A sharp-eyed Coverage Opinions reader alerted me to this unusual 2012 book:

The Claims Cookbook: A Culinary Guide to Job Satisfaction
by Carl Van and Laura E. Wimsatt

It is described on Amazon as follows:

“A cookbook for claims professionals. These are REAL recipes for delicious meals, but with a claims professional twist, such as Boston “Claim” Chowder and “Attorney Red Beans and Lies.”  Each recipe comes with a humorous story that any claims professional can relate to. The only cookbook in the world written by claims professionals for claims professionals.

“Other recipes include: Claimant Crab Cakes, So Sue Me Sushi, Fender Bender Splendor, The DUI Daiquiri, The Car-Tini, Fresh Fraud, Cod Chicken, TORTellini, Corned Beef and Crash, Negotiation Sensation, The SUBrogation Sandwich And many others.”

Needless to say, I needed to take a bigger bite out of this.  I reached out to co-author Carl Van and will soon be speaking to him about this rather unusual cookbook.  No doubt there is a good backstory here.  Look for this in an upcoming issue of CO. 

Of course I am now trying to think of foods that could have a claims twist.  Maybe there’s a CO contest here.

In my liability coverage class, I spend a of time addressing with the students whether “bodily injury” or “property damage” was caused by an accident (“occurrence”).  And it makes sense that I would do so.  After all, when it comes to general liability coverage, “what is an accident?” is the number one most important, frequently litigated and challenging issue.  It is the gateway to the policy and relevant to every claim. 

The number of potential accidents is infinite.  This is one reason why the issue is so complex, with courts having struggled with it for well over a century.  To prove this point, I have my students read a case from the Wisconsin Supreme Court from 1869, where the court addressed whether someone’s death was caused by an accident.  The students then read several modern “accident” coverage cases and quickly see that the issues and struggles have not changed since President Grant was in the White House.  This 19th century opinion reads like it was written a week ago.

In general, at the heart of the “accident” question, is an insured’s intent [or not] to cause injury or damage by his or her act.  Invariably, in my discussion with the class, I raise the situation of someone that seeks to strike and injure person A – which would not be an accident -- but they miss and hit person B.  So, is the injury to person B the result of an accident?  I suspect that this classic hypothetical is used in many insurance and tort law classes.

So, image my surprise, and delight, when a New York appeals court addressed just this hypothetical situation.

Jodi Cole filed suit against Amanda LePore for personal injuries sustained when, as a school staff member, she was injured trying to break up a fight between LePore and another student. “After LePore and the student were separated,” the court stated, “the student said something to LePore and, in response, LePore tried to hit her. Cole had her back to LePore at this time and then ‘felt somebody come up and over [her].’ According to a witness, LePore ‘took a swing and inadvertently hit [Cole] with her forearm.”  Cole fell into a cement wall. 

At issue in Vermont Mut. Ins. Group v. LePore, No. 534864 (N.Y. App. Div. Dec. 8, 2022) was coverage for LePore under a homeowner’s policy.  The court’s task was to address whether Cole’s injury was caused by an “occurrence” (accident) and the potential applicability of the expected or intended exclusion. 

The court, addressing these two aspects of the policy jointly, as is often the case, held that coverage was available for LePore:

“Plaintiff contends that no coverage exists under the insurance policy because LePore intended to cause physical harm to another person. An insured, however, may be indemnified for an intentional act that causes an unintended injury. (citations omitted)  To determine whether a result was accidental, ‘it is customary to look at the casualty from the point of view of the insured, to see whether or not, from [the insured’s] point of view, it was unexpected, unusual and unforeseen.’ (citations omitted)  In describing the incident at issue, LePore stated that she did not intend to hit Cole. The record also contains evidence that Cole was inadvertently hit. In view of this, a sufficient basis exists to conclude that Cole’s injuries were not expected or intended within the embrace of the policy exclusion.  (citations omitted)  To that end, LePore can be indemnified under the policy, not because she acted negligently, but because her intentional act caused unintended harm.”

Having read a gazillion “accident” coverage cases, I am not overly surprised by this decision.  While not every court would have ruled this way, it is not shocking for a court to conclude that an intentional act, that results in unintended harm, is an accident.  And this was the conclusion of the Wisconsin Supreme Court’s decision in Schneider v. The Provident Life Insurance Company 150 years ago.

