WOLLHEIM, P.J.
This case comes to us on remand after the Supreme Court affirmed in part and reversed in part our decision in ZRZ Realty v. Beneficial Fire and Casualty Ins., 222 Or.App. 453, 194 P.3d 167 (2008) (ZRZ Realty I), modified on recons, 225 Or.App. 257, 201 P.3d 912 (2009) (ZRZ Realty II), aff'd in part and rev'd in part, 349 Or. 117, 241 P.3d 710
The Supreme Court subsequently affirmed our decision as it pertained to the allocation of the burden of proof, but concluded that our remand was too broad. The Supreme Court reasoned that "[t]he remand should have been limited, at least initially, to the question whether, for the purposes of the express fortuity policies, Zidell either expected or intended that a series of contaminants resulting from the operation of its business would damage the environment." ZRZ Realty III, 349 Or. at 147, 241 P.3d 710. The court also held that we had erred in reversing the attorney fee award in the judgment and in vacating the attorney fee award in the supplemental judgment, because the issue to be retried — whether Zidell expected or intended the damage resulting from its business activity for purposes of express fortuity policies — "would have no effect on either the trial court's ruling that London had a duty to defend Zidell in DEQ's enforcement action or the trial court's conclusion that ORS 742.061 authorized Zidell to recover attorney fees it incurred in this action in establishing and enforcing London's duty to defend." Id. at 150, 241 P.3d 710.
After reversing our decision in those respects, the court sent the case back to us for consideration of the assignments of error that we previously did not reach. The court described the remand this way:
ZRZ Realty III, 349 Or. at 150-51, 241 P.3d 710.
The remand, however, did not reach this court immediately, because the Supreme Court issued two more opinions — one on reconsideration that clarified that the trial court was not foreclosed from taking live testimony on remand, ZRZ Realty IV, 349 Or. 657, 249 P.3d 111, and another dealing with Zidell's petition for an award of attorney fees for prevailing on appeal, 351 Or. 255, 266 P.3d 61 (2011) (ZRZ Realty V).
In June 2012, we received the remand judgment from the Supreme Court and invited further briefing from the parties on what issues remain to be decided by this court. Having reviewed the original briefs, the various appellate decisions in this case,
The facts underlying this appeal are set out in the Supreme Court's opinion, which we repeat here to provide context for the various assignments of error.
ZRZ Realty III, 349 Or. at 122-26, 241 P.3d 710 (footnotes omitted).
The trial court's judgment, entered in April 2003, awarded attorney fees to Zidell in excess of $1.3 million. The court later entered a supplemental judgment that awarded Zidell an additional $268,988.15 in attorney fees.
London appealed the judgment and supplemental judgment, raising ten assignments of error, and Zidell cross-appealed, raising five of its own assignments of error. As previously described, in ZRZ Realty I we reversed and remanded the judgment and vacated the supplemental judgment for attorney fees; we then modified that decision on reconsideration in ZRZ Realty II. The Supreme Court, in ZRZ Realty III, reversed in part our decision and remanded the case to us to consider issues that, because of our broad remand, we had not addressed. We now undertake that task and, in the course of our analysis, will describe in more detail the aspects of previous opinions that relate to issues now before this court.
In its second assignment of error, London asserts that the trial court should have granted its motion to dismiss Zidell's claims pertaining to damage to river sediments, because "the nature of Zidell's knowing and intentional acts were so sure to cause harm that harm must be said to have been expected or intended." In ZRZ Realty I, we rejected that argument on two independent grounds. We first explained that the trial court's error in allocating the burden of proof — the subject of London's first assignment of error — had infected the trial in a way that affected our review of the second assignment of error:
ZRZ Realty I, 222 Or.App. at 478, 194 P.3d 167.
Nonetheless, we went on to address and reject on its merits London's argument regarding the sufficiency of the evidence:
ZRZ Realty I, 222 Or.App. at 478-80, 194 P.3d 167 (emphasis in original).
