Opinion
98 CIV. 4650(KNF)
03-08-2002
NATIONAL GRANGE MUTUAL INSURANCE COMPANY, Plaintiff, v. UDAR CORPORATION, N.V., Defendant.
Jonathan M. Citrin, Esq., Armienti & Brooks, P.C., New York. Andrew Charles Kirwin, Esq., Weinstein Soybel & Kirwin, New York.
Jonathan M. Citrin, Esq., Armienti & Brooks, P.C., New York.
Andrew Charles Kirwin, Esq., Weinstein Soybel & Kirwin, New York.
MEMORANDUM AND ORDER
FOX, MAGISTRATE J.
I. INTRODUCTION
*1 Before the Court, in this action brought pursuant to the court's diversity jurisdiction, is defendant Udar Corporation, N.V.'s (“Udar”) application for attorney's fees. Udar opposed successfully plaintiff National Grange Mutual Insurance Company's (“NGM”) attempt to obtain a declaration from the Court that it did not owe a duty to defend or indemnify Udar in an underlying tort action. Udar now seeks an order directing NGM to pay it the attorney's fees Udar incurred in defending against NGM's declaratory judgment action. NGM opposes the application. It contends that under jurisprudential precedent in this judicial district, Udar's application for attorney's fees must be denied.
II. BACKGROUND
Udar was named as a defendant in a lead-based paint tort action filed by a former resident of property Udar owned in Bronx County, New York. A Udar agent had purchased a liability insurance policy from NGM for Udar's Bronx County property. Udar maintained that NGM, under the terms and conditions of that insurance policy, was obligated to defend and to indemnify Udar in the lead-based paint action. NGM provided Udar with a defense. However, it challenged whether it was obligated to do so and the declaratory judgment action referenced above was commenced in this court to resolve that issue.
NGM moved for summary judgment in the declaratory judgment action. Udar opposed the motion by filing a cross-motion for summary judgment. In a Memorandum and Order, dated July 31, 2000, the Court denied NGM's motion for summary judgment and granted Udar's cross-motion for summary judgment. Inasmuch as Udar defended itself successfully in the declaratory judgment action and, furthermore, in reliance upon New York law, which governs in this diversity action, Udar contends that it is entitled to recoup from NGM the attorney's fees Udar incurred while defending against the declaratory judgment action that NGM commenced in this court.
III. DISCUSSION
Entitlement to Attorney's Fees
Under New York law, an exception to the general rule that litigation costs are not recoverable by a winning litigant has been established. That exception applies when an insurance policyholder has been cast in a defensive posture by its insurer in a dispute over the insurer's duty to defend the policyholder. In such an instance, the insurance policyholder may recover attorney's fees incurred in defending against the legal steps the insurer took to free itself from its insurance policy's obligations. See Mighty Midgets, Inc. v. Centennial Ins. Co., 47 N.Y.2d 12, 21, 416 N.Y.S.2d 559, 564 (1979); Employers Mut. Cas. Co. v. Key Pharmaceuticals, 75 F.3d 815, 824 (1996). The rationale for the exception is that the insurer's responsibility to defend its insured “reaches the defense of any actions arising out of the occurrence.” Mighty Midgets, Inc. v. Centennial Ins. Co., 47 N.Y.2d at 21, 416 N.Y.S.2d at 564 (emphasis in original).
In the case at bar, it is uncontested that Udar was placed in a defensive posture by NGM in their dispute over NGM's duty to defend Udar in the lead-based paint action. It is also uncontested that Udar was successful in defending against NGM's motion for summary judgment. Therefore, the Court finds that the holding in Mighty Midgets, which is clear and unambiguous, permits Udar to recover from NGM the attorney's fees it incurred in mounting a defense to the declaratory judgment action.
*2 In reaching this determination, the Court has considered the many cases arising in this judicial district upon which NGM relied in urging that Udar's motion for attorney's fees be denied. Among the cases considered were the following: Great Northern Ins. Co. v. Dayco Corp., 637 F.Supp. 765 (S.D.N.Y.1986); Nationwide Mut. Ins. Co. v. Welch, 988 F.Supp. 629 (S.D.N.Y.1997); and Mount Vernon Fire Ins. Co. v. Congregation Kehilath Yakov, Inc., No. 95 Civ. 7973, 1999 WL 1072484 (S.D.N.Y. Nov. 29, 1999).
