F I L E D

United States Court of Appeals

Tenth Circuit

FEB 17 2004

PATRICK FISHER

Clerk

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

EMPLOYERS REINSURANCE

CORPORATION,

Plaintiff - Counter-Claim

Defendant - Appellant/

Cross-Appellee,

v. Nos. 02-3274 and 02-3291

MID-CONTINENT CASUALTY

COMPANY,

Defendant - CounterClaimant - Appellee/

Cross-Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF KANSAS

(D.C. NO. 01-CV-2058-KHV)

Douglas R. Richmond (Patrick J. Kenny and Carlton D. Callenbach, with him on

the briefs), of Armstrong Teasdale LLP, Kansas City, Missouri, for Plaintiff -

Counter-Claim Defendant - Appellant/Cross-Appellee.

Vincent F. O’Flaherty (Julie J. Gibson and Michael L. Belancio, with him on the

briefs), of Niewald, Waldeck & Brown, Kansas City, Missouri, for Defendant -

Counter-Claimant - Appellee/Cross-Appellant.

Before HARTZ , HOLLOWAY , and McKAY , Circuit Judges.
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HARTZ , Circuit Judge.

The parties to this appeal are two insurance companies. Employers

Reinsurance Corp. (ERC) and Mid-Continent Casualty Co. (MCCC), a property

and casualty insurance company, entered into a Liability Excess Reinsurance

Agreement (the Agreement). Under the Agreement ERC reinsured MCCC with

respect to certain payments and expenses for which MCCC was responsible to its

insureds under policies it issued. In addition, ERC insured MCCC for some

extra-contractual liabilities it might incur to its insureds—such as liability for bad

faith denial of a claim. Of particular concern on appeal, if MCCC had to pay a

“loss” exceeding $300,000, ERC would reimburse MCCC for the excess of the

loss above $300,000, up to a maximum loss of $1,000,000. (We will refer to the

$300,000 threshold as MCCC’s “retention,” which is similar to a deductible in

ordinary insurance policies.) Additionally, the Agreement required ERC to pay a

share of “claim expenses” incurred by MCCC if the retention was exceeded. 

The amounts disputed in this case arise out of declaratory judgment actions

between MCCC and its insureds. In several such actions it was determined that

MCCC should have provided its insured with a defense to a tort action brought by

a third party against the insured. As a result, (1) MCCC had to pay its insureds

the attorney fees and expenses incurred by the insureds in the declaratory
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judgment actions; (2) MCCC paid its own attorney fees and expenses in the

declaratory judgment actions; and (3) MCCC had to pay the attorney fees incurred

by the insureds in defending the underlying tort actions. This appeal centers on

whether these payments and expenses were covered by the Agreement as “losses,”

“claim expenses,” or neither. 

Regarding the first type of payment, MCCC contends that the Agreement’s

definition of “loss” unambiguously requires ERC to reimburse amounts MCCC

paid to its insureds to cover the insureds’ attorney fees in the declaratory

judgment actions. ERC contends that the Agreement unambiguously imposes no

such obligation. We disagree with both, reverse the district court’s summary

judgment on the issue in favor of MCCC, and remand for further proceedings to

resolve the meaning of Agreement language that we hold to be ambiguous in this

context. 

As for MCCC’s own attorney fees incurred in the declaratory judgment

action, we affirm the district court’s ruling that under the contractual language

presented to the district court, ERC must reimburse these attorney fees as “claim

expenses.” 

With respect to the third challenged item—MCCC’s payment of the

insureds’ attorney fees incurred in defending the underlying tort claims—we

reverse the district court and hold that ERC need not reimburse MCCC for those
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payments as “loss.” Rather, those payments should be treated as “claim

expenses” for which ERC need make only a proportionate payment. 

We also address several additional issues, including the Agreement’s

characterization of postjudgment interest as “loss” or “claim expenses,” the

percentage rate at which damage payments should be included as “loss” under the

Agreement, prejudgment interest, a discovery dispute, and a cross-appeal by

MCCC for attorney fees in this action. 

I. BACKGROUND

A. Description of Reinsurance Agreement

Reinsurance is essentially insurance for insurance companies. Spreading

part of the risk to the reinsurer can prevent a catastrophic loss from falling upon

the insurance company and enable the insurance company to serve more clients. 

See, e.g., Unigard Sec. Ins. Co., Inc. v. North River Ins. Co., 4 F.3d 1049, 1053

(2d Cir. 1993). Unlike typical insurance contracts that are offered on a take-it-orleave-it basis, reinsureds ordinarily negotiate the terms, conditions, and rates in

their reinsurance contracts. 

For nearly 30 years MCCC purchased reinsurance coverage from ERC. 

From January 1, 1994, until April 1, 2000, ERC and MCCC operated under the

Agreement whose meaning is at issue in this appeal. 
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The Agreement required ERC to reimburse MCCC for all “loss” in excess

of $300,000 for each occurrence, with a reinsurance limit of $1,000,000 for each

occurrence. Additionally, the Agreement required ERC to reimburse MCCC for

“claim expenses” at a rate equal to the fraction of the “loss” for which ERC was

responsible. If, for example, MCCC had to pay a “loss” of $500,000, ERC would

have to reimburse MCCC for $200,000 of that “loss” ($500,000 - $300,000). 

Because ERC thus paid 40% of the total “loss” ($200,000/$500,000 = 40%), ERC

would reimburse MCCC for 40% of the “claim expenses” MCCC incurred. 

The parties dispute the meaning of the terms “loss” and “claim expenses” in

the Agreement. Article VIII of the Agreement defines “loss”: 

The word “loss” shall mean only such amounts: 

(a) within applicable policy limits as are actually paid by [MCCC] in

settlement of claims or in satisfaction of awards or judgments

(including prejudgment interest and plaintiff’s costs included in the

judgment and subject with the judgment to the applicable policy

limit);

(b) equal to 80% of the amount paid by [MCCC] in excess of

applicable third party liability coverage policy limits

occasioned by liability imposed upon [MCCC] on account of

the failure of [MCCC] to settle a claim for an amount within

such policy limits;

(c)(1) equal to 80% of the amount paid by [MCCC] for punitive,

exemplary, or compensatory damages awarded to the insured

and arising out of the conduct of [MCCC] in the investigation,

trial or settlement of any claim or failure to pay or delay in

payment of any benefits under any policy if [ERC] has not, in
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advance of any such conduct by [MCCC] counseled with

[MCCC] and concurred in [MCCC’s] course of conduct; or

(c)(2) equal to 100% of the amount paid by [MCCC] for punitive,

exemplary, or compensatory damages awarded to the insured

and arising out of the conduct of [MCCC] in the investigation,

trial or settlement of any claim or failure to pay or delay in

payment of any benefits under any policy if [ERC] has, in

advance of any such conduct by [MCCC] counseled with

[MCCC] and concurred in [MCCC’s] course of conduct. 

