The Federal District Court for the District of Hawaii determined that the insured was not entitled to pre-tender defense fees. The Hanover Ins. Co. v. Anova Food, LLC, 2016 U.S. Dist. LEXIS 38947 (D. Haw. March 24, 2016).
Anova sold and marketed fish. It was insured under policies issued by Hanover that covered claims of "personal and advertising injury."
A patent infringement and false advertising case was filed against Anova in the District Court for the District of Hawaii.The underlying complaint alleged Anova falsely, misleadingly, and deceptively advertised, promoted, and sold fish. The allegations covered a period of time between 1999 and 2012, a portion of which time Anova was covered by the Hanover policies.
On October 12, 2012, nine months after the underlying lawsuit was filed, Anova requested that Hanover provide a defense. Hanover agreed to defend on December 4, 2012, but subject to a reservation of rights. Shortly thereafter, Anova retained the Zobrist law firm, a mainland firm, to represent it in the underlying case. Hanover sent a supplementary reservation of rights letter, again agreeing to defend, but appointing Gary Grimmer as defense counsel. The letter stated that Hanover had no obligation to pay for or reimburse any fees and costs incurred by Anova prior to the date of Anova's tender.
The underlying case settled. Hanover eventually paid $284,624 in attorneys fees to the Zobrist law firm. Anova contended that the Zobrist law firm was owed significantly more attorneys' fees. Subsequently, Hanover transferred Anova's defense to attorneys, Wesley H.H. Ching and Leighton K. Chong. Hanover advised Anova that it would no longer pay for fees generated by the Zobrist law firm.
Hanover filed suit for a declaratory judgment. Anova moved for partial summary judgment. Anova first contended that pre-tender fees were owed for the period of time before it requested a defense from Hanover. Second, Anova sought post-tender fees incurred after informing Hanover of their need to provide a defense on October 12, 2012.
The court first determined that Florida law applied to the interpretation of the policies. Florida was the state with the most significant interest in having its laws applied.
Next, the court found that Hanover had a duty to defend. The policies provided coverage for false advertising. The underlying complaint alleged that Anova had engaged in false advertising and unfair competition. Therefore, Anova's motion for partial summary judgment on Hanover's duty to defend was granted.
Turning to pre-tender fees, the court found that Hanover's December 12, 2012 reservation of rights letter did not constitute a breach of contract. Hanover agreed to provide a defense and appointed Mr. Grimmer, who Anova agreed would serve as defense counsel. Accordingly, pre-tender fees were not recoverable. Anova was not entitled to fees it incurred before it requested a defense on October 12, 2012.
Regarding post-tender fees, Hanover did not pay all of the post-tender fees to the Zobrist law firm. There were disputed questions of material fact concerning the post-tender fees that Anova incurred from the Zobrist law firm that prevented summary judgment. In the December 10, 2013 letter, Hanover stated that Anova would be responsible to pay for any attorneys fees for the Zobrist law firm if it chose to retain the firm. Hanover contended it did not agree to hire the Zobrist law firm, despite the contradictory evidence that it paid for a portion of the Zobrist law firm's attorneys fees. There were no facts to indicate for which period of time the attorneys' fees were paid to the Zobrist firm by Hanover. The record did not include what agreement was reached concerning the billing for the Zobrist law firm. These unresolved facts precluded the court from determining if Anova was entitled to additional attorneys' fees for the Zobrist law firm.