Homesite Insurance Company of the Midwest v. Howell

Opinion

1 2 3

4 5 UNITED STATES DISTRICT COURT 6 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 HOMESITE INSURANCE COMPANY OF CASE NO. 2:21-cv-01389-JHC 8 THE MIDWEST, a Wisconsin corporation, Plaintiff, ORDER 9 v. 10 ROBERT HOWELL, JR., a single individual, 11 ROBIN HOWELL, a single individual, and ROBERT HOWELL, SR., a single individual, 12

Defendants. 13

14 I 15 INTRODUCTION 16 This matter comes before the Court on Defendants’ Third Motion for Partial Summary 17 Judgment. Dkt. # 114. Defendants seek summary judgment on: (1) pre-tender defense costs; (2) 18 prejudgment interest on the pre-tender defense costs; and (3) attorney fees. Id. at 2. The Court 19 has reviewed the materials filed in support of, and in opposition to, the motion; the rest of the 20 file; and the governing law. For the reasons discussed below, the Court GRANTS in part and 21 DENIES in part the motion. 22

24 1 II BACKGROUND 2 Homesite Insurance Company of the Midwest brought this coverage suit against their 3 insureds, Robert Howell, Jr. and Robin Howell (Howells), in connection with a state court 4 lawsuit (Underlying Lawsuit) brought by Sierra Pacific Land & Timber Company (SPLT) 5 against Robert Howell, Jr. See Dkt. # 48 at 12–20. SPLT filed the Underlying Lawsuit on 6 December 3, 2020, in Whatcom County Superior Court. Dkt. # 97-1 at 2. The Howells tendered 7 the claim to Homesite on July 2, 2021. Dkt. # 85 at 2. 8 Before tendering the claim, the Howells hired Joseph Rehberger, a partner at Cascadia 9 Law Group, to represent them in the Underlying Lawsuit. Dkt. # 115-6 at 2–3. Mr. Rehberger 10 worked on the Underlying Lawsuit from January 15, 2021, to August 6, 2021, and the Howells 11 paid Cascadia $14,000. Dkt. # 115-6 at 3. 12 Mr. Rehberger’s standard hourly rate was $465 and his colleague, Tom McDonald, who 13 also worked on the case, had a standard hourly rate of $550. Id. For both lawyers, the firm 14 charged the Howells a discounted hourly rate of $400. Id. Homesite is now paying different 15 counsel to defend the Howells in the Underlying Lawsuit under a reservation of rights. Dkt. # 16 97-1 at 2. 17 In their Second Motion for Partial Summary Judgment, the Howells sought to recover 18 their pre-tender defense costs. Dkt. # 84 at 12. Homesite responded that it “agreed to reimburse 19 Howell Jr. for his reasonable pre-tender defense fees, but his counsel has repeatedly refused to 20 provide supporting invoices.” Dkt. # 94 at 3. In an order granting the Howells’ Second Motion 21 for Partial Summary Judgment, the Court ordered the parties to meet and confer about the pre- 22 tender defense fees. Dkt. # 113 at 22. The Court said, “[i]f the parties cannot come to a 23 resolution on this cause of action, the Howells may seek relief from the Court.” Id. 24 1 This issue is now before the Court again. The parties met and conferred on January 3, 2 2024, but did not resolve the amount of pre-tender fees owed by Homesite. Dkt. # 15 at 8. 3 The Howells argue that they paid Cascadia $14,000 to defend in the Underlying Lawsuit.