App. 600. For the dispute before us, the relevant part of the definition appears in

paragraphs (c)(1) and (c)(2), which require ERC to reimburse MCCC for

“compensatory damages . . . arising out of the conduct of [MCCC] in the

investigation, trial or settlement of any claim or failure to pay or delay in payment

of any benefits under any policy.” (A subsidiary dispute concerns whether it is

(c)(1) or (c)(2) that applies.) 

“Claim expenses” are defined in Article VIII of the Agreement as follows:

The term “claim expenses” shall mean all payment under the supplementary

payments provisions of the [MCCC] policy, including court costs, interest

upon judgments, and allocated investigation, adjustment and legal

expenses.” 

App. 601. As presented to the district court, the pertinent part of the

supplementary payments provisions incorporated by reference from insurance

policies issued by MCCC states:

SUPPLEMENTARY PAYMENTS – COVERAGES A AND B

We will pay, with respect to any claim we investigate or settle or “suit”

against an insured we defend: 
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a. All expenses we incur. 

. . . .

e. All costs taxed against the insured in the “suit”. 

f. Prejudgment interest awarded against the insured on that part

of the judgment we pay. If we make an offer to pay the

applicable limit of insurance, we will not pay any prejudgment

interest based on that period of time after the offer. 

g. All interest on the full amount of any judgment that accrues

after entry of the judgment and before we have paid, offered to

pay, or deposited in court the part of the judgment that is

within the applicable limit of insurance. 

These payments will not reduce the limits of insurance. 

App. 526-27. 

B. The District Court’s Ruling

The payments and expenses at issue in this litigation arose out of other

lawsuits: tort actions against MCCC insureds, and declaratory judgment actions

between MCCC and its insureds to determine MCCC’s responsibility to provide

coverage with respect to the tort actions. As a result of the declaratory judgment

actions, MCCC had to pay its insureds’ attorney fees in the declaratory judgment

actions, had to pay its own attorney fees for attorneys representing MCCC in the

declaratory judgment actions, and had to reimburse its insureds for the damages

awarded in the underlying tort actions and for the fees incurred by the insureds

for legal representation in the tort action. 
-8-

The lawsuit between MCCC and ERC involves whether ERC must

reimburse MCCC for these costs and expenses. After ERC had reimbursed

MCCC for payments and expenses arising out of four declaratory judgment

actions, it brought this diversity action for return of the reimbursements. MCCC

counterclaimed for reimbursement of payments and expenses arising out of three

other declaratory judgment actions. 

The district court granted MCCC summary judgment against ERC with

respect to MCCC’s payment of its insureds’ attorney fees and expenses in the

declaratory judgment actions. The court ruled that “the plain and ordinary

meaning of the term ‘compensatory damages’ included attorney fees and costs”

and that the declaratory judgment fees and expenses arose “out of MCCC’s

conduct in failing to pay or delaying payment of benefits under the policy.” App.

2452. Therefore, it held, the insureds’ attorney fees and expenses in the

declaratory judgment actions fell within the Agreement’s unambiguous definition

of “loss.” The district court also granted summary judgment to MCCC on its

claim that ERC had to reimburse MCCC for a portion of MCCC’s own attorney

fees and expenses in the declaratory judgment actions, because those fees and

expenses were “claim expenses” within the meaning of the Agreement. 

After a subsequent trial the district court further held that ERC had to

reimburse MCCC for MCCC’s payment of attorney fees and expenses incurred by
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its insureds in defending the underlying tort actions. The court stated that these

payments by MCCC were “loss” within the meaning of the Agreement. 

ERC appeals and MCCC cross appeals. We now proceed to address in turn

the issues raised by the parties. We have jurisdiction under 28 U.S.C. § 1291. 

II. MEANING OF “LOSS” AND “CLAIM EXPENSES”

Most of the issues before us require determination of the meaning of “loss”

and “claim expenses” under the Agreement. Because no facts are in dispute, we

review de novo the district court’s legal conclusions. See Dang v. UNUM Life

Ins. Co. of Am., 175 F.3d 1186, 1189 (10th Cir. 1999). The parties agree that

Oklahoma law governs the interpretation of the Agreement. Under Oklahoma law

the court interprets an insurance contract in accordance with principles applicable

to all contracts. First Bank of Turley v. FDIC, 928 P.2d 298, 302 & n.6 (Okla.

1996). “A contract must be so interpreted as to give effect to the mutual intention

of the parties, as it existed at the time of contracting . . . .” 15 Okla. Stat. § 152. 

Ordinarily, this means that the contract should be construed according to the plain

meaning of its language. Id. at §§ 154, 160. The court determines, as a matter of

law, whether the contract is ambiguous. Pitco Production Co. v. Chaparral

Energy, Inc., 63 P.3d 541, 545 (Okla. 2003). A contract is ambiguous if it is

reasonably susceptible to more than one meaning. Id. at 545-46. “The mere fact
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the parties disagree or press for a different construction does not make an

agreement ambiguous.” Id. at 545. 

If the court finds the contract to be unambiguous, it then interprets the

contract as a matter of law. Id. at 545. If the court cannot determine the intent of

the parties from the contract itself (that is, if the contract is ambiguous), the court

may look to “the circumstances under which [the contract] was made, and the

subject-matter to which it relates.” Sinclair Oil & Gas Co. v. Bishop, 441 P.2d

436, 442-43 (Okla. 1967); see 15 Okla Stat. § 163; see also Lum v. Lee Way

Motor Freight, Inc., 757 P.2d 810, 815 (Okla. 1987) (“Whether a contract is

ambiguous so as to require extrinsic evidence or whether the language is

ambiguous and hence permits consideration of surrounding circumstances are

questions of law for the court.” (emphasis added)). But cf. Restatement (Second)

of Contracts § 202 (1981) (language of contract should be interpreted “in light of

all the circumstances”); id. cmt. a (this rule “do[es] not depend upon any

determination that there is an ambiguity.”). If interpretation of an ambiguous

contract “depends upon extrinsic facts as to which there is a dispute, its

construction is a mixed question of law and fact, and is for the jury . . . .” 

