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Contractor and insurer get mixed results in final round of coverage war

Hastings Mutual Insurance Company refused to provide coverage when a contractor, Mosher Dolan Cataldo & Kelly (MDCK), was sued by a couple who hired them to build a home.  The contractor initially won a judgment and an appeal confirming that Hastings at least owed cost of defense coverage; later it won a judgment that Hastings owed it hundreds of thousands of dollars in defense costs incurred by Hastings.  In the interim, it lost on the issue of indemnity:  it was held that Hastings did not owe a duty to indemnify for those damages resulting from the contractors' work product. 

On what may be the final Appeals Court ruling in the case, the Court of Appeals held that Hastings was not required to pay the entire lower court award representing the contractor's defense costs. It noted Hastings' inconsistent position on expert witness fees and refused to allow Hastings to flip-flop on that issue. It enforced Hastings' limit of $150.00 per hour on attorneys' fees payable to MDCK's chosen attorneys despite the contractor's claim that it agreed to this limitation under duress.

The Court first rejected Hastings' attempt to re-argue the original decision in the Court of Appeals with regard to a claimed exclusion and its argument that no "occurrence" had been alleged.  The Court then acknowledged that where defense costs are incurred after a defense is wrongfully denied, the insurer's coverage limitations are not binding to limit the damages collectible by the insured.  Despite this longstanding rule, the Court allowed Hastings to limit daily defense costs recoverable by the insured to the $250.00 limitation in the policy since the contractor had not demonstrated how these expenses were directly related to the insurer's failure to defend.


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