Court Opinion

ID: 178872
Source: CourtListenerOpinion
Date Created: 2010-11-05 19:51:15+00
Date Added: 2024-06-11T17:25:46.428944
License: Public Domain

NOT PRECEDENTIAL

      UNITED STATES COURT OF APPEALS
           FOR THE THIRD CIRCUIT
                _____________

                    No. 09-4176
                   _____________

      SCOTTSDALE INSURANCE COMPANY

                          v.

   THE CITY OF HAZLETON; PEDRO LOZANO;
    CASA DOMINICANA OF HAZLETON, INC.;
 HAZLETON HISPANIC BUSINESS ASSOCIATION;
PENNSYLVANIA STATEWIDE LATINO COALITION

                     THE CITY OF HAZLETON,
                                  Appellant
                   _____________

     Appeal from the United States District Court
        for the Middle District of Pennsylvania
            (D.C. Civil No. 3-07-cv-01704)
     District Judge: Honorable A. Richard Caputo
                    _____________

     Submitted Under Third Circuit LAR 34.1(a)
                November 4, 2010

Before: SCIRICA, RENDELL and ROTH, Circuit Judges

             (Filed: November 5, 2010)
                   _____________

             OPINION OF THE COURT
                 _____________
RENDELL, Circuit Judge.

In Lozano v. City of Hazleton, a group of individuals and organizations challenged two

Hazleton, Pennsylvania ordinances regulating the employment and housing of aliens who

lack lawful immigration status. After a bench trial, the Lozano District Court enjoined

the City of Hazleton from enforcing those ordinances. In this case, Hazleton appeals a

final order of the District Court for the Middle District of Pennsylvania granting

summary judgment to Scottsdale Insurance Company on various insurance coverage

claims arising out of the Lozano litigation. Having thoroughly reviewed the parties’

briefs and the record, we will affirm the grant of summary judgment substantially for the

reasons set forth in the District Court’s well reasoned memorandum opinion.1

       The primary questions on appeal, as in the District Court, are whether Scottsdale is

obligated to pay for any attorneys’ fees assessed against Hazleton in the Lozano

litigation; whether Scottsdale is obligated to reimburse Hazleton for payments to an

attorney it retained to represent it alongside counsel provided by Scottsdale; and whether

Scottsdale acted in bad faith when it purportedly failed timely to advise Hazleton of a

conflict of interest.

       On the first question, regarding attorneys’ fees, the District Court held that the

policy’s exclusion of “fees, costs or expenses which the insured may become obligated to

pay as a result of any adverse judgment for declaratory relief or injunctive relief”

   1
     The District Court exercised diversity jurisdiction under 28 U.S.C. § 1332. Our
jurisdiction arises under 28 U.S.C. § 1291.
                                              2
unambiguously encompasses any attorneys’ fee award incident to the Lozano judgment

and rejected Hazleton’s argument that attorneys’ fees may be considered a form of

“monetary damages,” rather than “costs,” under the policy. We agree with, and adopt,

the District Court’s analysis.

       On appeal, Hazleton raises three additional issues regarding the attorneys’ fee

award, all of which lack merit. First, we need not speculate whether the allegations in the

Lozano plaintiffs’ Second Amended Complaint could have supported a claim for

damages because plaintiffs specifically amended their complaint to remove the prayer for

compensatory damages and because the litigation concluded without plaintiffs seeking, or

being awarded, such damages. Second, the “supplementary payments” clause that

Hazleton invokes does not alter the District Court’s analysis because the policy language

makes clear that the exclusions, including the exclusion that incorporates attorneys’ fees

awards incident to the Lozano judgment, supersede the obligations to defend or to

indemnify that arise out of other policy provisions. Third, Scottsdale does not owe

Hazleton coverage for attorneys’ fees incurred before the Lozano plaintiffs amended their

complaint to remove the damages claim. Regardless of why the attorneys’ fees were

incurred, Hazleton will only “become obligated to pay” them “as a result of an[] adverse

judgment for declaratory relief or injunctive relief.” Thus, the policy’s exclusion covers

the entire amount of the attorneys’ fee award.2

   2
    Although Hazleton does not specifically identify it as an “issue presented,” Hazleton
also argues in its brief that Scottsdale must pay any attorneys’ fee award as part of its
                                               3
       On the second major point, concerning Scottsdale’s obligation to reimburse

Hazleton for fees and expenses it paid to its independent attorney, the District Court

found that Hazleton failed to present any evidence to support its argument that it was

entitled to choose its own counsel because of a conflict between it and Scottsdale’s

appointed counsel. The District Court also held that, under the policy’s plain language,

Scottsdale has no obligation to pay for services provided by the independent attorney

because Hazleton retained him without Scottsdale’s consent. Here again, we agree with

the District Court’s assessment. Hazleton presents no new arguments or facts related to

this point on appeal.

       On the last major issue, the bad faith claim, the District Court concluded that

Hazleton failed to carry its burden in opposing summary judgment. It found that

Scottsdale properly put Hazleton on notice of the grounds for its potential denial of

coverage through a November 9, 2006 reservation of rights letter and that Scottsdale’s

three-month delay in issuing the letter was not unreasonable as a matter of law. The

District Court also rejected Hazleton’s assertion that Scottsdale pursued a trial strategy in

the Lozano case that was intended to avoid coverage. Hazleton does not raise any new

arguments or point to any facts that the District Court failed to consider. We adopt the

District Court’s cogent analysis on this point, as well.

duty to defend on the theory that “coverage is uncertain.” We reject this argument in
light of our conclusion that the policy unambiguously excludes coverage for attorneys’
fees in this case .
                                             4
       For the foregoing reasons, and for the reasons set forth in the District Court’s

memorandum accompanying its summary judgment order, we will affirm the order of the

District Court.

                                             5