Brogden v. Perryman, 56 P.2d 398, 399 (Okla. 1936) (internal quotation marks

omitted); see Polk v. Bartlett, 365 P.2d 987, 989-90 (Okla. 1961). 
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A. Insureds’ Attorney Fees and Expenses in Declaratory Judgment

Actions

We first consider whether the Agreement requires ERC to reimburse MCCC

for MCCC’s payment of its insureds’ attorney fees and expenses in the

declaratory judgment actions. The resolution of this issue turns on whether the

Agreement includes such payments within the definition of “loss.” Each party

contends that the Agreement is unambiguous. Rejecting their views, we hold that

the language of the Agreement is, as a matter of law, ambiguous on this point. 

The pertinent part of the Agreement’s definition of “loss” is as follows: 

The word “loss” shall mean only such amounts: 

. . . . 

paid by [MCCC] for punitive, exemplary, or compensatory damages

awarded to the insured and arising out of the conduct of [MCCC] in the

investigation, trial or settlement of any claim or failure to pay or delay in

payment of any benefits under any policy. . . .

Article VIII, ¶¶ (c)(1), (c)(2), App. 600. As do the parties, we focus on the

phrase “compensatory damages awarded to the insured.” The Agreement does not

define “compensatory damages.” MCCC urges that the insureds’ attorney fees

and expenses in the declaratory judgment actions constitute “compensatory

damages.” ERC contends that the attorney fees and expenses are not

“compensatory damages,” but rather “litigation costs” for which it need not

reimburse MCCC. 
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Before analyzing the phrase, we consider an argument by ERC that appears

to make the intent of the parties irrelevant. ERC asserts that although Oklahoma

law governs the interpretation of the Agreement, the Full Faith and Credit Clause

of the United States Constitution requires that Texas law govern whether the

attorney fees and expenses are “loss” or “litigation costs.” Because the amounts

at stake were awarded in Texas courts, it argues, the Texas courts’

characterization of these amounts—as compensatory damages, costs, or

otherwise—is entitled to full faith and credit in other States. Thus, ERC

concludes, we are bound by Texas law declaring that the judgments awarded by

the Texas courts were “litigation costs” rather than “compensatory damages.” 

We disagree. The parties to the Agreement could define “compensatory

damages” as they saw fit, without regard to the characterization by the State in

which judgment had been entered. The Full Faith and Credit Clause is simply

irrelevant to the issue before us. The Full Faith and Credit Clause states: “Full

Faith and Credit shall be given in each State to the public Acts, Records, and

judicial Proceedings of every other State. And the Congress may by general Laws

prescribe the Manner in which such Acts, Records and Proceedings shall be

proved, and the Effect thereof.” U.S. Const. Art. IV § 1. Although federal

judicial proceedings are not expressly included within the Clause, the “Clause . . .

and its implementing statute, 28 U.S.C. § 1738, as well as interstitial federal
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common law, dictate that courts in the United States, both state and federal, must

recognize and give effect to valid judgments rendered by other courts in the

United States, including state and federal courts.” 18 Moore’s Federal Practice

§ 130.01 (Matthew Bender 3d ed.).

In other words, roughly speaking, a judgment must be given the same legal

effect in every court within this country. If, for example, a Texas court had

interpreted the meaning of “compensatory damages” in the Agreement between

ERC and MCCC, that interpretation would have the same preclusive effect in

Oklahoma, or federal, litigation that it would have in litigation in a Texas state

court. See Dean Witter Reynolds, Inc. v. Byrd , 470 U.S. 213, 222 (1985) (“The

full-faith-and-credit statute requires that federal courts give the same preclusive

effect to a State’s judicial proceedings as would the courts of the State rendering

the judgment . . . .” (emphasis omitted)). Here, however, no Texas judgment has

interpreted the term “compensatory damages” in the Agreement, so no Texas

judgment is binding with respect to the meaning of that term. Of course, the

Agreement could have provided that the term should be construed in accordance

with the law of the State where the underlying judgment was entered. But ERC

does not argue for such a construction. The full-faith-and-credit requirement does

not restrict the parties’ right to define contractual terms as they wish. At oral

argument ERC properly conceded that if Texas law conflicted with an explicit
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definition in the Agreement, the Agreement would control. In short, ERC’s

reliance on the Full Faith and Credit Clause is misplaced. 

The district court ruled that “compensatory damages” unambiguously

includes attorney fees. After noting that attorney fees are sometimes awarded as

costs and sometimes as compensatory or punitive damages, it said that the label is

unimportant. Citing our decision in Prudential Insurance Company of America v.

Carlson , 126 F.2d 607, 611 (10th Cir. 1942), which held that an award of attorney

fees is a substantive right for purposes of choice-of-law analysis, the court

reasoned that such an award “is intended to compensate the prevailing party,” and

thus is “compensatory damages” within the definition of the term in Webster’s

Third New International Dictionary 463 (1986) (“compensatory damages” are

“damages awarded to make good or compensate for an injury sustained”). The

court concluded, “[T]he plain and ordinary meaning of the term ‘compensatory

damages’ includes attorneys’ fees and costs.” App. 2452. 

In support of the district court’s ruling, MCCC cites a legal dictionary that

states: “Compensatory damages are such as will compensate the injured party for

the injury sustained, and nothing more; such as will simply make good or replace

the loss caused by the wrong or injury. Damages awarded to a person as

compensation, indemnity, or restitution for harm sustained by him.” Black’s Law

Dictionary 390 (6th ed. 1990). MCCC argues that an award of the insured’s
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declaratory judgment expenses is intended to make the insured whole for all the

expenses it has incurred in enforcing the insurer’s duty to defend and indemnify it

with respect to the underlying claim. Thus, MCCC concludes, the insured’s

declaratory judgment expenses constitute “compensatory damages,” which

compensate for an improper denial of coverage. 

To challenge the district court’s ruling, ERC also relies on a dictionary, the

same one that the district court quoted. ERC argues that attorney fees are clearly

included within the definition of “costs”: 

4. Costs pl: expenses incurred in litigation: as a: those payable to the

attorney or counsel by his client esp. when fixed by law b: those

given by the law or the court to the prevailing against the losing

party in equity and frequently by statute–called also bill of costs . 