London then petitioned for reconsideration of our opinion, including our treatment of the second assignment of error. We allowed the petition for reconsideration and, in a subsequent opinion, explained:
ZRZ Realty II, 225 Or.App. at 262-63, 201 P.3d 912 (emphasis in original).
Thus, after reconsideration, our resolution of London's second assignment of error rested on the fact that London erroneously had been assigned the burden of proof with regard to certain policies, and that the error infected Zidell's presentation of its prima facie case in a way that made it improper to conclude, as a matter of law, that Zidell had not carried its burden below. We did not distinguish, for purposes of addressing the second assignment of error, between the express fortuity policies (on which Zidell had the burden of proof) and implied fortuity policies (on which London had the burden); rather, we assumed that the trial court's error regarding the burden of proof required a retrial as to all policies.
In ZRZ Realty III, the Supreme Court affirmed our allocation of the burden of proof on the express and implied fortuity policies, but concluded that our blanket remand was erroneous. The Supreme Court explained that, in the context of a bench trial, there was no reason why the court's retrial should not be limited, at least initially, to the express fortuity policies. Id. at 147, 241 P.3d 710. The court then remanded the case to this court and allowed the parties to ask us "to consider, if appropriate, those assignments of error that the court did not reach because it remanded the case for a new trial on both the express and implied fortuity policies." Id. at 151, 241 P.3d 710.
On remand, London now asks us to address its second assignment of error. London concedes that the second assignment is not among those that this court "did not reach" because of our broad remand; rather, London acknowledges that we rejected its second assignment but asks us to reconsider that holding in light of the more limited remand ordered by the Supreme Court. According to London, it was not unhappy with a retrial on all policies, as we held in ZRZ Realty I, and therefore "was properly circumspect in its reconsideration request" of the second assignment of error in ZRZ Realty II. But, London argues, "the Supreme Court has now decided that there will be no retrial on the implied fortuity policies. Accordingly, [the Court of Appeals] should decide whether, as a matter of law, Zidell expected the damage for which it seeks coverage
We agree with London that, in light of ZRZ Realty III, our treatment of its second assignment of error merits further consideration. The Supreme Court disagreed with one of the implicit premises of our holding as to the second assignment of error — namely, that the erroneous allocation of the burden of proof on the express fortuity policies necessarily affected the trial of the "unexpected and unintended" damage issue under the implied fortuity policies. Our prior reasoning — i.e., "it would be improper to conclude on appeal that the trial court should have granted a motion regarding Zidell's failure to make the wrong prima facie case," 222 Or.App. at 478, 194 P.3d 167 — logically extends to those policies on which the court misallocated the burden of proof: the express fortuity policies. Accordingly, we elect to reconsider London's arguments that it was entitled to judgment as a matter of law on the implied fortuity policies, on which the court correctly allocated the burden of proof.
As for the merits of the second assignment, London argues that the evidence established, as a matter of law, that Zidell expected and intended the damage for which it sought coverage. We analyzed the question of "intent" at length in ZRZ Realty I, but later withdrew that part of the opinion (ironically) to "avoid[] confusion on remand." ZRZ Realty II, 225 Or.App. at 262-63, 201 P.3d 912. Now that there will be no retrial as to the implied fortuity policies, we readopt our previous analysis concerning the evidence of "intent," which is set out above, 255 Or.App. at 535-39, 300 P.3d at 1230-32 (quoting ZRZ Realty I, 222 Or.App. at 478-80, 194 P.3d 167), and again conclude that the record gives rise to competing inferences as to whether Zidell intended the damage for which it seeks coverage.
Nor are we persuaded that the only inference available to the trier of fact was that Zidell "expected" the damage for which it seeks coverage. The trial court ruled that a person "expects" a result if the person "act[s] with awareness that the result is substantially certain to follow." Suffice it to say that, viewing the record as a whole, a factfinder could draw competing inferences regarding Zidell's degree of awareness of damage to river sediment and groundwater that would result from its activities. The question was one for the trier of fact, and the court did not err in denying London's motion to dismiss the claims as a matter of law with regard to the implied fortuity policies.