When it comes to the duty to defend, it is unusual to see a case involving a novel legal issue.  The rules concerning the duty to defend are well-settled.  With the exception of some outliers, the duty to defend is broad.  It’s broader than the duty to indemnify.  A defense is owed if there is any potential for coverage.  If there is a duty to defend one claim, there is a duty to defend the entirety of the complaint.  In some states, the duty to defend determination is tied solely to the allegations in the complaint.  In others, extrinsic evidence can be considered.  In general, duty to defend jurisprudence is a product of several long-ago established principles.

This is why I found the Minnesota federal court’s decision in Federal Ins. Co. v. 3M Co., No. 21-2093 (D. Minn. Nov. 23, 2022) so interesting.  The court addressed a novel duty to defend legal issue.

The crux of the matter was coverage for 3M Company, from Federal, for more than 5,000 product liability actions stemming from the design and manufacture of the “Bair Hugger Patient Warming System,” which is designed to maintain a patient’s body temperature during surgery by forcing warm air through a blanket.  These cases were centralized for pretrial proceedings in multidistrict litigation (“MDL”) in the District of Minnesota.

The court addressed several issues, but one that stands out as unusual is an insurer’s responsibility for defense costs associated with actions in an MDL.  The court likewise made the observation of the issue’s novelty, noting that, while it was not treading on completely barren terrain, it was close.

As you would expect, 3M argued that Federal was responsible for paying the full defense cost of the entire MDL.  The company did not need a Post-it Note to remind itself to assert that position.  Federal, for its part, agreed, at least for purposes of the motion, that it was responsible for paying some of the defense costs, but maintained that it should be those costs proportional to the number of cases in the MDL that are covered by its policies.

In setting up the issue, the court noted that the policy language was clear in two regards: Federal has a duty to pay defense costs against a “suit” to which the insurance applies, but has no duty to defend against any “suit” to which insurance does not apply.  The issue, the court noted, turns on whether the MDL is one “suit” or “whether each individual case in the MDL is a ‘suit.’”

To resolve the issue, the court started in the logical place -- the statute creating the multidistrict litigation framework -- and noted that “[t]he plain language of the statute supports a conclusion that the underlying cases in an MDL are separate actions that are merely grouped together for coordinated or consolidated proceedings. They can be treated individually by remanding or terminating an individual case even if the MDL is not terminated. The cases are also treated separately before transfer and after remand.”  In general, after looking at several aspects of the MDL statute, the court’s conclusion was that “the individual cases within an MDL—including the underlying cases in the Bair Hugger MDL—retain their individual character and the MDL is not a single case.”

At its core, 3M’s argument was that an MDL is one giant suit, arguing “that because all the cases in the MDL present common issues they are inextricably intertwined.” As the court described it, “according to 3M, there is no basis for distinguishing between the individual cases for allocating defense costs as they are based on the same legal theories and factual allegations.”

The court sided with Federal, explaining its decision as follows – which was guided by the MDL statute, but, ultimately, tied to the policy language:

“In view of the Policies’ language and how the MDL statute and courts handle MDLs and their constituent cases, the Policies’ defense duty language is reasonably susceptible to only one meaning which does not require Federal to pay the full cost of the MDL. Superficially, this may appear in tension with Minnesota law that extends the duty to defend ‘to every claim that ‘arguably’ falls within the scope of coverage.’ (citation omitted) This tension is resolved by distinguishing between claims and cases.  Absent policy language to the contrary, Minnesota law requires defense of all claims within a case to which a defense duty attaches but it does not require defense of a case in which a defense duty does not attach to any part of any claim even if the case is related to one the insurer has a duty to defend. (citations omitted) The Policies explicitly state the duty does not extend to the non-insured cases. (citation omitted)  Because the Policies and the law treats MDL constituent cases individually, ‘all parts of the cause of action’ in the uninsured cases ‘fall clearly outside the scope of coverage.’ (citation omitted)  If presented with this case, the Court predicts the Minnesota Supreme Court would hold the same. Therefore, Federal is only obligated under the Policies to pay the defense costs associated with the cases within the MDL that include claims that are arguably covered by the Policies.”

Upon concluding that Federal’s defense obligation did not encompass the entire MDL, the court turned to determining the extent of Federal’s obligation.  Its decision was to put it on hold: “Federal proposes having defense counsel allocate the costs each billing period based upon proportion of covered claimants. 3M, opposing any division of costs, did not propose a method. Because 3M has not weighed in on a method of apportioning costs, there may be factual disputes as to which cases include covered claims, and using a ratio may be inequitable in some circumstances, the Court will not resolve what method is appropriate at this time.”

