Under Arizona law, a party facing child molestation claims obtained Coverage for settling some of them. The claims arose "out of sexual abuse by Defendant's priests, staff, and laypersons." After settling these claims, the Defendant requested its Attorney's Fees for litigating Coverage in Interstate Fire & Cas. Co. v. Roman Catholic Church of the Diocese of Phoenix ex rel. Bishop Thomas J. Olmsted, 2012 WL 4856211 (D. Ariz. October 11, 2012).
In the beginning, there were four child molestation claims. The Defendant settled them all and demanded Coverage from its Excess Carrier, Interstate, under Excess Liability Indemnity Policies issued to the Defendant. The Excess Carrier filed a lawsuit first, suing for a Declaratory Judgment of no Coverage for settling any of the underlying child sexual abuse claims.
The Defendant counterclaimed alleging Bad Faith Failure to Settle (which included allegations that the Excess Carrier disclosed confidential information presumably about the child molestation claims at issue), and the Defendant further alleged Bad Faith by the Plaintiff Excess Carrier during the Coverage litigation.
Ultimately the Defendant prevailed on claiming the Excess Coverage at issue for 3 out of the 4 child molestation claims which the Defendant settled. The Plaintiff prevailed on a Declaration of no Coverage for the remaining underlying claim.
The Defendant's total settlement of the 3 claims held covered amounted to $801,289.39 plus interest. The remaining claim for which no Coverage was held and so on which the Excess Carrier prevailed, was settled alone for a total of $1,028,142.14. Interstate Fire & Cas. Co. v. Roman Catholic Church of the Diocese of Phoenix ex rel. Bishop Thomas J. Olmsted, 2012 WL 4856211 *1 (D. Ariz. October 11, 2012).
Both sides filed Motions for Attorney's Fees. The test for Attorney's Fees Awards in such Coverage cases (and other cases) under Arizona law, as in most jurisdictions in the U.S., is which party is the "prevailing party". Here, there are arguments on both sides.
For the Plaintiff, the argument ran that the Excess Carrier obtained an adjudication of no Coverage for what was by far the largest monetary settlement of the underlying child sexual abuse claims. Further, the Excess Carrier prevailed on the Bad Faith Failure to Settle Claims by Summary Judment in its favor. The Court declined to reach the alleged Bad Faith in Litigation claim.
For the Defendant's part, it argued that it prevailed by obtaining an award of Coverage for 3/4 of the underlying claims.
The Court awarded "prevailing party" Attorney's Fees to the Defendant in this case. In so ruling, the Court denominated the Excess Carrier's prevailing, successful defense of the Bad Faith Failure to Settle Counterclaim, as "nominal".
The Court then denominated the Defendant as the "prevailing party" and awarded the Defendant's Attorney's Fees accordingly. The Court awarded the "reasonable attorney's fees accrued in pursuit of the [3 claims held by the Court to be covered in that case]." Interstate Fire & Cas. Co. v. Roman Catholic Church of the Diocese of Phoenix ex rel. Bishop Thomas J. Olmsted, 2012 WL 4856211 *3 (D. Ariz. October 11, 2012).
PACER, the online docket of the Federal Courts, reflects that a Notice of Appeal of the Coverage Judgment was filed on September 28, 2012 and that a Notice of Cross-Appeal was filed on October 10, 2012. As soon as the District Court completes its labors in fixing the amount of Attorney's Fees and Costs to award, having determined the issues of entitlement by the Order discussed in this article, then at such time the Attorney's Fees issues will undoubtedly be added to the pending appeals by both parties.
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