In its third assignment of error, London argues that the trial court failed to enter a judgment consistent with its factual findings concerning post-1960 policies. Specifically, London argues that the trial court found as fact that Zidell (1) knew by 1956 that its operations were discharging paint chips into river sediments and (2) knew by 1961 that anti-fouling paint was "toxic to marine life." Yet, the court ultimately concluded that Zidell had coverage up until 1972 for damage to sediments and soil — a legal conclusion that, according to London, is patently inconsistent with the court's other findings.
In ZRZ Realty I, we expressly declined to reach the third assignment of error. 222 Or.App. at 480, 194 P.3d 167. On remand, in light of ZRZ Realty III, we now reach and reject London's third assignment of error on the merits.
Contrary to London's argument, the court's findings regarding the discharge of paint chips into sediment and the toxicity of anti-fouling paint to marine life are not irreconcilable with the court's ultimate finding that "Zidell management expected damage to sediments and soil from substances contained in anti-fouling paint beginning in 1972." The trial court distinguished toxicity to marine life — for instance, harm to barnacles that attach themselves to the hulls of ship — from damage to the soil and river sediment from substances contained in that paint; it is the latter damage for which Zidell would be liable to DEQ for cleanup costs, and for which
In its fourth assignment of error, London argues that the trial court erred in ruling that bumbershoot policies for 1970 and 1971 covered expected losses, so long as those losses were unintended.
In ZRZ Realty I, we addressed London's argument on its fourth assignment of error notwithstanding our remand for a new trial, because the interpretation of the policies "present[ed] an issue likely to arise on remand." 222 Or.App. at 481, 194 P.3d 167. On the merits, we held that "the trial court did not err in declining to impose an implicit requirement that losses under the bumbershoot policies be unexpected as well as unintended." Id. at 486, 194 P.3d 167. However, in response to London's petition for reconsideration, we ultimately withdrew our conclusion regarding the correctness of the trial court's ruling regarding the bumbershoot policies:
ZRZ Realty II, 225 Or.App. at 265, 201 P.3d 912.
Now, on remand from the Supreme Court, London asks us to address the issue that we reserved in ZRZ Realty II: whether the trial court ruled correctly that damage that was "expected but unintended" was covered by the bumbershoot policies. We decline to revisit the fourth assignment of error, however, because our rejection of London's second and third assignments of error regarding the trial court's findings and conclusions, coupled with the Supreme Court's holding that retrial should be limited to the express fortuity policies (which the bumbershoot policies are not), appear to obviate the need to resolve whether the bumbershoot policies cover "expected" damage. The bumbershoot policies at issue cover 1970 and 1971.
In its first assignment of error on cross-appeal, Zidell argues that the trial court erred in adopting a "straight-time-on-the-risk" approach to allocating indemnity costs, rather than the "all sums" approach that Zidell had urged. Zidell argues that, shortly after the notice of appeal was filed, the legislature in 2003 adopted the "all sums" rule in amendments to the Cleanup Assistance Act, ORS 465.480(3)(a) — a legislative change that applies to claims arising before or after the effective date of the amendments unless "a final judgment, after exhaustion of all appeals, was entered before [July 1, 2004]." Or. Laws 2003, ch. 799, §§ 5(1), (2). Moreover, Zidell argues that the trial court's approach is inconsistent with this court's decision in Cascade Corp. v. American Home Assurance Co., 206 Or.App. 1, 135 P.3d 450 (2006), rev. dismissed, 342 Or. 645, 165 P.3d 1176 (2007).