4 Dkt. # 114 at 2. Homesite counters that the proof relating to such fees provided by the Howells 5 lacks enough detail to show whether the fees were “reasonable.” Dkt. # 116 at 7. Homesite 6 asked to review the invoices from Cascadia, but the Howells refused to produce them on 7 attorney-client privilege grounds. Dkt. # 115-4 at 2. As a compromise, Homesite proposed: 8 In order to determine the reasonableness of the fees, Homesite will need to know 9 the basis of the $14,000 claimed. However, if you maintain your position that Homesite should not be allowed to review these invoices, perhaps Mr. Howell, Jr. 10 is willing to provide a declaration from his former counsel, Joseph Rehberger, that describes the rate(s) and broad nature of the work performed in defending Mr. 11 Howell, Jr., and the time Mr. Rehberger took to perform categories of tasks. This might be an appropriate middle-ground to avoid court intervention and expedite 12 reimbursement. Alternatively, please advise whether Mr. Howell, Jr. is willing to consider the invoices being submitted under a stipulated protective order or 13 confidentiality agreement. We are happy to confer further on this issue and trust we can work together to expedite resolution. 14 Dkt. # 115-5 at 3. The Howells obtained a declaration from Rehberger, which says: 15 16 I have reviewed the time records, specific billing entries, and invoices documenting legal services provided by myself and Cascadia Law Group to 17 Robert Howell, Jr. in defense of the claims asserted in the case captioned as Sierra Pacific Land & Timber Company v. Howell, Whatcom County Superior Court 18 Case No. 20-2-01247-37 (the “Lawsuit”). Attorneys working on this matter kept and recorded contemporaneous time records noting the legal services provided. 19 These time records reflect billing entries between January 15, 2021, and August 6, 2021. A summary tabulation of the same is attached as Exhibit A. 20 During the period of our firm’s representation of Mr. Howell, Mr. Howell was 21 invoiced and paid $14,000.00 in legal fees. On review of our firm’s time records, specific billing entries, and invoices, of the 41.75 total hours recorded and 22 reflected in Exhibit A, 38.75 hours were related to defense of Mr. Howell in the Lawsuit (with three (3) hours of time being unrelated to defense of the Lawsuit). 23 This time spent in defense of the Lawsuit included client conferences, review of the complaint and claims, a site visit, document review, preparation and filing of 24 an answer, conferences with opposing counsel, and investigation and discovery 1 work. Of the 38.75 hours recorded in defense of the Lawsuit, the invoices reflect four entries totaling a combined one (1) hour of time reflected as NO CHARGE. 2 Accordingly, of the 38.75 hours recorded in defense of the Lawsuit, 37.75 were recorded as billable hours for a total fee of $15,100.00. Upon review of the 3 specific billing entries and invoices, an additional three (3) hours of time was recorded as billable hours not related to defense of the Lawsuit, reflecting an 4 additional fee amount of $1,200.00. Combined, these amounts total $16,300.00. As reflected in Exhibit A, our firm provided discounts on the total invoiced 5 amounts in the combined amount of $2,300.00. 6 Dkt. # 115-6 at 3-4. III 7 SUMMARY JUDGMENT STANDARDS 8 Summary judgment is warranted if the movant shows that there is no genuine dispute as 9 to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 10 56(a). The moving party is entitled to judgment as a matter of law when the nonmoving party 11 fails to make an adequate showing on an essential element of a claim in the case on which the 12 nonmoving party has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1985). 13 There is no genuine issue of fact for trial when the record, taken as a whole, could not lead a 14 rational trier of fact to find for the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio 15 Corp., 475 U.S. 574, 586 (1986) (nonmoving party must present specific, significant probative 16 evidence, not simply “some metaphysical doubt”); Fed. R. Civ. P. 56(e). Underlying facts are 17 viewed in the light most favorable to the non-moving party. Matsushita, 475 U.S. at 587. 18 IV 19 DISCUSSION 20 A. Pre-tender defense costs 21 When an insurer has a duty to defend, the “insured can recover pretender fees and costs 22 except where a late tender prejudiced the insurer.” Nat’l Sur. Corp. v. Immunex Corp., 176 23 Wash. 2d 872, 889, 297 P.3d 688, 696 (2013). “[T]o establish prejudice an ‘insurer must prove 24 1 that an insured’s breach of a notice provision had an identifiable and material detrimental effect 2 on its ability to defend its interests.’” Id. at 890, 297 P.3d at 696 (quoting Mut. of Enumclaw Ins. 3 Co. v. USF Ins. Co., 164 Wash. 2d 411, 430, 191 P.3d 866, 878 (2008)). Further, “Washington

4 courts ‘reject speculation, and require evidence of concrete detriment resulting from delay, 5 together with some specific harm to the insurer caused thereby.’” Goodstein v. Cont’l Cas. Co., 6 509 F.3d 1042, 1058 (9th Cir. 2007) (quoting Canron, Inc. v. Fed. Ins. Co., 82 Wash. App. 480, 7 918 P.2d 937, 941 (1996)). The insurer bears the burden of proving prejudice. Mut. of 8 Enumclaw Ins. Co. v. USF Ins. Co., 164 Wash. 2d at 430, 191 P.3d at 878. 9 “If the insurer claims that its own counsel would have defended differently, it must show 10 that its participation would have materially affected the outcome, either as to liability or the 11 amount of damages. If the insurer claims that it was deprived of the ability to investigate, it must 12 show that the kind of evidence that was lost would have been material to its defense.” Id.; see

