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Buss v. Superior Court of Los Angeles County2/29/1996
CROSKEY, J.:
This case presents the question of whether, and under what circumstances, a liability insurer, which has provided a defense to its insured under a reservation of rights, may recover from that insured the attorney's fees and costs expended to defend the insured from claims for which there was no coverage under the policy. In answering this question, we necessarily recognize that a distinction must be made between two different types of noncovered claims: (1) those claims for which a potential for coverage existed but were ultimately determined not to be covered and (2) those claims for which there was never any potential for coverage under the terms of the policy but were nonetheless required to be defended because they were joined with other claims for which a potential for coverage did exist. We hold that in the former case an insurer may not recover its defense costs (incurred prior to the determination of noncoverage) absent an express policy term so providing or an agreement with the insured supported by a new consideration; however, in the latter situation, the insurer may recover such costs as it can prove, by a preponderance of the evidence, are fairly and reasonably allocable solely to the noncovered claims.
Because in this case the insurer seeks only to recover fees and costs expended in the defense of admittedly noncovered claims (which had been joined with a potentially covered claim) and has demonstrated that issues of material fact exist as to the fair and reasonable allocation of such defense costs, the trial court properly denied the insured's motion for summary judgment. We therefore deny the insured's petition for a writ of mandate.
FACTUAL AND PROCEDURAL BACKGROUND
On March 10, 1089, the petitioners Jerry H. Buss and California Sports Incorporated (collectively, "Buss") were sued by H & H Sports, Incorporated ("H & H Sports"), a corporation which had, since approximately December 1981, acted as Buss's exclusive agent in obtaining advertising for the Forum Sporting Arena and the Prime Ticket Network. Buss, the master tenant of the Forum, owned a professional basketball team (Los Angeles Lakers) and a professional hockey team (Los Angeles Kings) both of which used the Forum as their home arena. In addition, Buss promoted other sporting and entertainment events at that facility.
H & H Sports and Buss entered into certain contractual agreements regarding the performance and duration of such exclusive relationship. The agreements relevant to this case were entered into in 1984 and 1986. However, in the summer and fall of 1988, Buss acted to terminate H & H Sports' exclusive advertising rights. This action on the part of Buss led to the filing of the underlying lawsuit on March 10, 1989.
In that action, H & H Sports asserted 14 claims. In its final amended form (Third Amended Complaint filed on or about August 10, 1990), the H & H Sports' complaint consisted of 27 counts which were based on the following principal allegations: (1) breach of a 1984 written contract between Buss and H & H Sports providing for a complex mechanism for commission payments; (2) breach of a 1986 contract extension, again relating to the payment of commissions; (3) Buss's failure to honor his promises to provide H & H Sports with an ownership interest in the fledgling Prime Ticket Network; (4) Buss's conversion of $200,000 of H & H Sports' money, and his failure to pay interest on a $200,000 loan from H & H Sports; (5) conspiracy to defraud H & H Sports of commissions on the change of name from the "Forum" to the "Great Western Forum"; and, finally, (6) termination of the contract between H &a
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