Opinion ID: 672338
Heading Depth: 2
Heading Rank: 4

Heading: The Insurance Coverage Litigation.

Text: 19 In August 1986 PSC filed this suit for a declaratory judgment and damages against Lloyd's and CNA, alleging breach of the insurance contract. PSC sought a determination that the policy covered the settlement of the Waranch litigation, plus PSC's litigation costs, including attorneys' fees associated therewith. Shortly thereafter PSC settled its claim against Lloyd's, leaving CNA as the sole defendant. 20 In October 1986 CNA sought discovery from PSC, including all documents relating to the Waranch action. CNA also served document requests on Kelly, Stansfield & O'Donnell, the law firm that had represented PSC in the Waranch action, demanding all documents relating to the Waranch action, including invoices, bills and other documents reflecting attorney time or fees incurred in connection with the litigation. 21 In January 1987 PSC filed a motion for summary judgment in the instant case, arguing that as a matter of law, coverage existed under the CNA policy for its Waranch settlement and litigation expenses and that no genuine issue of material fact existed as to the amount of insured loss, including attorneys' fees. In its response, CNA argued that (1) the Waranch action was not an occurrence within the meaning of the policy, (2) triable issues of fact existed concerning damages to which PSC was entitled under the policy, and (3) triable issues existed concerning CNA's defense of waiver of coverage. CNA also noted that it had outstanding discovery requests relevant to both coverage and damages and that discovery could establish additional issues of fact for trial. 22 The district court denied PSC's motion for summary judgment as to damages but granted it as to coverage, stating: 23 [T]he language of the ... policy appears to be sufficiently clear that the Court can conclude as a matter of law that it covers this incident. The policy says the following: The term 'occurrence' wherever here used shall mean an accident or a happening or event or a continued or repeated exposure to conditions which results in personal injury or property damage. 24 Contrary to some of the cases which have been cited by Defendant [CNA] and argued by Defendant which talk about accident which have specific clauses which rule out intentional discrimination--I have seen such policies--this one does not. It says, accident or happening or event, which is certainly pretty broad, resulting in personal injury or property damage. And then in fact we do have another definitional term which talks about personal injury and which does say personal injury covers; and then it lists many things, including discrimination. 25 Principal Brief of Appellant, App. 2 at 0266. 26 Meanwhile CNA had noticed the depositions of two members of the Kelly, Stansfield & O'Donnell firm who had been involved in defending PSC in the Waranch action. PSC moved for protective orders shielding PSC from CNA's deposition notices. In response, CNA argued that the requested depositions might uncover evidence relevant to the coverage and damages issues raised by PSC in its pending motion for summary judgment and thus were integral to CNA's defense. 27 The discovery motions were heard by the magistrate and taken under advisement. However, the magistrate's ruling was not issued until after the August 1987 hearing on PSC's motion for summary judgment, which resulted in partial summary judgment for PSC on the coverage issue. In his ruling on the discovery issues, the magistrate limited CNA's discovery to items relating to damages, the only remaining issue following the partial summary judgment ruling on the coverage issue. 28 After further discovery on damages, PSC filed a second motion for summary judgment as to the damages, including attorneys' fees, incurred by it in connection with the Waranch litigation. The district court granted PSC's motion as to the $328,000 paid by PSC in the settlement of the Waranch litigation. 1 The court also agreed with PSC that the CNA policy covered attorneys' fees incurred in defending the Waranch litigation, but concluded that summary judgment would be denied as to attorneys' fees and expenses relating to the PUC administrative proceedings. An evidentiary hearing was set on those matters for October 4, 1990. Id. at 0246. 29 The issue of reasonable attorneys' fees was tried to the district court in the October 1990 hearing. After reviewing the evidence and hearing the testimony of PSC's experts, the judge concluded that fees and expenses totaling $152,996.64 were reasonable. Adding this amount to the $328,000 already awarded to PSC, and deducting PSC's $100,000 retention and Lloyd's 30% share of coverage, the judge entered judgment for PSC in the amount of $459,477.17 (including prejudgment interest of 8% per annum from the date of demand in 1983). Id. at 0248-0251, 0253. The judge denied PSC's post-trial motion for attorneys' fees incurred by PSC in prosecuting the instant coverage suit against CNA. Appellee's Supp.App. 2 at 0163-0166.