In ZRZ Realty I, we declined to reach the assignment concerning allocation because the trial court on remand would have an opportunity to reconsider the allocation question in light of subsequent changes to the law and was in the best position to pass upon the question in the first instance. We adhere to that conclusion on remand. As the Supreme Court explained in ZRZ Realty III, "if the trial court reaches a different conclusion on remand as to when Zidell expected or intended property damage for the purposes of the express fortuity policies, then the court also will presumably have to adjust the findings allocating responsibility for remediating the damage between London and Zidell." 349 Or. at 148, 241 P.3d 710. And, even assuming that the trial court were to make the same findings on remand as it did initially, we do not understand the Supreme Court's opinion or this court's opinion to preclude the trial court from reconsidering the allocation question in light of amendments to the Cleanup Assistance Act or Cascade Corp. — an issue that neither this court nor the Supreme Court addressed on appeal. ZRZ Realty III, 349 Or. at 148, 241 P.3d 710 ("If, on either the existing or a supplemented record, the trial court makes the same findings on remand that the trial court did initially, then it presumably can reenter the judgment, with any appropriate adjustment for attorney fees." (Emphasis added.)). Because we conclude that, in light of the statutory changes and developments in case law, any review of this issue would benefit from a better-developed record below, we decline to address Zidell's first assignment of error.
In its second assignment, Zidell argues that the trial court erred in ruling that certain ship dismantling policies do not require London to pay defense costs. The policy language at issue provides:
In the trial court, Zidell argued that, although "[t]he ship dismantling policies do not provide for a duty to defend separate from policy limits, as in traditional [comprehensive general liability] coverage," the policy language nevertheless requires London to pay Zidell's defense costs up to the policy limits. In response, London argued that, under the final sentence of Clause 3, defense costs are recoverable only when liability "has been contested with the consent in writing of [London]" — a condition that Zidell failed to satisfy. In a reply memorandum, Zidell addressed London's objection "to paying defense costs under the ship dismantling policies based on a condition that Zidell's liability must be `contested with the consent in writing of [London],'" but Zidell did not argue that the "contested with consent" language was inapplicable to defense costs up to policy limits. Rather, Zidell argued that the condition should not preclude recovery because (1) despite entering into a consent decree with DEQ, Zidell was contesting liability; and (2) the failure to obtain London's consent was excused or waived by London's disclaimer of coverage.
The trial court agreed with London's interpretation of the policy language and rejected Zidell's reply. The trial court concluded:
On appeal, Zidell argues that the trial court erred in relying on the final sentence of Clause 3, suggesting, for the first time, that the "contest with consent" language is "directed to a specific type of situation":
In ZRZ Realty I, we stated that "[t]he argument that Zidell makes on appeal is different from the argument made to the trial court, and given that the case must be remanded for a new trial on both claims, we decline to address that argument for the first time on appeal." 222 Or.App. at 496, 194 P.3d 167. Now, in light of the more limited remand ordered in ZRZ Realty III, Zidell
Although Zidell's specific argument has morphed on appeal — a factor that, in light of our broad remand, counseled against offering any opinion on the issue in ZRZ Realty I — we are nonetheless persuaded that the parties and the trial court were adequately alerted to the issue of contractual interpretation that Zidell now raises, namely, whether the language in Clause 3 establishes an obligation to pay defense costs up to policy limits. For that reason, we agree with Zidell that, notwithstanding the evolution of its reasoning, preservation principles are not an impediment to our review. See State v. Haugen, 349 Or. 174, 190, 243 P.3d 31 (2010) ("A party ordinarily may preserve an issue for review merely by raising an issue at trial; alternatively (and preferably), a party may preserve an issue by raising the issue, identifying a source for the party's position, and advancing a particular argument." (Citing State v. Hitz, 307 Or. 183, 188, 766 P.2d 373 (1988))). We therefore turn to the merits.
Even in light of Zidell's newly proffered interpretation, we agree with the trial court that the language of Clause 3 "is neither vague nor ambiguous." Under Clause 3, if Zidell "shall become liable to pay and shall pay any sum or sums in respect of any liability, claim, demand, damages, and/or expenses arising from or occasioned by * * * [l]oss of or damage to any [itemized thing]," then London "will pay * * * such proportion of sum or sums so paid, or which may be required to indemnify [Zidell] for such loss[.]" Clause 3 continues by stating that any liability under Clauses 3 and 4 "in respect of any one accident or series of accidents arising out of the same event, shall be limited to the sum hereby insured, but when the liability of the Assured has been contested with the consent in writing of the Underwriters, the Underwriters will also pay a like proportion of the costs which the Assured shall thereby incur or be compelled to pay." (Emphasis added.)
