Opinion ID: 532071
Heading Depth: 2
Heading Rank: 3

Heading: Cost of Defense

Text: 37 Canal also asks us to declare that First General is liable for its costs in defending Custom in state court. Canal claims that it defended under reservation of right, providing the defense as a matter of good faith, to control the litigation and possibly to mitigate damages that may have been awarded in the state court action. First General responds that Canal had no duty to defend under the ICC endorsement and therefore was acting as a volunteer. As such, First General asserts, Canal is not entitled to reimbursement. 38 The Mississippi Supreme Court has not described the circumstances under which it would find that an insurer was acting as a volunteer and therefore not entitled to reimbursement, but we confidently can predict what the court would hold in this case. The terms of Canal's policy, exclusive of the ICC endorsement, obligate it to defend insureds for claims of liability arising from occurrences involving covered vehicles even if the claims are groundless, false or fraudulent. The ICC endorsement requires Canal to pay any third-party judgments obtained against Canal, but does not in itself require Canal to defend an insured. Because the accident did not involve a listed vehicle, Canal had no duty to defend Custom. However, Canal reasonably could have feared that a court might have construed the ICC endorsement in conjunction with the duty-to-defend clause in the text of the policy as requiring it to provide Custom a defense. Moreover, the ICC endorsement created in Canal a manifest interest in controlling the litigation to minimize the size of any judgments once First General denied coverage and refused to defend. Canal can hardly be characterized as a volunteer. 39 First General, on the other hand, wrongfully refused to assume Custom's defense when requested by Canal. According to its policy, First General agreed to provide a defense when claims were made against an insured for occurrences happening during operation of a vehicle covered under the policy. Custom was an omnibus insured operating covered vehicles. Therefore, First General had a duty to defend Custom. Because Canal was not a volunteer and First General had a duty to defend Custom, First General must reimburse Canal for its costs in defending Custom. IV 40 First General's policy provided coverage to Custom; Canal's did not. Further, First General wrongfully refused to defend Custom and Canal did not volunteer by providing Custom a defense. First General must reimburse Canal for, and in the amount of, judgments and settlements paid by Canal on behalf of Custom in the related state court actions, Canal's cost of defending Custom, and the court costs in the district court. In addition, First General will pay costs in this court. The record is unclear as to the actual amounts. On remand, the district court is to calculate these amounts and enter judgment accordingly. The judgment of the district court is 41 VACATED and the cause is REMANDED WITH DIRECTIONS.