Webster’s, supra , at 515. Consequently, ERC asserts, attorney fees are “litigation

costs,” not “compensatory damages.” 

We do not see the issue as so clear-cut as the parties seem to. The

difficulty here is that payment of attorney fees undoubtedly “compensates” the

prevailing party for losses ultimately caused by the opposing party’s wrongdoing,

but such fees can also be considered as simply the cost of recovering

“compensatory damages”—a cost which is not itself considered to be part of

compensatory damages and is therefore not recoverable. After all, the American

Rule (which is followed in Oklahoma, see Kay v. Venezuelan Sun Oil Co. , 806

P.2d 648, 650 (Okla. 1991)) ordinarily bars the recovery of attorney fees by the
-16-

prevailing party in litigation, on the theory that such fees are a cost of recovering

damages, not damages in themselves. See, e.g. , St. Peter’s Church v. Beach , 26

Conn. 355, *8 (Conn. 1857) (“Now the expenses of litigation are never damages

sued for in any case when the action is brought for the wrong itself, not even if

the tort be wanton or malicious. They are not the natural and proximate

consequence of the wrongful act, which is the universal rule, but are remote,

future and contingent.” (internal quotation marks omitted)). 

Both of these strains of thought—that attorney fees are compensatory

damages or are only unrecoverable costs of litigation to recover compensatory

damages—are reflected in Oklahoma statutes and judicial opinions. Some

Oklahoma authority leads to the conclusion that attorney fees are “compensatory

damages.” See, e.g. , Floyd v. Anderson , 128 P. 249, 250 (Okla. 1912) (“[w]e

think . . . that all actual damages, compensatory in their nature, such as . . . costs

and expenses, including . . . a reasonable attorney’s fee . . . .”). On the other

hand, McAlester Urban Renewal Authority v. Hamilton , 521 P.2d 823, 826 (Okla.

1974), held that interest on costs, including attorney fees, was not recoverable,

whereas interest on damages was. See also 59 Okla. Stat. § 858-604(A) (“For

purposes of this subsection, attorney fees and costs shall not be considered as or

included in actual or compensatory damages.”). There appears to be no all-
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encompassing Oklahoma rule that attorney fees are or are not “compensatory

damages.” 

Thus, we cannot hold the term “compensatory damages” in the Agreement

to be unambiguous with respect to whether it includes or excludes attorney fees. 

The term is reasonably susceptible to more than one meaning. 

To break the standoff between the alternative plausible interpretations of

“compensatory damages,” MCCC argues that ambiguous contract language must

be construed against its drafter. This rule of interpretation, often referred to as

“contra proferentem ,” is particularly suitable for standard insurance contracts

where the insured does not have an opportunity to negotiate or bargain. The rule

is less appropriate in reinsurance agreements, however, because the parties

typically have comparable bargaining power in negotiating the terms of their

contracts. For this reason some courts have declined to apply the rule to

reinsurance contracts. See, e.g. , Unigard Sec. Ins. Co. v. N. River Ins. Co., 4

F.3d 1049, 1064-65 (2d Cir. 1993). 

In any event, Oklahoma appears to have codified the rule. An Oklahoma

statute states: “In cases of uncertainty not removed by the preceding rules [15

Okla. Stat. §§ 151-69], the language of a contract should be interpreted most

strongly against the party who caused the uncertainty to exist. The promisor is

presumed to be such party. . . .” 15 Okla. Stat. § 170. Yet the statute itself, as
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well as courts construing the statute, state that this rule is to be applied only when

the ambiguity has not been “removed by the preceding [statutory] rules.” Id; see,

e.g., Cities Service Oil Co. v. Geolograph Co., Inc., 254 P.2d 775, 782 (Okla.

1953). Among the preceding rules is 15 Okla. Stat. § 163, which states that “[a]

contract may be explained by reference to the circumstances under which it was

made, and the matter to which it relates.” Accordingly, a court should not resort

to the doctrine of contra proferentem until the parties have an opportunity to

present the circumstances surrounding the execution of the contract and other

relevant evidence, such as custom in the industry. See Restatement (Second) of

Contracts § 202 (setting forth types of evidence appropriate to consider in

construing contracts). That opportunity should be afforded the parties here. 

We therefore remand this issue to the district court for further proceedings

regarding the meaning of “compensatory damages” in the Agreement. 

B. MCCC’s Own Attorney Fees Incurred in Declaratory Judgment

Actions

We next address whether the Agreement requires ERC to indemnify MCCC

for MCCC’s own attorney fees and expenses associated with the declaratory

judgment actions. The answer turns on whether these attorney fees and expenses

constitute “claim expenses” within the meaning of the Agreement. The district

court held that MCCC’s attorney fees and expenses were such “claim expenses”
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and therefore were subject to proportionate reimbursement as provided in the

Agreement. 

The Agreement defines “claim expenses” to “mean all payment under the

supplementary payments provisions of [MCCC’s] policy, including court costs,

interest upon judgments, and allocated investigation, adjustment and legal

expenses.” This definition incorporates by reference the supplementary payments

provisions of MCCC’s policies with its insureds. 

The “Statement of Uncontroverted Facts” in ERC’s memorandum in

support of its motion for summary judgment contained what it asserted to be the

language of the supplementary payments provisions. MCCC’s response stated

that the assertion was “uncontroverted.” App. 1673 ¶ 7. The pertinent part of

that language is as follows: 

SUPPLEMENTARY PAYMENTS–COVERAGES A AND B

We will pay, with respect to any claim we investigate or settle or

“suit” against an insured we defend:

A. All expenses we incur

. . . .

These payments will not reduce the limits of insurance. 

The district court held:
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A plain reading of the supplementary payments provision

indicates that it covers MCCC’s declaratory judgment fees and

expenses. The provision provides that MCCC will pay all expenses

which it incurs with respect to any claim that it investigates. 

Certainly, MCCC investigated the claims for which it litigated

coverage. Moreover, the fees and expenses which MCCC incurred in

the declaratory judgment proceedings are expenses which it incurred

with respect to such claims. Accordingly, the declaratory judgment

fees and expenses fall within the plain and ordinary meaning of the

supplementary payments provision. 

App. 2454 (emphasis added). 

We agree with the district court that “claim expenses,” which include “all

payments under the supplementary payments provisions of [MCCC’s] policy,”

thus covers MCCC’s declaratory judgment attorney fees and expenses. MCCC

investigated the claims that formed the basis of the declaratory judgment actions. 

