Opinion ID: 187079
Heading Depth: 2
Heading Rank: 1

Heading: r.e.

Text: The policy states: “The sublimit of liability shown in this endorsement is the most we will pay for all damages including investigation and defense because of injury arising out of any one claim for sexual abuse and/or misconduct.” J.A. 65 (emphasis added). The policy further provides that the “aggregate limit stated in this endorsement is the most we will pay for all claims, including investigation and defense, arising out of sexual abuse and/or misconduct.” J.A. 65 (emphasis added). Essex contends that the contract allows it to subtract the costs of investigating and defending a claim from its coverage limits – a so-called defense-within-limits policy. Challenging Essex’s interpretation, Doe points to the phrase “pay for all damages including investigation and defense” in the contract and argues – based entirely on the words “damages including” – that the investigation and defense costs referenced here are the third-party claimant’s investigation and defense costs (which Doe says could be included in the claimant’s 4 We emphasize that our analysis here is limited to the precise language of this contract when read as a whole. We also stress that it is undisputed that there were multiple “occurrences” as “occurrence” is defined by this contract. Finally, we underscore that this case involves only one injured victim. 8 “damages”), not Essex’s investigation and defense costs. But Doe’s argument makes little sense in the context of this contract: How could the damages paid by A.R.E. to a third party who has sued A.R.E. because of sexual abuse ever include something known as “defense” costs? In other words, what defense costs does the sexual abuse victim incur? Doe has no good – or even plausible – answer to this question. The defense-within-limits language certainly could have been clearer. For example, the contract could have substituted the word “and” for “including.” Or the parties could have inserted the phrase “including investigation and defense” after the phrase “most we will pay.” Either of those alternatives would have been more precise. But the fact that the language could have been clearer or grammatically improved does not mean we can read the phrase “including investigation and defense costs” entirely out of the contract – as Doe’s position would require, in contravention of blackletter contract principles. See Caglioti v. District Hosp. Partners, 933 A.2d 800, 811 (D.C. 2007); 1010 Potomac Assocs. v. Grocery Mfrs. of Am., 485 A.2d 199, 205 (D.C. 1984); RESTATEMENT (SECOND) OF CONTRACTS § 203(a) (1981). We thus agree with the District Court that the defense-within-limits provision means that Essex may reduce its coverage by the amount Essex spent on investigation and defense.5 5 In this case, Essex directly incurred investigation and defense costs, as opposed to reimbursing A.R.E. for A.R.E.’s investigation and defense costs. Doe has not attempted to argue that investigation and defense costs are subtracted only if they were reimbursed by Essex to A.R.E. as opposed to incurred by Essex directly. 9