While the Court found the determinations reached in these cases, and others relied upon by NGM, to be most informative, the Court found the determinations reached by New York's intermediate appellate court—all of which are premised on the holding by New York's highest court in Mighty Midgets—more persuasive. Each division of New York's intermediate appellate court has, in the recent past, confronted the issue presented in the instant application, and each has determined that an insured who has been required to defend against its insurer's attempt to free itself from its insurance policy obligations is entitled, under New York law, to recover attorney's fees from the insurer. See U.S. Underwriters Ins. Co. v. Mesiftah Eitz Chaim of Bobov, 210 A.D.2d 218, 620 N.Y.S.2d 5 (App. Div.2d Dep't 1994); Mohawk Minden Ins. Co. v. Ferry, 251 A.D.2d 846, 674 N.Y.S.2d 512 (App. Div.3d Dep't 1998); Chase Manhattan Bank, N.A. v. Each Individual Underwriter Bound to Lloyd's Policy No. 790/004A89005, 258 A.D.2d 1, 5 , 690 N.Y.S.2d 570, 573 (App. Div. 1st Dep't 1999); and United States Fidelity and Guaranty Co. v. New York, Susquehanna and Western Railway Corp., 277 A.D.2d 1026, 716 N.Y.S.2d 181 (App. Div. 4th Dep't 2000). The New York State Supreme Court, Appellate Division, is required to interpret, apply and enforce New York law on a daily basis, consistent with the pronouncements of New York's highest court, the New York Court of Appeals. The New York Court of Appeals has stated that, in a situation such as exists in the instant case, an insured is entitled to recover its attorney's fees from its insurer. The Appellate Division decisions cited above—none of which has been upset by the New York Court of Appeals—confirm that this is the law in New York. Accordingly, the Court finds that Udar is entitled to recover from NGM the attorney's fees it incurred when it defended against the declaratory judgment action that NGM initiated in this court.
To the extent that NGM contends that an insurer's liability for the attorney's fees incurred by its insured, when the insured is placed in a defensive posture by the insurer, turns on whether the insurer provided a defense for the insured in an underlying litigation, NGM is wrong. See United States Fidelity and Guaranty Co. v. New York, Susquehanna and Western Railway Corp., 277 A.D.2d at 1026-1027, 716 N.Y.S.2d at 181-182 (holding that whether the insurer provided a defense in an underlying tort action is of no moment when an insured seeks to recover attorney's fees after having been placed in a defensive posture by the insurer).
Amount of Attorney's Fees
When fixing a reasonable rate for attorney fees, it is appropriate for a court to consider and to apply the prevailing market rates in the relevant community for similar legal work of lawyers of reasonably comparable skill, experience and reputation. See Blum v. Stenson, 465 U.S. 886, 895, n. 11, 104 S.Ct. 1541, 1547 n. 11 (1984). In addition, it is permissible for a court to rely upon its own knowledge of private firm hourly rates in deciding what reasonable attorney fees are in the community. Miele v. N.Y. State Teamsters Conference Pension & Retirement Fund, 831 F.2d 407, 409 (2d Cir.1987).
*3 In defending this action, Udar incurred attorney fees through the work performed by Andrew Kirwin, a member of Weinstein Soybel & Kirwin, the law firm engaged to represent Udar. Mr. Kirwin has practiced law in excess of eight years. His practice consists primarily of representing commercial and residential landlords in matters germane to the management of their properties and in litigation. For the period August 20, 1998, through February 16, 1999, he was compensated at the hourly rate of $200.00 and worked 15 .9 hours on this case. During the period February 17, 1999, through October 17, 2000, Mr. Kirwin was compensated at the hourly rate of $250.00 and worked 44.8 hours on defendant's behalf. An additional 7 .3 hours of work were performed by Mr. Kirwin for Udar during the period March 16, 2001, through May 22, 2001. His hourly billing rate during that period was also $250.00. In addition, defendant has established that its counsel's disbursements in connection with this action total $15.71.
Plaintiff has not contested, as unreasonable, the number of hours defendant's counsel expended defending this action on Udar's behalf, the hourly rates at which Udar's counsel was compensated or the total amount of his disbursements. Based upon the nature of the case, the Court's review of the submissions by Udar, which outline the services performed by its counsel, and the Court's understanding of the hourly rates charged by private law firms in the community, the Court concludes that $16,220.71 in attorney fees were reasonably incurred by Udar in connection with defending against NGM's declaratory judgment action. Therefore, plaintiff shall tender to defendant $16,220.71 within ten (10) days of the date of this order.
SO ORDERED.
All Citations
Not Reported in F.Supp.2d, 2002 WL 373240