While this issue is not going to come up every day, it is also far from obscure.  According to the website for the Judicial Panel on Multidistrict Litigation, there are 172 MDL dockets as of November 15, 2022.  And given the types of cases that often make their way into an MDL, I suspect that many involve insurers paying for defense.

I have always found the CGL policy’s definition of “employee” to be curious: “Employee” includes a “leased worker.”  Employee does not include a “temporary worker”.
 
That’s it.  The definition doesn’t say who an employee is, only who it incudes and who it’s not.  In the end, the analysis usually comes down to whether the injured person is an “employee” under state law, which may involve looking at the law of employee versus independent contractor or some other area.  So, after all that, the part about “leased worker” and “temporary worker” – the entire language of the exclusion – usually never even comes into play.

But in Union Insurance Company v. New England Ice Cream Corp., No. 21-10740 (D. Mass. Nov. 4, 2022), the case was all about whether someone was an employee based on being a “temporary worker.”
 
New England Ice Cream Corp. is, well, a company that distributes ice cream.  [Who’s buried in Grant’s tomb?]  Its sales spike during the summer months.  [The shocks just keep coming.]  To meet the need for extra employees for Peak Season (April to September), the company works with various staffing agencies.

Angel Rivera went to work for New England Ice Cream.  He had been furnished to NEICC through a staffing services company.  He alleged that “on or about April 28, 2019, while he was working in the course and scope of employment for Monroe [the staffing company] as a laborer at NEICC’s warehouse, NEICC negligently breached its duties ‘by expos[ing] [him] to freezing temperatures in the refrigerated warehouse with inadequate protective clothing . . . for prolonged periods of time.’”

Rivera filed suit against NEICC for personal injuries.  Union Insurance disputed that it had a duty to denied NEICC under a general liability policy, but agreed to do so subject to a reservation of rights, and then filed a coverage action.

At issue, as you would expect, was the applicability of the Employers Liability Exclusion.  The Employers Liability Exclusion would not apply, and, hence, NEICC would be entitled to coverage, if Rivera had not been an “employee” at the time of the injury, because he had been a “temporary worker.”  But if Rivera had been a “leased worker,” he would have been an “employee” and NEICC would not be entitled to coverage.

The policy defined “leased worker” as “a person leased to [the insured] by a labor leasing firm under an agreement between [the insured] and the labor leasing firm, to perform duties related to the conduct of your business.”  A “temporary worker” was defined as “a person who is furnished to [the insured] to substitute for a permanent ‘employee’ on leave or to meet seasonal or short-term workload conditions.”  Union argued that Rivera was a “leased worker” and NEICC argued that Rivera was a “temporary worker.”

On its face, it seems very clear that Rivera was a “temporary worker.”  After all, he was hired to meet NEICC’s needs for additional warehouse workers during the peak -- warm weather -- season.  So where’s the issue?

During the claim investigation, a Union Insurance representative ask an NEICC official about Mr. Rivera’s hiring and the official responded as follows: “NEICC hired Mr. Rivera with the intention of a temp to permanent role. NEICC has been successful hiring temp to perm for our warehouse positions. The extreme cold warehouse environment is not for everybody, this allows NEICC to not invest upfront with employees that might leave the job after several weeks, days or hours. If the employee can do the job then after 90 days we move towards hire for full time employment with NEICC.”

So, as Union saw it, Mr. Rivera was not a “temporary employee,” as NEICC was hoping that he could handle the cold nature of the job and become a permanent employee.

However, the court disagreed, looking at the issue based on the purpose of the employee’s hiring:

“Looking prospectively at NEICC’s intent in hiring Rivera, as the Court must under the relevant case law cited above, its intent was to address its seasonal needs. This is reflected in the timing of the hire, its workload needs at the time of hiring and its arrangement with Monroe to make this hire. That a temporary worker might become a permanent one, does not change the nature of that temporary engagement. Even Lagor’s [of NEICC] response to Hurley [of Union] upon which Union relies, makes clear that the initial hire was as a temporary worker and any move to a permanent position might only come later if he could do the job and, even after 90 days, it would be a move toward hire, not a guaranteed hire which is supported by other uncontested evidence that most temporary workers hired in this manner are let go at the end of the Peak Season.”

It's an interesting case and one in which that curious definition of “employee” served its purpose.

In general, those seeking a defense for injury allegedly caused in a physical altercation have an uphill battle.  First, the policy may have an assault and battery exclusion.  And even if not, courts routinely conclude that allegations of assault and battery are not an “occurrence” (accident) or the expected or intended exclusion applies.  I rarely report on these types of cases in Coverage Opinions because they are routine and predictable. 

