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San Gabriel Valley Water Co. v. Hartford Accident and Indemnity Co.8/9/2000
CERTIFIED FOR PUBLICATION
APPEAL from a judgment of the Superior Court of the County of Los Angeles, Edward M. Ross, Judge.
Affirmed.
Civil Code section 2860, subdivision (c) provides in part that in cases of conflict of interest requiring an insurer to provide independent counsel to defend an insured, "The insurer's obligation to pay fees to the independent counsel selected by the insured is limited to the rates which are actually paid by the insurer to attorneys retained by it in the ordinary course of business in the defense of similar actions in the community where the claim arose or is being defended." This case presents two questions regarding the application of section 2860(c). First, does the statute properly apply to actions commenced after its enactment but where the underlying insurance policy pre-existed that enactment? Second, in cases in which more than one insurer has reserved rights and is obligated to provide for independent counsel, does the statute provide for a single rate limit applicable to those insurers collectively, as opposed to requiring them each potentially to pay up to its own ordinary rate? We agree with the trial court that the answer to both questions is affirmative, and we therefore affirm the declaratory judgment granted in favor of defendants, liability insurers of plaintiff San Gabriel Valley Water Company.
FACTS
Plaintiff brought this action for declaratory relief against a group of insurers (defendants) with which plaintiff had liability insurance policies that potentially covered two damages lawsuits, filed in 1997 and 1998, which charged plaintiff with furnishing contaminated drinking water over a period of years. As reflected in the stipulated facts on which the case was tried, some of these policies predated January 1, 1988, the date section 2860 became effective. None of them contained provisions regarding attorney fees or disputes concerning such fees that would render section 2860(c) inapplicable. Defendants each agreed to provide a defense of the actions subject to reservations of rights affecting indemnity coverage, and each agreed that plaintiff was therefore entitled, pursuant to section 2860, to retain independent counsel for that defense.
Plaintiff chose as independent counsel the law firm of Proskauer Rose LLP (Proskauer). Proskauer has billed plaintiff hourly rates of between $245 and $310 for certain named senior attorneys, $125 to $235 for junior associates, and $40 to $110 for clerks and paralegals. In contrast, according to the complaint, the various defendants advised plaintiff that the hourly rates they ordinarily paid for defense of similar actions in the community ranged from $125 to $186 for partners, $110 to $146 for associates, and $65 to $75 for paralegals. Defendants jointly offered to pay $170 per hour for partners, $140 for associates, and $65 for paralegals.
Plaintiff's original complaint sought a declaration that section 2860(c)'s limitation of fee rates applied to the defendants individually, not collectively, and therefore that defendants collectively could be required under the statute to pay a rate in excess of their individual rates, provided it was reasonable. Defendants disputed this position. By amended complaint, plaintiff sought a further declaration that section 2860(c) did not apply to the payment of independent counsel fees "pursuant to" those of defendants' policies that had been issued before January 1, 1988.
After consideration of the stipulated facts, and the parties' trial briefs and oral arguments, the trial court determined both issues in favor of defendants. The court thereupon issued a declaratory judgment to the
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