MCCC incurred attorney fees and expenses with respect to those claims. Hence,

the declaratory judgment attorney fees and expenses fall within the unambiguous

language of the supplementary payments provisions. ERC must reimburse MCCC

for those “claim expenses” at the contractually provided proportionate rate. 

ERC contends that this construction of the language makes the words

“settle or ‘suit’ against an insured we defend” superfluous, because any case that

is settled or involves a suit must also be investigated. Citing Bituminous Casualty

Corporation v. Cowen Construction, Inc., 55 P.3d 1030, 1034 (Okla. 2002), ERC
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relies on the general proposition that courts should avoid construing a document

in such a way as to render some of the language surplusage. ERC suggests: 

A more reasonable construction of the supplementary payments

provision . . . is that MCCC will pay all expenses that it incurs with

respect to any suit against an insured that it defends. It also will pay

all pre-suit expenses that it incurs with respect to any claim that it

investigates or settles. This construction makes sense. A provision

that MCCC will pay its own expenses in any suit where MCCC

defends its insured leaves MCCC’s insureds liable for all expenses

incurred when MCCC settles a claim before suit is filed. The

addition of the “investigate or settle” language would provide

coverage for those pre-suit expenses. 

Aplt. Br. at 42. 

But ERC’s construction does not avoid the surplusage problem. First, the

words “or settle” serve no purpose, since it is impossible to believe that MCCC

would settle a claim without having investigated it. Moreover, although ERC’s

argument explains why the words “any claim we investigate” would need to be

added to the words “‘suit’ against an insured we defend,” it does not explain why,

once the words “any claim we investigate” are in the MCCC policy, there is any

need to retain the words “or ‘suit’ against an insured we defend.” At times, no

reasonable interpretation of contract language can avoid rendering some of the

language surplusage. ERC’s construction of the policy language here has no

advantage over the natural reading insofar as avoiding surplusage is concerned. 
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ERC’s principal argument on appeal, however, avoids the difficulty of

construing the above-quoted language. It points out that the quoted language is

not the actual language of the supplementary payments provisions in the MCCC

policies at issue. Rather than saying, “We will pay, with respect to any claim we

investigate or settle or ‘suit’ against an insured we defend,” the provisions say,

“We will pay, with respect to any claim or ‘suit’ we defend.” 

The problem with this argument is that it was never presented to the district

court. It is well settled that “[i]f a party fails to raise an issue in the trial court, it

is deemed waived on appeal unless plain error is demonstrated.” Hynes v. Energy

West, Inc., 211 F.3d 1193, 1201-02 (10th Cir. 2000). 

The role of plain error in civil litigation is very limited. There is no “plain

error” provision in the rules governing civil matters except with respect to

erroneous instructions, see Fed. R. Civ. P. 51(d)(2) (2003 amendment), and

rulings on evidence, Fed. R. Evid. 103(d). Yet we have recognized the possibility

of plain error in other circumstances. See Quigley v. Rosenthal, 327 F.3d 1044,

1063 (10th Cir. 2003); Charles Alan Wright & Arthur R. Miller, Federal Practice

and Procedure § 2472 (2d ed. 1995) (“[A]lthough the Civil Rules . . . do not

contain a formal provision allowing the appellate courts to notice plain error, the

appellate courts have held in a few cases that despite the absence of an objection
-23-

they may consider an error so fundamental that it may have resulted in a

miscarriage of justice.”) 

In reviewing for plain error, we have used the standard applied in criminal

proceedings. Federal Rule of Criminal Procedure 52(b) states: “A plain error that

affects substantial rights may be considered even though it was not brought to the

court’s attention.” Fed. R. Crim. P. 52(b) (2002). As pointed out by the Supreme

Court, “Rule 52(b) is permissive, not mandatory. If the forfeited error is ‘plain’

and ‘affect[s] substantial rights,’ the court of appeals has authority to order

correction, but is not required to do so.” United States v. Olano, 507 U.S. 725,

735 (1993). “[T]he discretion conferred by Rule 52(b) should be employed in

those circumstances in which a miscarriage of justice would otherwise result.” 

Id. at 736 (internal quotation marks omitted). The doctrine is limited to

“correct[ing] a plain forfeited error affecting substantial rights if the error

seriously affects the fairness, integrity or public reputation of judicial

proceedings.” Id. (internal quotation marks and bracket omitted). Accord

Quigley, 327 F.3d at 1063. Establishing entitlement to plain-error relief “is an

extraordinary, nearly insurmountable burden.” Quigley, 327 F.3d at 1063

In our view, several factors combine to make this an inappropriate occasion

to grant relief under the plain-error doctrine. First, the error was not an action or

omission by the district court; it was an error by the parties. In their summary-
-24-

judgment pleadings, ERC misquoted the policy language and MCCC responded

that the quote was accurate. To be sure, ERC provided the district court with

copies of the policies, which contained the correct language. ERC, however,

miscited the record; it referred to “page 6” of the contracts, but the pertinent

language is not on any page numbered “6” in any of the contracts. Of course, the

district court could have searched the record to verify the accuracy of language to

which the parties stipulated. But courts could never complete their work if they

have the burden of engaging in such time-consuming activity—activity that would

be totally fruitless if attorneys performed their duties adequately. 

Second, ERC had ample opportunity to bring the error to the district court’s

attention. The district court, relying on the language provided by ERC, granted

summary judgment with respect to recovery of MCCC’s own declaratoryjudgment attorney fees on May 23, 2002. Trial on the issues not resolved by

summary judgment was on June 18, 2002, almost a month later. ERC could also

have alerted the district court to the matter by a post-trial, or even post-judgment,

motion. 

Third, the alleged error here does not concern any matter of significant

public policy. We are dealing with a private contract dispute in a business

relationship. And fourth, we are not certain whether the result we reach would be
-25-

different under the language now presented to us by ERC. The proper

construction of ERC’s “new” language is not obvious. 

In short, the judicial proceeding below was fair, and the error (by the

parties) should not raise serious doubts about the integrity of that proceeding or

bring disrepute upon the district court. We therefore affirm the district court on

this issue. 

