The federal district court for the district of Hawaii found that an arbitrator's award of attorneys' fees was part of the "damages because of property damage" and covered under a CGL policy. Ass'n of Apt. Owners of the Moorings v. Dongbu Ins. Co., 2016 U.S. Dist. LEXIS 110283 (Aug. 18, 2016 D. Haw).
The Moorings AOAO was the named insured under the policy issued by Dongbu. Jo-Anne and Brent Braden, owners of a residential unit at the Moorings, filed a demand for arbitration against the AOAO. The Bradens alleged that the AOAO had failed to repair and maintain their lanai roof, which caused water damage to their unit. The arbitrator awarded the Bradens $6,103.49 in special damages, which was the amount they paid to repair their roof and interior damage. The arbitrator also awarded $85,644.30 in attorneys' fees and $8,515.91 in costs to the Bradens.
Dongbu reimbursed the AOAO $6,203,49 in special damages and $8,515.91 in costs, but refused to reimburse for the attorneys' fees award. Dongbu contended that the award of attorneys' fees was not covered under the policy because the fees did not constitute "bodily injury," "property damage," or "personal and advertising injury" as those terms were used in the policy.The AOAO filed suit, seeking a judgment for the $85,644.30 awarded in fees by the arbitrator and prejudgment interest.
The district court found it was undisputed that the AOAO became legally obligated to pay the attorneys fees award when the state court confirmed the award. Further, it was undisputed that the arbitrator found the Bradens suffered property damage due to leaks in their lanai roof. It was also undisputed that Dongbu reimbursed the AOAO pursuant to the policy for special damages and costs awarded by the arbitrator. The sole question was whether the arbitrator's award of attorneys' fees constituted "damages because of . . . [the Bradens'] 'property damage.'"
The court found that (1) the AOAO became legally obligated to pay the attorneys fee award when the state court confirmed the arbitration award and (2) the Bradens' property damage constituted "property damage to which this insurance applies" insofar as Dongbu reimbursed the AOAO for the special damages awarded by the arbitrator. Further, the fees award was restitutive payment to the Bradens and flowed from their property damage. But for their property damage, they would not have pursued arbitration and been awarded fees.
Dongbu did not challenge the request for prejudgment interest, so this was also awarded. Judgment was entered for the AOAO in the amount of $85,644.30 plus prejudgment interest.