13 also Griffin v. Allstate Ins. Co., 108 Wash. App. 133, 141, 29 P.3d 777, 782 (2001) (“Prejudice 14 to the insurer may follow from an insured’s retention of counsel who may charge higher rates or 15 fail to pursue appropriate strategies.”).1 16 The Court has determined that Homesite has a duty to defend the Howells in the 17 Underlying Lawsuit. Dkt. # 113. Homesite concedes that it owes pre-tender costs but says there 18 are questions of fact as to whether $14,000 is reasonable. Dkt. # 116 at 7. It says that there are 19 questions as to (1) whether the fees “were reasonably related to the defense of covered claims”; 20 1 The reasonableness of the pre-tender defense costs fees is part of the prejudice analysis. 21 Washington courts have determined that insurers must pay reasonable pre-tender defense expenses. Griffin v. Allstate Ins. Co., 108 Wash. App. at 142, 29 P.3d at 783. “[T]he insurer’s obligation to pay for 22 pre-notice expenses depends not on whether the insurer was unable to formulate an adequate defense, but whether it was reasonable under the circumstances for the insured to have incurred the expenses, whether the expenses were reasonable, and whether the expenses materially exceeded that which the insurer would 23 have likely incurred if notice had been given earlier. Under this analysis, if the expenses are reasonable, then the insurer must normally cover or reimburse such costs to the insured.” 1 Robert P. Redemann & 24 Michael F. Smith, LAW AND PRAC. OF INS. COVERAGE LITIG. § 4:20 (2023). 1 (2) whether the attorney’s rate was reasonable; and (3) “whether [Mr. Rehberger] pursued 2 appropriate strategies that were directly related to Howell Jr.’s defense.” Id. 3 However, Homesite has not identified any genuine disputes of material facts regarding

4 whether it was prejudiced by the late tender such that the pre-tender defense costs are 5 unreasonable. As to the first issue, Homesite argues that the legal fees could have been related to 6 an unrelated criminal charge against Howell Jr. in 2021. Dkt. # 116 at 7. But this is a 7 speculative argument not based on any evidence, and it is contradicted by the facts in the record. 8 First, Mr. Rehberger declared that he worked only on the Underlying Lawsuit. Second, neither 9 Mr. Rehberger nor anyone else at his law firm is counsel of record for the criminal matter. See 10 USA v. Howell, 2:21-mj-00434-MLP. Therefore, there is no material dispute of fact on whether 11 the $14,000 that the Howells paid Cascadia were related to the defense of the Underlying 12 Lawsuit.

13 As to the issue of the reasonableness of the fees, Homesite has shown no prejudice due to 14 Mr. Rehberger’s hourly rate or litigation strategy. Homesite speculates that there are issues of 15 fact as to “whether [Mr. Rehberger’s] rate was reasonable” and “whether [Mr. Rehberger] 16 pursued appropriate strategies that were directly related to Howell Jr.’s defense.” Dkt. # 116 at 17 7. But this is the end of Homesite’s argument. It does not argue that the rate or the litigation 18 strategy were unreasonable. And it does not point to any other facts that it does not currently 19 have access to that could show that the litigation strategy or the hourly rate was unreasonable.2 20 21 22 23 2 In their meet and confer, the parties disagreed about whether the itemized billing statement from Cascadia is covered by the attorney-client privilege. Dkt. # 115. But the parties did not brief or argue this issue, so the Court 24 does not address it. 1 B. Prejudgment Interest 2 The Howells ask for prejudgment interest on the pre-tender fees. Dkt. # 114 at 9. 3 Washington law governs a request for prejudgment interest. Lund v. Albrecht, 936 F.2d 459, 464

4 (9th Cir.1991). 5 “Prejudgment interest is available ‘(1) when an amount claimed is “liquidated” or (2) 6 when the amount of an “unliquidated” claim is for an amount due upon a specific contract for the 7 payment of money and the amount due is determinable by computation with reference to a fixed 8 standard contained in the contract, without reliance on opinion or discretion.’” Rekhter v. State, 9 Dep’t of Soc. & Health Servs., 180 Wash. 2d 102, 124, 323 P.3d 1036, 1047 (2014) (quoting 10 Prier v. Refrigeration Eng’g Co., 74 Wash.2d 25, 32, 442 P.2d 621 (1968)). “A claim is 11 liquidated ‘where the evidence furnishes data which, if believed, makes it possible to compute 12 the amount with exactness, without reliance on opinion or discretion.’” Id. (emphasis in