C. MCCC’s Reimbursement of its Insureds’ Attorney Fees

Incurred in Underlying Tort Actions

ERC does not dispute that it must partially reimburse MCCC for amounts

that MCCC paid its insureds for their defense costs in the underlying tort actions

(in which MCCC should have provided a defense and did not). The parties

dispute what the amount of the reimbursement should be. The specific

disagreement is whether the insureds’ attorney fees constitute “loss” under the

Agreement, or merely “claim expenses.” Under the Agreement ERC reimburses

MCCC at a different rate for “loss” than for “claim expenses.” 

We hold that MCCC’s payment of an insured’s attorney fees in defending a

third-party claim is a “claim expense” under the Agreement. ERC need only

reimburse MCCC at the contractual proportionate rate. 

The relevant portion of the “loss” definition provides:
-26-

The word “loss” shall mean only such amounts:

. . . .

paid by [MCCC] for punitive, exemplary, or compensatory damages

awarded to the insured and arising out of the conduct of MCCC in the

investigation, trial, or settlement of any claim or failure to pay or delay in

payment of any benefits under any policy . . . .

Article VIII, ¶¶ (c)(1), (c)(2), App. 600. There are two requirements for a

payment to constitute “loss.” First, the payment must be for “punitive,

exemplary, or compensatory damages.” Second, it must “aris[e] out of the

conduct of MCCC in the investigation, trial, or settlement of any claim or failure

to pay or delay in payment of any benefits . . . .” Here, the amounts paid do not

arise out of MCCC’s conduct. 

The amounts at issue are fees for attorneys to represent the insureds in the

underlying tort litigation. These fees were a consequence of the underlying

litigation, not of any conduct by MCCC. Whatever MCCC’s conduct had been in

the “investigation, trial, or settlement” of the claim, attorneys would be needed to

represent the insured in the tort action. Perhaps the fees for attorneys to defend

the tort actions would have been less if MCCC had hired and paid for the

attorneys (because of lower hourly rates, more efficient conduct of the defense, or

even earlier resolution by settlement), but the fees might also have been greater

(higher hourly rates, greater willingness to “play hard ball,” etc.). Regardless, the

payments to attorneys for the insured in the tort action do not “arise out of the 
-27-

conduct of MCCC.” Rather, they arise out of the fact that a third party sued the

insured. 

We are reinforced in this interpretation of the Agreement by the

observation that adopting MCCC’s interpretation—that the payments constitute

“loss”—would create a perverse incentive for MCCC when the “loss” would

otherwise approach the $300,000 retention threshold. There is no dispute that if

MCCC had provided attorneys to defend its insureds in the underlying tort

actions, the fees and expenses it incurred would have been treated under the

Agreement as “claim expenses.” ERC would have been required to reimburse

MCCC for these “claim expenses” at the contractual proportionate rate, once the

“loss” exceeded $300,000. In other words, MCCC would receive, at most, partial

payment from ERC. A “loss,” however, is fully reimbursable by ERC (once the

$300,000 threshold is passed). Thus, if MCCC is correct that payment to the

insured for hiring its own attorneys is a “loss,” then MCCC would have a

financial incentive to refuse to pay for a defense of its insureds. It would usually

end up paying less out-of-pocket (after reimbursement from ERC) if it paid its

insured for having hired an attorney than if it hired an attorney itself to represent

the insured. This is a highly unlikely intent of the parties, and the result might

well violate public policy favoring the honoring of insurance contracts because

MCCC could be induced to refuse to provide an attorney for its insured. 
-28-

We therefore reverse the district court and hold that MCCC’s payments of

its insureds’ attorney fees incurred in the underlying tort actions should be treated

as “claim expenses.” 

D. Safe Tire Claim/Postjudgment Interest

One of MCCC’s claims for reimbursement arises from its payments to its

insured, Safe Tire Disposal Corporation. ERC argues that MCCC is not entitled

to any reimbursement on the Safe Tire claim, because MCCC’s “loss” on the

claim does not exceed MCCC’s $300,000 retention. The validity of this argument

turns on whether postjudgment interest is a “loss” or a “claim expense.” We hold,

as ERC contends, that such interest is a “claim expense.” 

MCCC requested reimbursement for the following amounts with respect to

the Safe Tire claim: (1) $208,500 for funds MCCC paid to claimants in the

underlying lawsuit; (2) $80,432.53 awarded to Safe Tire to reimburse it for

attorney fees incurred in the underlying lawsuit; (3) $53,530 awarded to Safe Tire

to reimburse it for attorney fees it incurred in the declaratory judgment action; (4)

$15,000 awarded to Safe Tire to reimburse it for attorney fees it incurred on the

appeal of the declaratory judgment action; and (5) $36,467.25 for postjudgment

interest awarded to Safe Tire in the declaratory judgment action. ERC concedes

that the $208,500 is “loss.” As for item (2), we have already held that the

$80,432.53 for attorney fees incurred by the insured in the underlying action was
-29-

a “claim expense,” not a “loss.” See supra section II. C. Regarding items (3) and

(4), we are remanding to the district court the question whether reimbursement of 

the insured’s declaratory judgment attorney fees and expenses constituted “loss,”

see supra section II. A; but even if we assume that they should be considered

“loss,” the total for items (1), (3), and (4) is just $277,030. Thus, the “loss”

exceeds MCCC’s retention threshold only if the postjudgment interest of

$36,467.25 is included. For the following reasons we hold that the postjudgment

interest is not “loss,” so the Safe Tire “loss” is less than $300,000. 

The district court treated the postjudgment interest as “loss,” just as it

treated the declaratory judgment fees and expenses themselves. ERC disputes

that ruling, arguing that postjudgment interest on the attorney fees awarded to

MCCC’s insureds are “claim expenses.” ERC asserts that postjudgment interest is

covered explicitly by the supplementary payments provisions of MCCC’s policies,

which are incorporated into the definition of “claim expenses.” The pertinent

language of the supplementary payments provisions (as provided to the district

court) states: 

We will pay, with respect to any claim we investigate or settle or

“suit” against an insured we defend:

a. all expenses we incur. 

. . . .
-30-

g. All interest on the full amount of any judgment that accrues

after entry of the judgment and before we have paid, offered to

pay, or deposited in a court the part of the judgment that is

within the applicable limit of insurance. 

App. 526-27. 

