Opinion ID: 1263554
Heading Depth: 2
Heading Rank: 3

Heading: Whether the Insureds Are Entitled to Coverage Fees

Text: Westchester's final argument on appeal is that the district court erred by sua sponte awarding the insureds their coverage fees. According to Westchester, coverage fees are only available in Minnesota when an insurer breaches its duty to defend. Because Westchester had no duty to defend, it asserts that the district court erroneously found that Westchester breached its duty to defend by initially denying coverage to the Insureds. In response, the Insureds contend that the district court correctly concluded that Westchester must pay the insured's coverage fees incurred before Westchester accepted the duty to defend. According to the Insureds, Westchester still has a duty to defend, so these coverage fees are clearly awardable. But even if this court concludes that Westchester does not have a duty to defend, the Insureds assert that the trial court correctly concluded that the coverage issue was arguable at the time of tender and thus Westchester should have agreed to accept the defense in the first instance. Arguable coverage includes disputed issues of policy interpretation. By accepting the duty to defend, Westchester admitted that coverage was arguable and needed to be resolved by the district court. In the insurance context, Minnesota courts allow recovery for attorneys' fees when an insurer breaches its duty to defend. In re Silicone Implant Ins. Coverage Litig., 667 N.W.2d 405, 422 (Minn. 2003). An insurer has a duty to defend [i]f any part of a cause of action against the insured arguably falls within the scope of the insurance coverage, either on the face of the complaint or from facts known to the insurer. Denike v. W. Nat. Mut. Ins. Co., 473 N.W.2d 370, 373 (Minn.Ct. App.1991). But if an insurer is under no duty to defend, the insured is not entitled to attorneys' fees and litigation costs. St. Paul Fire & Marine Ins. Co. v. Seagate Tech., Inc., 570 N.W.2d 503, 507 (Minn.Ct. App.1997). Thus, absent statutory authorization, an insured's ability to recover attorney fees is limited to situations where the insurer has breached its contractual duty to defend. Silicone, 667 N.W.2d at 423. We have already determined that the policy's insured v. insured exclusion applies and that the language of the policy is unambiguous as to Shayna Fayette's status as an Insured under the policy. Therefore, there was never arguable coverage. As a result, Westchester never had a duty to defend the Insureds. Applying Minnesota law, the Insureds are not entitled to coverage fees because Westchester never had a duty to defend.