The opinion of the court was delivered by: Louis L. Stanton, United States District Judge
In an opinion issued July 15, 2002, this Court found that defendant
General Security Insurance Company ("General Security") owed plaintiff
Ultra Coachbuilders, Inc. ("Ultra"), the duty of defending Ultra in an
action brought by the Ford Motor Company in a federal district court in
California ("the Ford action").*fn1 Ultra now moves for partial summary
judgment against General Security, awarding Ultra $149,658.07 in
attorneys' fees and other costs it had incurred defending the Ford
action, with pre-judgment interest thereon at the annual rate of 10
percent, from the date of each invoice until the date of judgment.
The relevant facts are not disputed. Ultra tendered the defense of the
Ford action to General Security in April or early May 2000, and General
Security declined the tender by letter dated July 24, 2000. (West Decl.
¶¶ 8, 9.)
On or about May 16, 2000, Ultra retained the California law firm of
Knobbe, Martens, Olson & Bear, LLP ("Knobbe") to defend it in the
Ford action. (Def.'s Statement of Material Facts ("DSOMF") ¶ 7.) The
Ford action was stayed at the end of December 2000 when Ultra filed a
petition in bankruptcy. (DSOMF ¶¶ 8, 9.) Knobbe's invoices total
$149,658.07, toward which Ultra made three payments totaling $60,662.68.
(DSOMF ¶¶ 10, 18.)
On June 15, 2001, as part of its bankruptcy proceedings, Ultra entered
into a stipulation with Knobbe, assigning to Knobbe its "right, title and
interest in and to the Insurance Policies, including but not limited to,
any and all rights to recoveries for defense fees and costs incurred."
(Somoza Aff., Ex. 1, ¶ G.) The assignment provides that any recovery
under the General Security policy on claims asserted by Knobbe would be
a. First, to all fees and costs incurred by Knobbe in
pursuing such claim which shall include cost of
coverage counsel as well as cost of bankruptcy
counsel to effect this assignment;
b. Second, to Knobbe on account of fees and costs
incurred by the debtor which remain due and owing;
c. Third, any excess shall be paid to the debtor care
of its counsel of record herein for distribution to
creditors consistent with the plan and as approved
by this [bankruptcy] court.
As assignee of Ultra, Knobbe retained the law firm of Gauntlett &
Associates for the purpose of securing and obtaining from General
Security the policy benefits of defense of the Ford action. (Decl. Tarzi
In opposition to the instant motion, General Security argues that Ultra
is not entitled to recover pre-judgment interest on still-unpaid defense
costs, because Ultra has enjoyed the use of the money it would have paid
for those costs. For the costs that Ultra has paid, General Security
argues that pre-judgment interest should run from the date of payment,
rather than from the date of invoice.
General Security also claims certain defense costs should not be
recoverable because they were unreasonable or unnecessary. It objects to
paying for late fees assessed for unpaid defense costs, for the assertion
of counterclaims on Ultra's behalf, and for paralegal work and computer
research. It also claims that Knobbe's excessive billing rates and
duplicative work warrant a 50% reduction in attorneys' fees.
Generally, the insured, as the party seeking relief,
carries the burden of proving the amount of costs
incurred in defense of the action. By contrast, in the
exceptional case, wherein the insurer has breached its
duty to defend, it is the insured that must carry the
burden of proof on the existence and amount of the .
. . expenses, which are then presumed to be necessary
as defense costs, and it is the insurer that must
carry the burden of proof that they are in fact
unreasonable or unnecessary.
State of California v. Pacific Indemnity Co., 63 Cal.App.4th 1535,
1548-49 (1998) (internal quotations and citation omitted, ellipsis in the
original). Here, General Security has not carried its burden of proving
that the claimed attorneys' fees and costs were unreasonable or
unnecessary for Ultra's defense. Ultra is entitled to recover its defense
costs, as well as pre-judgment interest on ...