We agree with ERC. The “claim expenses” language clearly includes

postjudgment interest. (We note that ERC’s previously mentioned error in

quoting the MCCC policies has no bearing on this issue.) Not only is ERC’s

position supported by the plain language of the Agreement (together with the

supplementary payments provisions), but it also makes sense. If postjudgment

interest were considered a “loss,” MCCC would have an incentive not to pay a

judgment owed to an insured near or above $300,000. Delay in payment could

result in sufficient interest being due that the $300,000 retention would be

exceeded; and once the retention threshold was reached, ERC would have to pay

all subsequently accruing interest. Delay would be an unmitigated boon to

MCCC, because the cost of the delay (accruing interest) would be borne solely by

ERC. It would be remarkable if ERC agreed to such a result, which would also

seem to violate public policy in favor of prompt payment of insurance claims. 

As a result of determining that postjudgment interest is a “claim expense,”

we hold that MCCC cannot satisfy the $300,000 retention for the Safe Tire claim. 
-31-

E. Does “Loss” Include 80% or 100% of Payments Arising from

the Declaratory Judgment Actions?

Under the Agreement, when MCCC makes certain payments for damages,

the “loss” includes either 80% or 100% of the payments, depending on whether

ERC agreed to the conduct causing the damages. The relevant provisions of the

“loss” definition state that “loss” is: 

(c)(1) equal to 80% of the amount paid by [MCCC] for punitive,

exemplary, or compensatory damages awarded to the insured

and arising out of the conduct of [MCCC] in the investigation,

trial or settlement of any claim or failure to pay or delay in

payment of any benefits under any policy if [ERC] has not, in

advance of any such conduct by [MCCC] counseled with

[MCCC] and concurred in [MCCC’s] course of conduct ; or

(c)(2) equal to 100% of the amount paid by [MCCC] for punitive,

exemplary, or compensatory damages awarded to the insured

and arising out of the conduct of [MCCC] in the investigation,

trial or settlement of any claim or failure to pay or delay in

payment of any benefits under any policy if [ERC] has, in

advance of any such conduct by [MCCC] counseled with

[MCCC] and concurred in [MCCC’s] course of conduct . 

App. 600 (emphasis added). 

ERC challenges on appeal the district court’s ruling with respect to three

claims that ERC had “counseled and concurred” in MCCC’s course of conduct in

denying coverage to its insureds, thereby triggering paragraph (c)(2) and inclusion

of the payments at a rate of 100%. The court based its ruling on the following
-32-

stipulated facts: (1) “ERC . . . counseled with [MCCC] and concurred in

[MCCC’s] course of conduct after the date of filing of any declaratory judgment

actions” and (2) “ERC never advised [MCCC] orally or in writing that [MCCC]

had not counseled with ERC and that ERC had not concurred in [MCCC’s] course

of conduct.” App. 2650. After trial the district court decided: “Under the

language of (c)(2), the Court finds that MCCC did counsel with ERC in advance

of the investigation, trial or settlement of the three claims at issue and that ERC

concurred in MCCC’s course of conduct in the three claims.” App. 2539. 

ERC’s sole appellate claim on this issue is that for the damages to be

included as “loss” at the 100% rate, the counseling and concurrence must have

occurred before the first step in MCCC’s course of conduct—that is, before

MCCC filed the declaratory judgment action. MCCC responds that it sufficed for

the counseling and concurrence to occur before the last step in its course of

conduct—when the declaratory judgment action concluded. 

We disagree with both parties. As we read the plain language of the

Agreement, the percentage treated as “loss” depends upon whether the damages

arose from conduct predating ERC’s concurrence in the course of conduct. Some

damages could have arisen from conduct predating ERC’s concurrence in the

course of conduct and some could have arisen from conduct postdating such

concurrence. For example, much of an insured’s attorney fee in the declaratory
-33-

judgment action could have been incurred after ERC approved of MCCC’s

bringing the action, even if approval did not precede filing of the action. Thus, it

is likely that some of the payments for damages in this case should be included as

“loss” at an 80% rate and some at a 100% rate. The district court seemed to read

the Agreement as we do when it expressed its views during argument on the

matter. The parties, however, did not give the district court sufficient information

to apportion the payments precisely. The stipulations establish only that at some

point ERC “counseled and concurred in [MCCC’s] conduct.” There is no

stipulation regarding what, if any, damages occurred as a result of conduct

preceding concurrence or what occurred after concurrence. In any event, we

reject ERC’s contention that all payments must be included at only the 80% rate

because it had not approved of the declaratory judgment actions before they were

filed. (Perhaps the district court also relied on ratification principles, but we need

not reach that issue.) 

We therefore affirm the district court’s ruling. If the district court

determines on remand (as discussed supra , part II (A)) that MCCC’s payments of

its insureds’ attorney fees in the declaratory judgment actions constitute payments

for “compensatory damages,” and therefore that Article VIII(c) of the Agreement

applies, it should treat these payments as provided in paragraph (c)(2). 
-34-

III. OTHER ISSUES

A. Prejudgment Interest

ERC disputes whether the district court was correct in awarding MCCC

prejudgment interest on damages awarded by the court. Because the issue is one

of statutory interpretation, our review is de novo . United States v. Telluride Co. ,

146 F.3d 1241, 1244 (10th Cir. 1998). The parties agree that 23 Okla. Stat. § 6

governs the award of prejudgment interest. That statute provides:

Any person who is entitled to recover damages certain, or capable of

being made certain by calculation, and the right to recover which is

vested in him upon a particular day, is entitled also to recover

interest thereon from that day, except during such time as the debtor

is prevented by law, or by the act of the creditor from paying the

debt. 

23 Okla. Stat. § 6. 

We have interpreted this statute to mean that when a factual finding must

be made to determine the precise amount of damages recoverable, then

prejudgment interest is not appropriate. Chesapeake Operating, Inc. v. Valence

Operating Co. , 193 F.3d 1153, 1156 (10th Cir. 1999). Prejudgment interest is

appropriate in a contract dispute, however, when the amount of damages is

undisputed but a court must make a legal determination whether those damages

are recoverable under the contract. Id. 
-35-

This case presents an unusual situation because the amounts of the

payments for which MCCC seeks reimbursement are undisputed but a factual

finding was necessary to determine whether payments would be included as

reimbursable “loss” at a rate of 80% or 100%. Thus, 80% was “certain” within

the meaning of the statute. Only the remaining 20% turned on a fact question. 

We hold that MCCC is entitled to prejudgment interest on the amount of the

judgment against ERC that would have been awarded if damage payments had

been included as “loss” at an 80% rate. 

