are inseparable from the fees incurred in "prosecuting" its claims for declaratory relief. Indeed, all actions taken by H.W. Carter in pursuit of its claims for declaratory relief were necessary to its defense of the counterclaims. Thus, there is no basis for awarding H.W. Carter only those fees incurred in "defending" the counterclaims.
The parties have not cited any case under New York law on the issue of insurance coverage for "defense" costs where an insured brought a preemptive suit in the underlying action seeking a declaration that it has not engaged in wrongdoing. The parties have cited cases, however, where insureds were held to be entitled to costs associated with the filing of third-party claims that were related to the covered primary action. E.g., Sucrest Corp., 371 N.Y.S.2d at 936 (defense costs in underlying action included costs for insured's third-party complaint); Regis Radio Corp. v. American Employers Ins. Co., 30 Misc. 2d 341, 214 N.Y.S.2d 976, 980 (Sup. Ct. N.Y. County 1961) (insurer liable for all defense costs when "gravamen" of underlying action involved covered claim and insured's counsel was not required to perform "additional or different legal services" on uncovered claim). These cases support the conclusion that H.W. Carter is entitled to recover costs incurred in connection with its claims for declaratory relief that were or would have been incurred in any event in connection with its defense of the counterclaims. Cf. Mighty Midgets, Inc. v. Centennial Ins. Co., 47 N.Y.2d 12, 416 N.Y.S.2d 559, 564, 389 N.E.2d 1080 (N.Y. 1979) (in coverage action, courts permit an insured to recover attorneys' fees incurred when it was cast in a defensive posture, as opposed to a situation where it initiated an action to settle its rights).
D. The Lanham Act Claim
Finally, Penn General contends that the Policy does not cover fees and costs incurred by H.W. Carter in processing its Lanham Act claim based on Wm. Carter's letter to the trade. I agree.
Unlike H.W. Carter's initial declaratory judgment claim and Wm. Carter's counterclaims, both of which placed H.W. Carter in a defensive posture, H.W. Carter initiated the Lanham Act aspect of the Underlying Action, seeking money damages. Indeed, H.W. Carter did not amend its complaint to add the Lanham Act claim until April 1995, almost two months after Wm. Carter asserted its counterclaims. Although H.W. Carter now argues that the Lanham Act claim was asserted as part of its overall defense strategy, in fact it was an affirmative claim for damages that was separate and distinct from the trademark infringement claims and involved different proof. Thus, H.W. Carter is not entitled to recover attorneys' fees incurred in prosecuting the Lanham Act claim in the Underlying Action.
For the foregoing reasons, the parties' motions for summary judgment are granted in part and denied in part. Plaintiffs are to submit by July 31, 1996 affidavits with supporting documentation detailing the attorneys' fees and costs incurred after March 6, 1995 in connection with all aspects of the Underlying Action, except with respect to the Lanham Act claim, for which they seek reimbursement under the Policy. Defendant may respond to plaintiffs' submissions on or before August 16, 1996.
Dated: New York, New York
July 10, 1996
United States District Judge