Opinion ID: 703215
Heading Depth: 2
Heading Rank: 3

Heading: Safeway's Suit Against National Union

Text: 10 Thereafter, Safeway demanded coverage of the settlement by National Union, which refused it. Safeway brought suit in federal district court seeking reimbursement of $11.5 million 5 for the early dividend, approximately $1.8 million in plaintiffs' attorney's fees and costs (the settlement costs), and approximately $230,000 6 in defense costs and attorney's fees (the defense costs). Safeway also alleged breach of contract, breach of the covenant of good faith and fair dealing, and violation of California Insurance Code Sec. 790.03, and requested punitive damages. 11 In a series of orders, 7 the district court, presided over by District Judge Jensen, ruled on the parties' summary judgment motions as follows. The court granted National Union's motion for summary judgment on the $11.5 million dividend, finding that Safeway could not show that it constituted a covered loss under the D & O policy. Summary judgment was also granted in favor of National Union on Safeway's claims of breach of good faith and fair dealing and violation of California's insurance code, and Safeway's prayer for punitive damages was stricken. The district court denied National Union's motion to bar recovery by Safeway for failure to indemnify its officers and directors, finding that National Union had not shown that Safeway failed to comply with the indemnification procedures required by Maryland law. 12 The court granted Safeway's motion on the settlement and defense costs, holding that both were covered losses. Nevertheless, the court ruled that the $1.8 million in settlement costs and $230,000 in defense costs would be allocated three-quarters to the covered directors and officers (and thus paid for by National Union under the D & O policy) and one-quarter to Safeway and KKR. The result was approximately $1.5 million payable by National Union, minus the $1 million policy deductible, resulting in judgment for Safeway of about $500,000. 13 Safeway timely appeals and National Union timely cross-appeals. The district court entered a final judgment in the case on January 5, 1994. Accordingly, this court has jurisdiction under 28 U.S.C. Sec. 1291.