But there is nothing routine nor predictable about the court’s decision in Nationwide Gen. Ins. Co. v. Staples, No. 21-401 (E.D. Va. Sept. 7, 2022).  In fact, the court seems to have handed policyholders a nifty way to secure a defense for assault and battery claims.

Noman Stevens filed a complaint against Brian Staples alleging that Staples physically attacked and injured him at AJ Gators Sports Bar and Grill.  Staples sought coverage from Nationwide under a homeowner’s and umbrella policy.  The insurer undertook Staples’s defense under a reservation of rights and filed a coverage action seeking a determination of no duty to defend or indemnify.  At issue before the court was Nationwide’s motion for judgment on the pleadings.

While not relevant to the discussion here, first the court took on a notice issue, concluding that no coverage was owed under the primary policy because of late notice.  However, this was not a basis for a disclaimer under the umbrella policy.  Thus, the court moved to address coverage for a defense for Staples under the umbrella policy.

As you would expect, the court addressed whether Mr. Staples’s actions qualified as an “occurrence” and concluded that they did not:

“In applying the Eight Corners Rule, the Court finds that Mr. Staples’ actions, as alleged in the Stevens complaint, do not qualify as an ‘occurrence.’ Mr. Stevens alleged that Mr. Staples ‘came at Stevens in a threatening manner’ and ‘unlawfully and wantonly without justification, excuse or caveat, attacked Stevens.’  Mr. Stevens further alleged that Mr. Staples, ‘without being provoked in any way by Stevens, viciously attacked Stevens, wrapping his arm around Stevens’ neck in a choke hold and slamming Stevens [sic] head into the table and concrete patio.’ Additionally, Mr. Stevens alleged that ‘Defendant [Staples] purposefully and intentionally attacked and injured Stevens.’ The underlying complaint alleged actions that are intentional on their face, and Mr. Stevens’ injuries are the natural and probable consequence of the alleged intentional act. An intentional act is not an accident and thus does not qualify as an ‘occurrence.’”

This should have ended the story.  No “occurrence” means that the insuring agreement has not been satisfied.  End of discussion.  Do not pass go.  Do not collect $200.  Nationwide saw it as I did and made the same argument.

But the court continued on, addressing whether the “expected or intended” exclusion applied.  More to the point, whether the exception to the “expected or intended” exclusion – “bodily injury resulting from the use of reasonable force by an insured to protect persons or property” – applied.  This is usually known as the “self-defense” exception to the “expected or intended” exclusion.  The court here called it the “reasonable force” exception.           
 
Despite the argument that a finding of no “occurrence” should have ended things, the court concluded that it must construe the contract as a whole, seeking to give effect to every provision, and avoid any interpretation that renders a provision superfluous or meaningless.          

As the court saw it, under Nationwide’s rationale, “this interpretation of the contract would mean that a court could rarely, if ever, reach the question of whether the exclusion for intended bodily injury or the exception for use of reasonable force applied because, by definition, an intentional act is not an ‘occurrence’ under the general policy. In other words, Nationwide Mutual’s interpretation of the Umbrella Policy would render the reasonable force exception meaningless, whereas this Court is required to avoid, where possible, interpreting a contract to render particular provisions meaningless.”

Facing this, Nationwide made the point that no extrinsic materials demonstrated that Mr. Staples acted in self-defense.  However, this was not a consideration by the court, as it was bound to use the eight corners rule to determine if there is a duty to defend.  So, whether Mr. Staples used reasonable force to protect persons or property was a question for the factfinder in the underlying action.

Under this flawed rationale, an insured can get a defense for what is clearly intentionally caused injury.  It won’t be an “occurrence,” but that won’t be the end of it – as it should be -- as the court will then turn to the applicability of the “expected or intended” exclusion.  It will apply for such intentionally caused injury.  But that also won’t be the end of it, as the court will then move on to the possible applicability of the self-defense exception.

There will be nothing in the complaint saying that the insured acted in self-defense.  Of course not.  No plaintiff would ever plead that the defendant acted in self-defense, as it would be an admission that the plaintiff was an aggressor.  So, under the four corners/eight corners rule, whichever your preference, because the applicability of the self-defense exception cannot be ruled out – and must await the facts developed in the underlying action – a defense is owed.  This court seems to have created a road map for an insured getting a defense for what is clearly intentionally caused injury.

