‘tax’ as meaning to judicially assess the amount of costs; levying a tax on; making an onerous demand on. (Merrian-Webster’s Collegiate Dict. (10th ed., 1999) p. 1208.) According to Philadelphia, the first definition is the one intended by the parties. But in our view the use of the word ‘taxed’ in Philadelphia’s policies is ambiguous. It could narrowly refer to a judicial assessment of costs or broadly to any levy of an assessment. Following precedent, we are required to interpret ‘taxed’ broadly if feasible. We find it feasible to do so without perverting semantics. Thus, we construe the term broadly.” (Slip Opn., at p. 9.) There was also a policy reason for this broader interpretation: “Additionally, if taxed costs did not include anticipated costs in a settlement, insurers would be discouraged from settling cases with high costs because they would be barred from seeking contribution. Our holding eliminates that dilemma.” (Slip Opn., at p. 10.)
The appellate panel also affirmed the trial court’s determination that the $1.8 million in settlement fees was a “fixed cost” that did not change, notwithstanding that 79 new plaintiffs moved into the mobilehome park after Philadelphia’s last policy expired. Thus, there was no reason to reduce Philadelphia’s proportionate share downward.
There is also an interesting discussion of the methods for determining an equitable allocation among multiple insurers on the same risk: time on the risk; policy limits; combined policy limits/time on the risk; equal shares; and maximum loss. The trial court in this case used the “time on the risk” allocation method, which was upheld on appeal. (See Centennial Ins. Co. v. United States Fire Ins. Co., 88 Cal.App.4th 105, 112-113 (2001).)
BLOG UNDERVIEW—The trial court was Los Angeles County Superior Court Judge John Shepard Wiley, Jr. Marc and Mike had a recent law-and-motion hearing before him, finding he ran a thoughtful, considerate courtroom. He also mentioned an interesting website which we have added to our home page sidebar—where one can get feedback and ratings on federal and state judges throughout the United States as well as add one’s own personal experiences on a particular judge. Appropriately enough, it is called “The Robing Room.”