Carolina Casualty Ins. Co. v. Merge Healthcare Solutions Inc.

Dist. Ct. did not err in finding that plaintiff-insurance company owed entire $3.15 million in attorney fees awarded in underlying lawsuit challenging defendant-insured’s proxy statement used to seek shareholder approval of proposed merger with another company, where plaintiff’s insurance policy contained clause covering as part of defendant’s “loss” not only what insured paid its own lawyers in underlying litigation, but also what shareholders paid to their attorneys. Record showed that court had awarded fees in terms of $630,000 lodestar that was multiplied by five to reflect risk of nonpayment, as well as good result for shareholders. While plaintiff conceded that policy covered lodestar figure, it further asserted that multiplier was not covered, where policy provided that loss would not include “multiplied portion of multiplied damages.” Ct., though, found that entire fee award was covered where nothing in policy defined “damages” in instant exclusion to include attorney fees. Moreover, context of instant exclusion did not pertain to fee awards, but rather pertained to category of losses that insurers exclude on grounds of moral hazard.