January 15, 2014
UNITED PARCEL SERVICE, INC., Plaintiff,
LEXINGTON INSURANCE COMPANY, Defendant.
Stefanie Ann Bashar, Esq., Stephen P. McLaughlin, Esq. Ansa Assuncao, LLP White Plains, NY. For Plaintiff:
J. Gregory Lahr, Esq. Sedgwick, LLP New York, NY.
Ryan Christopher Chapoteau, Esq. Sedgwick, LLP New York, NY. For Defendant:
OPINION AND ORDER
SHIRA A. SCHEINDLIN, District Judge.
United Parcel Service, Inc. ("UPS") brought this action seeking a declaration that Lexington Insurance Company ("Lexington") is obligated to defend and indemnify UPS against a Complaint filed against it in an underlying personal injury action. In an Opinion and Order dated October 16, 2013, I granted UPS's motion for partial summary judgment and held that (1) Lexington owed a duty to defend the Underlying Action; and (2) Lexington must reimburse UPS for reasonable attorneys' fees and litigation expenses incurred in defending the Underlying Action, plus interest at a rate of nine percent per year. The Opinion, however, did not address when Lexington's duty to defend was triggered and therefore when the damages period began. UPS was directed to file a request for fees and costs within twenty-one (21) days of receipt of the Opinion. On November 7, 2013, UPS submitted a request for attorneys' fees in the amount of $35, 269.00, and costs of $2, 503.73, totaling $37, 772.73. I hereby grant UPS's request for fees and costs albeit in a reduced amount.
II. LEGAL STANDARD
Where an insurer breaches the duty to defend, it must pay damages in the form of attorneys' fees and litigation expenses reasonably incurred by the insured in defending the underlying action. The insurer must also pay interest at a rate of nine percent from the date of each legal bill "[T]he fee applicant bears the burden of establishing entitlement to an award and documenting the appropriate hours expended and hourly rates." "The district court retains discretion to determine.. what constitutes a reasonable fee.'" In determining the amount of a fee award, courts must calculate the "lodestar" figure which represents the "presumptively reasonable fee." "In reducing the lodestar' amount, the court may exclude the excessive and unreasonable hours from its calculation by making an across the board reduction, or percentage cut, in the amount of hours."
A reasonable rate is generally the "prevailing market rate for counsel of similar experience and skill to the fee applicant's counsel." In making this determination, a court may consider "rates awarded in prior cases and the court's own familiarity with the rates prevailing in the district." "The reasonable hourly rate for such calculation is determined by the rates prevailing in the community in which the action or proceeding arose for the kind and quality of services furnished." The burden is on the movant to show "by satisfactory evidence - in addition to the attorney's own affidavits - that the requested hourly rates are the prevailing market rates."
In calculating the reasonable number of hours expended "the court takes account of claimed hours that it views as excessive, redundant, or otherwise unnecessary.'" In doing so, the court "may look to its own familiarity with the case and its experience generally as well as to the evidentiary submissions and arguments of the parties."
A. Hourly Rates
In support of UPS's request for reimbursement for attorneys' fees and litigation expenses, UPS's counsel submits invoices for services it rendered in defending the Underlying Action. Lexington does not dispute the proposed hourly rates for Steven Orlowski, UPS's lead attorney, or supporting partner, counsel, associates and paralegals from which he received assistance. The Court finds that, in light of factors including the time and labor required, experience and qualifications, and attorney rates in this district, the rates proposed in the Orlowski declaration are reasonable.
B. Hours Expended
1 Damages Period
In his Declaration Orlowski represents the time expended by the firm on the Underlying Action as 197.70 hours. The Invoices, attached as Exhibit A to the Declaration, are detailed time entries that document the attorney who performed the work, the hours expended, and a description of the work performed. These time entries account for the legal services rendered to UPS in defense of the Underlying Action and date from April 28, 2010 through October 24, 2013. Lexington argues that pursuant to the Commercial General Liability Policy (the "Policy"), issued to its named insured, Adelis International Security, Inc. ("Adelis"), UPS had a duty to notify Lexington of the Underlying Action and failed to fulfill this condition precedent by not tendering notice of the Complaint. Lexington further argues that because of UPS's failure to provide proper notice of the Underlying Action and seek Lexington's consent to incur defense expenses, it is not responsible for any charges incurred before it received a copy of Marilyn Chase's deposition testimony on June 20, 2012.
"It is established that a repudiation of liability by an insurer on the ground that the loss is not covered by the policy operates as a waiver of the notice requirements contained in the policy." Here, Lexington concedes that it received UPS's November 18, 2009 notice of Chase's claim and denied coverage on December 3, 2009 reasoning that an internal investigation revealed that Chase's injuries resulted from the sole negligence of UPS. UPS also points out that it asserted affirmative defenses regarding Chase's contributory negligence in its Answer. Because Lexington was on notice of the claim from the outset of the Underlying Action, its duty to defend was triggered when UPS first tendered its defense and Lexington's disclaimer thereby excused UPS from further obligations under the Lexington Policy.
Finally, Lexington's reliance on Smart Style Industries, Incorporated v. Pennsylvania General Insurance Company is misplaced. While the court noted that a "voluntary payments" clause is enforceable and that costs incurred before consent is given may not be reimbursed, it ultimately rejected the insurer's argument that coverage is not triggered until an insurer actually gives its consen. The court reasoned that, "once the duty to defend is triggered, it would be unreasonable for an insurer to withhold consent for reasonable expenses incurred after notice was given, merely because consent had not yet been granted when those reasonable expenses were incurred." Once UPS notified Lexington of the Underlying Action the duty to defend was triggered and Lexington was in a position to control or influence the litigation. Accordingly, UPS was also not required to seek Lexington's consent to retain counsel and incur litigation expenses in the Underlying Action.
2. Declaratory Judgment Action
Lexington argues that UPS is not entitled to reimbursement for expenses it incurred in the declaratory judgment action nor for those in connection with its fee application. It is well settled in New York that "an insured may not recover the expenses incurred in bringing an affirmative action against an insurer to settle its rights under the policy." However, it is also well settled that the time spent on an attorney's fee application is compensable.
The expenses incurred in the declaratory judgment action arc set forth in the Declaration of Ryan C. Chapoteau. Lexington suggests a reduction in those fees should be $5, 564.00. It is impossible to say precisely how much time plaintiff's counsel devoted to prosecuting the declaratory judgment action. But a review of the time records reveals that a reduction of $3, 000.00 is a fair reduction. Based on these hours and the reasonable hourly rates described above the total fees awarded at this time are $32, 269.00.
UPS also seeks $2, 503.73 in costs for expenses incurred including court fees, transcript fees, process server fees, medical record fees, and copying fees. These amounts appear reasonable and are included in UPS's fee award.
In sum, UPS seeks $35, 269.00 in attorneys' fees and $2, 503.73 in costs. In the Court's discretion, a reduction in the amount of $3, 000.00 was made to adjust for the non-compensable time spent on the declaratory judgment action. Accordingly, UPS is hereby awarded total attorneys' fees of $32, 269.00 and total Accordingly, UPS is hereby awarded total attorneys' fees of $32, 269.00 and total costs of $2, 503.73, for a combined award of $34, 772.73. However, UPS may submit a request for fees incurred in bringing this motion if it does so no later than close of business on January 22, 2014. The Clerk of the Court is directed to close UPS's motion for attorneys' fees and costs (Docket Entry # 36).