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Travelers Wins Attorney Fees in Insurance Coverage Litigation

January 3, 2019 | Posted in : Coverage of Fees / Duty to Defend, Fee Dispute, Fee Entitlement

A recent Law 360 story by John Kennedy, “Travelers Wins Atty Fees Spat in Litigation Coverage Dispute,” reports that Travelers acted reasonably when it initially refused to reimburse a pipe manufacturer for attorneys' fees linked to a Canadian lawsuit over allegedly defective water pipes, a Washington federal judge said.  Weighing dueling summary judgment motions filed by Travelers Property Casualty Co. of America and Northwest Pipe Co., U.S. District Judge Benjamin H. Settle sided with the insurer and rejected Northwest Pipe’s request. Although Travelers initiated the suit in February 2017 seeking answers to insurance coverage questions stemming from the Canadian litigation, Judge Settle’s order dealt only with the pipe-maker’s counterclaims that the insurer acted in bad faith.

Ultimately, Judge Settle found that no reasonable juror could say Travelers acted improperly when it decided not to pay for the services of Portland, Oregon-based lawyer Michael J. Sandmire of Ater Wynne LLP.  That refusal was based on a one-sentence email that said Northwest Pipe had hired Sandmire and a second attorney based out of Vancouver, British Columbia, the judge said.  The email failed to explain why an Oregon attorney was necessary to defend a case in Canada or that Northwest Pipe was seeking reimbursement for fees it had already incurred, Judge Settle said. 

“Travelers stated that it ‘is not agreeing to pay for the services of Mr. Sandmire,’” Judge Settle said.  “This was a reasonable position because, without further explanation, there should be no need for the services of an additional attorney, especially one that is not even licensed to practice in the country of the underlying litigation.”  Northwest Pipe has been a Travelers customer since at least 2006, the year the Greater Vancouver Water District hired the pipe manufacturer to help build two underground pipelines for waste and drinking water, court documents show.

In 2013, the Water District accused Northwest Pipe of making faulty parts and installing them improperly, delaying the entire project.  Two years later, the utility took the dispute to court in British Columbia.  After Northwest Pipe told Travelers it had hired Sandmire and the other attorney to handle the case, the insurer agreed to defend the pipe-maker and use the Canadian lawyer, but refused to pay for Sandmire.  The pipe manufacturer said Travelers didn’t even evaluate Sandmire before denying coverage of his fees and that its failure to do so was an act of bad faith and a violation of the Washington Consumer Protection Act.

Travelers made numerous arguments that Northwest Pipe hadn’t shown it acted unreasonably, including that it didn’t deny any aspect of the company’s coverage claim.  Judge Settle agreed with that argument only somewhat because the email, albeit brief, put Travelers on notice that it would be asked to cover the attorneys’ fees.  When Northwest Pipe demanded reimbursement for Sandmire’s bills, Travelers asked for more information.  When it got that, it agreed to pay for Sandmire’s work, plus interest.  The pipe-maker refused, not wanting to let Travelers off the hook for breach of contract, the judge said.

The case is Travelers Property Casualty Co. of America, et al., v. Northwest Pipe Co., et al., case number 3:17-cv-05098, in the U.S. District Court for the Western District of Washington.