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Jaynes Corporation v. American Safety Indemnity Co.

United States District Court, D. Nevada

April 25, 2014



MIRANDA M. DU, District Judge.


Trial in this case was limited to the issue of damages on Plaintiff Jaynes Corporation's ("Jaynes") claim for breach of contract on defendant American Safety Indemnity Company's ("ASIC") failure to provide a defense of Jaynes in the underlying action, Sun City Anthem Community Association v. Del Webb Communities, et. al., Clark County District Court Case No. A-10-608708-D (" Sun City Action" or "Underlying Action"). (Dkt. no. 57.) The Court granted the parties' stipulation to withdrawal of ASIC's jury demand (dkt. no. 115), and held a one-day bench trial on April 1, 2014 (dkt. no. 131).


The Court finds that Jaynes incurred fees defending itself in the Sun City Action and that those are the fees Jaynes seeks in the instant case. ASIC had a duty to defend Jaynes in the Sun City Action and is therefore obligated to pay the reasonable and necessary expenses Jaynes incurred.


When the insurer has breached its duty to defend, the insured carries the burden of proof regarding the existence and the amount of the expense. Once that burden is met, the expenses are presumed to be reasonable and necessary and it is the insurer that then carries the burden of proof to demonstrate that they are actually unreasonable and unnecessary. See Aerojet-General Corp. v. Transp. Indem. Co., 17 Cal.4th 38, 64 (1997); State of Cal. v. Pacific Indem. Co., 63 Cal.App.4th 1535, 1549 (1998). In Pacific Indemnity, the insured met its burden "when it demonstrated the hours worked and provided testimony that the work was all related to the defense." 63 Cal.App.4th at 1549.

A. Jaynes' Burden

In the Court's order denying Plaintiff's motion for summary judgment on damages, the Court found that while the insured's expenses are presumed reasonable and necessary in a case in which the insurer breached its duty to defend, the insured must still provide sufficient evidence so that the opposing party can rebut the presumption with evidence or argument. (Dkt. no. 77 at 5.) The Court noted that, generally, the insured is required to show the rates charged, the hours worked, and what the hours were spent addressing. See, e.g., Jordan v. Multnomah Cnty., 815 F.2d 1258, 1262-63 (9th Cir. 1987).

At trial, Plaintiff provided the invoices generated by Morris, Polich & Purdy, LLP ("MPP") in its representation of Jaynes in the Underlying Action as Plaintiff's Exhibit 1. Additionally, Plaintiff provided as Plaintiff's Exhibit 2 the payment history for the General Contractor, dated July 22, 2013, and as Plaintiff's Exhibit 3 the checks served upon Nicholas M. Wieczorek, the handling attorney at MPP for the Sun City Action, in compensation for the firm's work on the Sun City Action.

Mr. Wieczorek testified to the process by which MPP tracked its time spent on the Sun City Action. Mr. Wieczorek explained that each attorney and paralegal recorded his or her time in the Elite system that the firm uses, the firm generated a prebill each month that Mr. Wieczorek reviewed for accuracy, and then the firm prepared a final bill that was then sent to the client. Jaynes paid each final bill in full. Mr. Wieczorek also explained that he reported to Jaynes throughout the case, including written status updates and phone calls with Jim Rosel, who was the vice-president and general counsel for Jaynes during the Sun City Action.

Plaintiff's Exhibit 1, Mr. Wieczorek testified, includes a copy of every bill generated in the Sun City Action from the beginning of the case to its conclusion. Mr. Wieczorek testified that the bills total $178, 422.07. This figure, Mr. Wieczorek explained, does not include a number of costs for bills that Jaynes paid directly. Because those bills went directly to the client, Mr. Wieczorek did not include those costs in his total.[2] Mr. Wieczorek also identified the entries that were related to pursuit, totaling $8, 230, and subtracted them from the fees total. As a result, Jaynes seeks a total of $170, 192.07 in fees, from which Jaynes agrees the Court will deduct the self-insured retention ("SIR").

ASIC presented a single witness at trial, Jean Fisher, corporate claims counsel at ASIC during the relevant period of time. Ms. Fisher testified that ASIC's calculation of the invoices in Exhibit 1 totals $176, 199.07, compared to Mr. Wieczorek's calculation of $178, 422.07. Ms. Fisher also subtracted the fees related to pursuit totaling $8, 230.[3] Thus, ASIC testified that $167, 969.07 is the baseline fee calculation for Jaynes. It is from this baseline calculation that ASIC argues a number of charges should be subtracted as unreasonable and unnecessary, discussed in Section III.B. infra.

After considering the exhibits, and the testimony Plaintiff presented at trial explaining the calculations, the Court finds that Jaynes' requested fees are reasonable and necessary. However, the Court's own calculation totaling the invoices from Exhibit 1 matches neither Plaintiff's nor Defendant's.[4] The Court's calculation of fees from Exhibit 1, excluding costs, totals $176, 199.92. The Court has identified its discrepancy with Defendant's calculation. Defendant's Exhibit 512 erroneously listed the total invoice amount from invoice number 185566 as $16, 139, [5] instead of the correct amount of $16, 139.85, resulting in the Court's calculation being $.85 higher. The Court cannot provide an explanation for the discrepancy between its number and the number provided by Plaintiff as Plaintiff failed to provide the Court with a breakdown of its calculations.

The Court finds that Jaynes has met its initial burden to demonstrate that it incurred $167, 969.92 ($176, 199.92 minus $8, 230 in pursuit fees) in reasonable and necessary attorneys' ...

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