As for the remainder of the judgment, we hold that MCCC is not entitled to

receive prejudgment interest. To be sure, the facts regarding when ERC

counseled and concurred in MCCC’s conduct—the facts that determined whether

damage payments should be included as “loss” at a rate of 80% or 100%—were

not in dispute at trial. They were, however, disputed until the day of trial. On the

day of trial ERC and MCCC entered into their stipulation regarding when ERC

“counseled and concurred” in MCCC’s conduct. Before that stipulation,

questions of fact remained and damages were not “certain or capable of being

made certain by calculation.” Indeed, less than a month before trial the court

denied summary judgment on this issue, stating: “Questions of fact remain as to

whether ERC counseled in advance with MCCC and concurred in MCCC’s course

of conduct. Therefore the Court cannot determine on this record whether MCCC
-36-

may recover 80 per cent of its fees and expenses under paragraph (c)(1) or 100

per cent under paragraph (c)(2).” App. 2452. 

In this circumstance, we believe that the facts stipulated at trial should be

treated as resolved at trial. To hold otherwise would discourage parties from

stipulating to facts, a beneficial practice that conserves time and scarce judicial

resources. Therefore, we hold that MCCC is not entitled to prejudgment interest

on the portion of the judgment that depended on a favorable resolution of when

ERC “counseled and concurred.” 

B. Privilege

ERC asserts that four documents it was ordered to produce during

discovery were protected by the attorney-client and work-product privileges. The

district court compelled ERC to produce these documents because it found ERC’s

privilege log inadequate to enable the court to determine whether the documents

were privileged. We need not, however, address this issue. We do not review

district court rulings that do not affect the result. Griffin v. Davies , 929 F.2d

550, 554 (10th Cir. 1991). ERC acknowledges that the district court did not rely

in any way on the four documents in arriving at the judgment challenged on

appeal. It argues, however, that if we reverse and remand, the documents may

become relevant. Perhaps. But ERC has not pointed to any issue on which the

documents may be (or even lead to) admissible evidence. In this circumstance,
-37-

we will not undertake the likely unnecessary effort of reviewing the rulings

regarding the documents. 

C. MCCC Cross-Appeal

MCCC appeals the district court’s decision not to award it attorney fees

incurred in this litigation. We affirm because MCCC’s argument on appeal is not

the one it presented to the district court. See, e.g. , Bancamerica Commercial

Corp. v. Mosher Steel of Kan., Inc. , 100 F.3d 792, 798-99 (10th Cir. 1996) (court

will not consider a new theory on appeal, even one “that falls under the same

general category as an argument presented at trial”(internal quotation marks

omitted)), opinion amended on other grounds , 103 F.3d 80 (10th Cir. 1996). 

MCCC relies on 12 Okla. Stat. § 936. When the district court rendered

judgment the statute provided:

In any civil action to recover on an open account, a statement of

account, account stated, note, bill, negotiable instrument, or contract

relating to the purchase or sale of goods, wares, or merchandise, or

for labor or services, unless otherwise provided by law or the

contract which is the subject of the action, the prevailing party shall

be allowed a reasonable attorney fee to be set by the court, to be

taxed and collected as costs. 

12 Okla. Stat. § 936 (2002) (emphasis added). In district court MCCC argued that

the Agreement was a contract for services because ERC provided various

services, including same-day processing of reimbursement requests; assistance in

locating defense counsel; providing information on plaintiffs’ attorneys, local
-38-

values, and jury trends; and providing advice on pursuit of declaratory judgment

actions. 

On appeal MCCC still claims that this suit is to recover on a contract for

services, but it no longer refers to services by ERC. Instead, the services it refers

to are services provided by attorneys hired by MCCC to represent it in the

declaratory judgment actions with MCCC’s insureds. MCCC argues that because

this litigation between MCCC and ERC dealt in part with MCCC’s ability to

recover from ERC sums that MCCC paid to the declaratory judgment attorneys,

this lawsuit is a civil action to recover for services rendered, and MCCC is

entitled to attorney fees it incurred in this lawsuit. 

MCCC attempts to justify this switch in theories on the ground that the

Oklahoma legislature recently amended the statute to clarify its meaning and to

correct courts that had been incorrectly interpreting the statute. The newly

amended version of § 936, enacted after the district court decided the attorney-fee

issue, states:

In any civil action to recover for labor or services rendered, or on an

open account, a statement of account, account stated, note, bill,

negotiable instrument, or contract relating to the purchase or sale of

goods, wares, or merchandise, unless otherwise provided by law or

the contract which is the subject of the action, the prevailing party

shall be allowed a reasonable attorney fee to be set by the court, to

be taxed and collected as costs. 
-39-

12 Okla. Stat. § 936 (November 1, 2002) (emphasis added). According to MCCC,

this “clarification” supports an award of attorney fees under facts different from

those argued to the district court. To be sure, in some circumstances an appellate

court may allow a party to raise an issue for the first time on appeal because of an

intervening change in the law. See United States v. Charley, 189 F.3d 1251, 1279

(10th Cir. 1999) (Holloway, J., concurring in part and dissenting in part). But this

is not such a circumstance. As MCCC admits, any change in the Oklahoma

statute was not applicable to this case. As a result, MCCC’s reference to the

amended statute is simply to support its argument regarding what the law meant at

the time it argued its theory to the district court. The presence of this additional

“evidence” cannot justify MCCC’s switch with respect to the services it contends

made this lawsuit a suit to recover for breach of a “contract . . . for . . . services.” 

We therefore refuse to consider MCCC’s new theory. See Bancamerica

Commercial Corp., 100 F.3d at 798-99. We affirm the district court’s denial of

attorney fees. 

IV. CONCLUSION

We AFFIRM the district court’s rulings that (1) MCCC’s own attorney fees

and expenses incurred in the declaratory judgment actions are “claim expenses”;

(2) the payments for compensatory damages should be included as “loss” at a rate

of 100%, not 80%; and (3) MCCC is not entitled to attorney fees associated with
-40-

this lawsuit. We REVERSE the rulings that (1) payments for the insureds’

attorney fees and expenses incurred in defending the underlying tort actions are

“loss,” rather than “claim expense”; and (2) MCCC is entitled to reimbursement

for the Safe Tire claim. We REMAND for further proceedings regarding (1)

whether payments for the insureds’ attorney fees and expenses incurred in the

declaratory judgment actions constitute “loss” within the meaning of the

Agreement; and (2) the award of prejudgment interest. We do not address the

privilege issue.