By Al Haverkamp of Lucas & Haverkamp
1Question: This quiz concerns the Supplementary Payments provision commonly found in CGL policies. Minni and Evans sued Pritchard for multiple causes of action including breach of contract, misrepresentation, and defamation. Pritchard tendered to his liability insurer, Liberty, and Liberty was required to provide a defense because there was a potential for coverage for the defamation claim. Minni and Evans prevailed in the case and were also awarded $250,000 in costs, which were attorneys’ fees awarded via a contractual prevailing party provision. Under California law, such prevailing party attorneys’ fees are costs taxed against the losing party. Liberty asserted its policy did not obligate it to indemnify Pritchard for these attorneys’ fees as they were not covered damages. Is there coverage?
Answer: Yes. The Supplementary Payments provision stated “we will pay, with regard to any suit we defend, all costs taxed against the insured.” Here, the $250,000 in attorneys’ fees were costs taxed against the insured and because Liberty had a duty to defend, Liberty had to pay these costs. The Court noted coverage for these attorneys’ fees was not under the indemnity obligation of the policy, rather it was a function of Liberty’s defense obligation as set forth in the Supplementary Payments provision. See Pritchard v Liberty Mutual (2000) 84 Cal. App. 4th 890.
