Opinion ID: 174852
Heading Depth: 2
Heading Rank: 4

Heading: recoupment of costs

Text: We review the district court's grant of summary judgment de novo, using the same legal standard applied by the district court. Apartment Inv. & Mgmt. Co. v. Nutmeg Ins. Co., 593 F.3d 1188, 1192 (10th Cir.2010). Summary judgment should be granted if there is no genuine issue as to any material fact and ... the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c)(2). When applying this standard, [w]e examine the factual record and draw all reasonable inferences in the light most favorable to the nonmoving party. City of Herriman v. Bell, 590 F.3d 1176, 1181 (10th Cir.2010). The district court denied EMC's motion for summary judgment with respect to the request to recoup the costs of defending Bartile in the underlying action. EMC argues that it undertook this defense subject to a reservation of rights. Because the district court concluded that EMC did not have a duty to defend Bartile against the allegations, EMC contends that it is entitled to recoup those defense costs. Under Wyoming law, [19] courts disfavor insurer's attempts to defend insureds while retaining the right to deny coverage and recoup defense costs at a later date. Shoshone First Bank, 2 P.3d at 515-16; see Am. States Ins. Co. v. Ridco, Inc., No. Civ. 95CV158D, 1996 WL 33401184, at  (D.Wyo. Feb.8, 1996). The insurer is not permitted to unilaterally modify and change policy coverage. Shoshone First Bank, 2 P.3d at 515. Furthermore, `[a] reservation of rights letter does not create a contract allowing an insurer to recoup defense costs from its insureds.' Id. at 516 (quoting Ridco, 1996 WL 33401184, at ). `If an insurance carrier believes that no coverage exists, then it should deny its insured a defense at the beginning instead of defending and later attempting to recoup from its insured the costs of defending the underlying action.' Id. (quoting Ridco, 1996 WL 33401184, at ). In this action, EMC has no right to recoup its costs of defending Bartile. As an initial matter, the CGL policies contain no provisions reserving EMC's right to recoup defense costs from Bartile. Although EMC subsequently issued a reservation-of-rights letter, this letter constituted a unilateral attempt either to modify the existing CGL policies or to create a new contract authorizing recoupment. Neither attempt succeeds. As Shoshone First Bank instructs, EMC should have denied Bartile a defense at the outset of the underlying action instead of defending against the action for several years and only now attempting to recoup its defense costs. EMC attempts to distinguish Shoshone First Bank on its facts. In particular, EMC notes that Shoshone First Bank addressed an insurer's request to recoup its defense costs in a case involving an amalgam of covered and non-covered claims. By contrast, EMC explains that it seeks to recover defense costs in a case involving only non-covered claims. In reaching its conclusion in Shoshone First Bank, however, the Wyoming Supreme Court favorably cited a very clear and incisive articulation of the problem with reservation-of-rights letters. 2 P.3d at 516 (referencing Ridco, 1996 WL 33401184, at ). As noted supra, the problem is that [a] reservation of rights letter does not create a contract and is therefore unenforceable. Id. This articulation constitutes a strong indication of how the Wyoming Supreme Court would rule on this matter where only non-covered claims are at issue. Finally, despite EMC's requests, we decline to reverse the district court merely because Wyoming follows the minority position on the recoupment-of-costs issue. [20]