The Ninth Circuit upheld the District Court's decision that the insured Association of Apartment Owners was entitled to coverage for the attorneys' fees incurred [prior post here].Ass'n of Apartment Owners of the Moorings, Inc. v. Dongbu Ins. Co., Ltd., 2018 U.S. App. LEXIS 20251 (9th Cir. July 20, 2018).
The District Court for the District of Hawaii granted summary judgment to the AOAO, requiring Dongbu to indemnify the AOAO for an award of attorney's fees that an arbitrator ordered the AOAO to pay to the underlying claimants. The claimants prevailed on a claim that their condominium unit incurred water damage due to a common roof leak. Dongbu's policy required it to reimburse those sums that the AOAO was legally obligated to pay as damages because of property damage. The AOAO became legally obligated to pay the claimants' fees once the state court confirmed the arbitration award. Further, the water damage to the home constituted covered property damage under the policy.
The policy did not define "damages," but in the context of the policy, the plain meaning of "damages" encompassed the fees that the claimants incurred to vindicate their claim for water damage to their home, even if those fees were not a measure of the physical damage. The fees awarded to the claimants as the prevailing party thus fell within the meaning of "damages" under the policy.
The phrase "because of" connoted a non-exacting causation requirement whereby any award of damages that flows from covered property damage is covered, unless otherwise excluded. The fee award was properly considered an award of damages that the AOAO must pay "because of" that covered property damage and is not otherwise excluded.
Therefore, the District Court's judgment was affirmed.
Thanks to John Hall of Insurance Associates in Honolulu for sending me this decision.