Another one in the “what is an accident” category.  As I’ve said elsewhere in this dispatch of CO, this is the number one most important, frequently litigated and challenging issue.  It is the gateway to the policy and relevant to every claim.  Courts have struggled with the issue since at least 1869. 

The beat goes on.  The estate of Elle Migneault filed suit against Imran Iqbal, alleging that he utilized his position as an employee of Sam’s Food Mart to procure illegal drugs and provide them to Elle Migneault, who suffered an overdose and passed away as a result.

The estate also filed suit against Mohammad Iqbal, in his capacity as operator of Sam’s Food Stores, alleging that “he was responsible for hiring Imran Iqbal despite Imran’s previous arrests for drug-related offenses, including possession of a controlled substance while working at Sam’s Food Store and selling tobacco to minors.”  As you would expect, the complaint alleged all kinds of ways in which Mohammad Iqbal failed to prevent the situation, such as improper supervision and failing to maintain and install security, etc. 

No surprise here.  At issue in Acceptance Indemnity Ins. Co. v. Migneault, No. 21-510 (D. Conn. Oct. 31, 2022) was whether the defendants were owed a defense under a liability policy that provided coverage for bodily injury caused by an “occurrence,” defined as an accident, as well as containing an expected or intended exclusion.  The court noted that it was going to address these two aspects of the policy interchangeably.

The court started out with the following observation: “There is no precedent in Connecticut directly addressing whether causing another person's death by providing them with illegal drugs is considered an ‘accident’ for purposes of a liability insurance policy, and courts have varied in their approach to the question of evaluating what kind of negligence may nevertheless be considered intentional rather than an accident.”

Continuing with no real surprises here, the court pointed out two ways in which courts have addressed the accident issue:

“If the conduct is inherently harmful such that an injury is the natural consequence, some Connecticut courts have held that negligent conduct will not be considered an accident even if the harm was not specifically intended. . . . On the other hand, some courts have found negligent actions to be accidents, even when the underlying conduct is intentional, when there is no reason to believe the resulting harm was expected or intended.

***

“A distillation of the precedent on this topic leaves the Court with the following principle: death caused by a drug overdose will only be an expected or intended harm if either the provision of drugs is so ‘inherently harmful’ that death by overdose would be a natural consequence, or Imran Iqbal had actual knowledge that the drugs were harmful enough that Elle Migneault might perish as a result of taking them.”

The court concluded that it did have the information necessary to resolve the issue, as there was the “possibility that, for example, Imran ‘did not appreciate the nature of what he was actually selling to Ms. Migneault[.]’  Without details on what kind of drugs Imran provided, in what quantity, and under what circumstances, Plaintiff [insurer] has not met its burden in showing that there are no genuine issues of material fact in dispute.”

After reaching this conclusion for Imran Iqbal, the court easily reached the same one for Mohammad Iqbal, noting that the complaint asserted a theory of negligence and not intentional conduct against him. 

The number of cases that set out the circumstances under which a defense is owed are incalculable.  The number of cases that set out the circumstances under which a defense can be withdrawn?  Not so many. 

Sure, lots of cases state that a defense can be withdrawn when there are no more covered claims remaining in the complaint.  But that paradigm situation, where the only covered claims(s) are dismissed, is few and far between.  Usually the issue is more complex, such as where information developed as part of an investigation, or in discovery, reveals that, despite what the complaint says, there are no longer any potentially covered damages.

Both of these situations were at issue in Voyager Indem. Ins. Co. v. Gifford, No. 21-242 (W.D.N.C. Oct. 3, 2022).  On September 17, 2020, Amaziah Dondero filed suit against Dakota Gifford alleging that, on August 4, 2020, Gifford crashed his vehicle into Dondero as he was crossing a street in Asheville, North Carolina.  In the complaint, Dondero alleged that, at the time of the accident, Gifford was operating his vehicle “in the course of making a food delivery for Door Dash.”

Voyager Indemnity issued a commercial auto policy to Door Dash.  The policy extended coverage to contractors operating as delivery drivers, subject to the following time frame: after the driver accepts an order and begins to use his or her automobile for delivery, with coverage ending upon completion of the delivery.

Based on the allegations in the complaint, Voyager undertook Gifford’s defense.  However, when it did so, Voyager had possession, from Door Dash, of Gifford’s activity log on the night in question, showing that Gifford had completed his last delivery before the time of the accident and had not accepted a new delivery.  Therefore, despite the allegation in the complaint, that, at the time of the accident, Gifford was operating his vehicle “in the course of making a food delivery for Door Dash,” the truth was clearly otherwise.  [Plus, Gifford admitted the same thing during his deposition – that he was not in the course of making a delivery for Door Dash at the time of the accident.]