13 original). 14 The parties disagree about whether pre-tender fees are liquidated or unliquidated. Fees 15 subject to a reasonableness analysis, such as attorney fees, are “unliquidated.” See Flint v. Hart, 16 82 Wash. App. 209, 226, 917 P.2d 590, 599 (1996). This rule has been applied to the recovery 17 of defense costs after a breach of the duty to defend, see Jaco Env’t, Inc. v. Am. Int’l Specialty 18 Lines Ins. Co., No. 2:09-CV-0145JLR, 2009 WL 1591340, at *9 (W.D. Wash. May 19, 2009), 19 and to the recovery of defense costs after a breach of an indemnification provision of a contract, 20 see Tri-M Erectors, Inc. v. Donald M. Drake Co., 27 Wash. App. 529, 537, 618 P.2d 1341, 1346 21 (1980). In Flint, the court held that “[t]o the extent the [] award for legal and related expenses 22 concerns ‘reasonable’ attorney fees, the award is unliquidated and the award of prejudgment

23 interest was improper. The costs included in the award, however, are liquidated.” 82 Wash. App. 24 at 226, 917 P.2d at 599. But the court determined that prejudgment interest was proper for an 1 award of attorney fees when the defendant did not challenge the reasonableness of the fees. Id.; 2 see also Taylor v. Shigaki, 84 Wash. App. 723, 732, 930 P.2d 340, 345 (1997) (upholding an 3 award of prejudgment interest on attorney fees where the “dispute was over which of two

4 contractual payment clauses to apply” and the amount could be computed without the court’s 5 discretion). 6 The Howells contend that because the pre-tender defense costs are contractual, and 7 different from attorney fees, they are liquidated. Dkt. # 114 at 9–10. Indeed, pre-tender defense 8 costs arise out of the insurer’s contractual duty to defend. See Nat’l Sur. Corp. v. Immunex 9 Corp., 176 Wash. 2d at 889, 297 P.3d at 696 (“‘The scope of a duty, however, is defined not by 10 its breach, but by the contract.’ Accordingly, an insured can recover pretender fees and costs 11 except where a late tender prejudiced the insurer.” (quoting Griffin v. Allstate Ins. Co., 108 12 Wash. App. at 141, 29 P.3d at 782)). But pre-tender defense costs are subject to a

13 reasonableness analysis; therefore, they are unliquidated. See Griffin v. Allstate Ins. Co., 108 14 Wash. App. at 142, 29 P.3d at 783 (holding that Allstate must pay “reasonable pre-tender 15 defense expenses” because they did not show prejudice from late tender). Therefore, 16 prejudgment interest is unavailable here. The Court DENIES the Howells’ motion for summary 17 judgment on this issue. 18 C. Attorney Fees 19 The Howells seek attorney fees under Olympic Steamship Co. v. Centennial Insurance 20 Co., 117 Wash. 2d 37, 52, 811 P.2d 673, 681 (1991). Under Olympic Steamship, “an award of 21 fees is required in any legal action where the insurer compels the insured to assume the burden of 22 legal action, to obtain the full benefit of his insurance contract, regardless of whether the

23 insurer’s duty to defend is at issue.” 117 Wash. 2d at 53, 811 P.2d at 681. 24 l The Howells seek attorney fees for some claims on which the Court has granted summary 2 ||judgment. But the issue of attorney fees is premature at this stage of litigation as multiple issues 3 are still pending before the Court. Thus, the Court DENIES the Howells’ motion for attorney 4 fees without prejudice. 5 IV 6 CONCLUSION

4 For the above stated reasons, the Court GRANTS in part and DENIES in part the

g Howells Third Motion for Partial Summary Judgment. Homesite is ORDERED to reimburse the

9 Howells for the reasonable pre-tender defense fees of $14,000.

10 1] Dated this 6 day of June, 2024.

13 CS / Af : Cbiwr- 14 John H. Chun United States District Judge 15 16 17 18 19 20 21 22 23 24