256 P.3d 439
Wash. Ct. App.2011Background
- Immunex Corp. faced at least 23 complaints in the AWP litigation alleging inflated average wholesale prices (AWP) and related fraud, RICO, and consumer-protection claims.
- National Surety insured Immunex under umbrella and excess policies for policy period Sept 1, 1998 to Sept 1, 2002; Immunex tendered defense in 2006 for AWP suits.
- National Surety initially denied coverage but defended under a reservation of rights, seeking reimbursement if later determined no duty to defend.
- The trial court granted National Surety summary judgment that there was no duty to defend Immunex in the AWP litigation.
- Immunex sought defense-cost reimbursement and argued the insurer must cover costs until a court resolved coverage; National Surety argued late notice and prejudice issues.
- The court held the duty to defend existed until a court ruled no duty, ordered reimbursement of defense costs up to that point, and remanded for issues on prejudice and pre-tender costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend under discrimination provision | Immunex: claims arise out of discrimination; duty triggered. | National Surety: offenses alleged are fraud-based, not arising from discrimination; no duty. | No duty to defend; offenses do not arise out of discrimination. |
| Recovery of defense costs under reservation of rights | Immunex entitled to defense-cost reimbursement until court decides no coverage. | No express recoupment provision; reimbursement not required. | Insurer must reimburse defense costs until court resolves coverage; no requirement to recoup absent policy language. |
| Pre-tender defense costs recoverability | Griffin and related precedents require insurer to cover pre-tender costs if tender is required. | Pre-tender costs depend on prejudice or tender timing; disputed here. | Ambiguity remains; issue of pre-tender costs reserved for trial; not summary judgment. |
| Prejudice as a matter of law | Late tender prejudices insurer; prejudice may be presumed. | Prejudice must be proven with identifiable effects; not proven as a matter of law here. | Prejudice is a question of fact; not decided as a matter of law; remanded for trial. |
Key Cases Cited
- Kitsap County v. Allstate Ins. Co., 136 Wash.2d 567 (1998) (analyzes 'arising out of' and offense vs. injury determinations)
- Austl. Unlimited, Inc. v. Hartford Cas. Co., 147 Wash.App. 758 (2008) (definitions of 'arising out of' and coverage scope)
- Toll Bridge Auth. v. Aetna Ins. Co., 54 Wash.App. 400 (1989) (limits on coverage arising from origin of offenses)
- Avemco Ins. Co. v. Mock, 44 Wash.App. 327 (1986) (offense-origin concepts in policy interpretation)
- Woo v. Fireman's Fund Ins. Co., 161 Wash.2d 43 (2007) (duty to defend exists when complaint could trigger coverage; reservation of rights discussed)
- Am. Best Food, Inc. v. Alea London, Ltd., 168 Wash.2d 398 (2010) (duty to defend vs. indemnify distinction; trigger to defend)
- Truck Ins. Exch. v. VanPort Homes, Inc., 147 Wash.2d 751 (2002) (reservations of rights and defense obligations guidance)
- Griffin v. Allstate Ins. Co., 108 Wash.App. 133 (2001) (pre-tender costs and duty-to-defend timing; prejudice considerations)
- Unigard Ins. Co. v. Leven, 97 Wash.App. 417 (1999) (prejudice framework and influence on defense costs)