On November 2, 2020, Dondero filed an amended complaint.  It was identical to the original complaint, except it had removed the allegation that Gifford was making a Door Dash delivery at the time of the accident.

On September 10, 2021, Voyager filed a declaratory judgment action.   It filed an amended complaint in the coverage action on November 29, 2021.    

The court addressed Voyager’s duty to defend and if, and when, it ceased.  The fact that a defense was not owed at the time of the original complaint -- if you considered the Door Dash activity log -- could not have been clearer.  And the activity log had been authenticated. 

However, the court concluded that this was not a basis to deny a defense.  The allegations of the original complaint – at the time of the accident, Gifford was operating his vehicle “in the course of making a food delivery for Door Dash” – is what controlled.

It was only after the amended complaint – what the court called the “operative complaint” – “[did] not allege facts arguably covered by the Policy and no facts demonstrating coverage have been revealed through the Plaintiff's investigation, [that] the Plaintiff does not have a duty to defend Gifford.”

It is not surprising that Voyager was able to cease defending Gifford after the amended complaint had been filed.  This is tantamount to the paradigm situation of there no longer being any potentially covered claims remaining in the complaint -- albeit, here, an amended complaint. 

But the challenge for insurers, of being able to cease defending, was on display by the court’s reliance on the “comparison test” for purposes of determining the insurer’s duty to defend” – put the complaint and the policy side-by-side and ask if there’s coverage.  This left the insurer with no way to extricate itself from a duty to defend, despite crystal clear evidence that the claim was not even potentially covered.

There is no shortage of coverage litigation over the meaning of the term “ultimate net loss.”  And that’s not too surprising.  The term is used frequently in policies, has a definition that varies and  is often used in excess policies, so its meaning sometimes comes up against policy language in an underlying policy.  For a good example of the last one, see Ohio Cas. Ins. Co. v. Patterson UTI Energy, No. 14-22-26 (Tex. Ct. App. Nov. 22, 2022), which I discussed in a recent CO blast.    

Starstone Ins. SE v. City of Chicago, No. 20-2475 (N.D. Ill. Sept. 26, 2022) is in that can be knotty category of the meaning of “ultimate net loss.”  In 2020, the City of Chicago paid $18,750,000 to settle a wrongful conviction case following a jury verdict.

The City was insured under a wrongful act/errors and omissions excess policy issued by Starstone Inc.  The policy had a $15,000,000 self-insured retention.  Starstone did not object to the settlement.  The city sought recovery from Starstone of the $3,750,000 in excess of the self-insured retention.  The parties agreed that at least $3,7500,000 of the settlement included plaintiff’s attorney’s fees and costs that were recoverable under statute.   

Starstone denied coverage, arguing that the policy did not cover costs, which include attorney’s fees.  As Starstone saw it, “costs” are not “damages,” and the policy only provides coverage for damages. 

As you would expect, the court immediately set out the relevant policy language.  The policy’s insuring agreement was simple:

“We shall pay you, or on your behalf, the ultimate net loss, in excess of the retained limit, that the insured becomes legally obligated to pay to compensate others for loss arising out of your wrongful act that takes place during the Policy Period and arises solely in performing or failing to perform duties of the public entity.”

Next up was the definition of “ultimate net loss:”

“[T]he sum actually paid or payable due to a claim or suit for which you are liable either by a settlement to which you and we agreed or a final judgment. Such sum will include proper adjustments for recoveries and salvage.”

As the court saw it, the flaw in Starstone’s argument was the policy language – not so much what it said; more what it didn’t say: “[T]he policy does not limit coverage to ‘damages’; rather, the policy expressly covers the ‘ultimate net loss,’ which by its terms includes ‘the sum actually paid’ in settlement.”

The court was also not persuaded by the insurer’s argument that the word “compensate,” as used in the insuring agreement, meant compensation to the tort plaintiff and not the fees to his counsel: “But fees and costs also compensate a wronged and prevailing party and are designed to make him whole. Compensating someone for a loss goes beyond damages; if that were not the case, the phrase ‘compensatory damages’ would be redundant.”

This stands in contrast to other decisions that have held that damages do not include attorney’s fees that must be paid to a prevailing party.  In other words, some courts have ruled that amounts sought to seek damages are not themselves damages.  I’ll have more on this next month in the Top 10 Coverage Cases of 2022