Read in isolation, the "will also pay" language could mean, as Zidell contends, that "costs" are a subset of other covered liabilities in Clause 3, and that, when liability is contested with London's consent, London will pay those costs without regard to otherwise applicable policy limits. In context, however, it is evident that "costs" incurred to contest liability are separate from "expenses." Clause 4, which is set out above, distinguishes between "expenses * * * not recoverable under Clause 3" and "payment of legal costs" under Clause 3. Clause 1 of the policy is similarly worded, distinguishing between liability as a consequence of collision, which London will pay based on a proportionate formula, and "cases in which the liability of the Vessel has been contested, or proceedings have been taken to limit liability with the consent in writing of the Underwriters"; in the latter case, London "will also pay a like proportion of the costs which the Assured shall thereby incur or be compelled to pay."
Zidell's explanation — that the "will also pay" language applies only in circumstances in which London prefers to pay the claim but the policyholder wants to defend — would impose an implausible limitation on the language of the policy. As London points out, it is difficult to conceive of a reason why London would want to pay the claim without incurring defense costs but would nevertheless consent to pay them. Given the parties' respective commercial interests, the only plausible interpretation of the policy is the one that the trial court applied: London will pay Zidell's defense costs "when the liability of [Zidell] has been contested with the consent in writing of the Underwriters."
For the reasons stated above, we conclude that the trial court did not err in ruling that Zidell failed to satisfy the unambiguous predicate for coverage of defense costs under the ship dismantling policies. Accordingly, we reject Zidell's second assignment of error on cross-appeal.
All of the parties' remaining assignments of error concern the trial court's rulings regarding attorney fees. Because some of those assignments involve overlapping issues, we have grouped them by subject matter rather than by assignment of error. We review the trial court's rulings regarding Zidell's entitlement to attorney fees for errors of law, and its determinations regarding a reasonable amount of such an award for an abuse of discretion. E.g., Barber v. Green, 248 Or.App. 404, 273 P.3d 294 (2012).
In its eighth assignment, London argues that Zidell's attorney fee recovery under ORS 742.061 should have been limited to those attorney fees that Zidell incurred in establishing London's duty to defend under the insurance policies. Instead, London argues, the trial court permitted Zidell to recover attorney fees for work that its attorneys performed to "obtain a declaration of coverage for events that may or may not occur" — that is, on the prospective indemnity issue. See McGraw v. Gwinner, 282 Or. 393, 400, 578 P.2d 1250 (1978) (an insured must obtain a money judgment against an insurer to recover attorney fees under statutory predecessor of ORS 742.061; obtaining a declaration of future coverage does not, by itself, trigger the right to attorney fees).
Zidell's response is twofold. At one point Zidell contends, without much elaboration, that "the trial court did not award any attorney fees for work done specifically with regard to London's duty to indemnify." The trial court record suggests otherwise. At a hearing on entitlement to attorney fees, Zidell took the position that "we are entitled to all costs for this court proceeding to date and continuing," but conceded that it might not be able to recover for work performed on certain tort claims it brought against London. The court ruled that Zidell was entitled to attorney fees "for the defense cost portion of the case" from the tender of the DEQ action in July 1994 until the date of the trial court's summary judgment ruling on the duty to defend (July 23, 1999). The court then took up "the question of what about the attorney fees on the declaratory prima facie judgment action up until that same time." (Emphasis added.)
Citing McGraw, London argued that the declaratory judgment claim involved both indemnity and duty-to-defend issues, and that, as to the indemnity issues, Zidell had not obtained a money judgment that would entitle it to attorney fees.
Later, the court adhered to that ruling:
As a consequence, Zidell's statement of attorney fees and the court's ultimate award included time spent on the declaratory judgment action prior to July 23, 1999, without regard to whether that time was spent on matters concerning the duty to defend or the duty to indemnify.
Zidell's second response — and the bulk of its argument — is that ORS 742.061 "should be interpreted broadly" to include attorney fees regarding the indemnification issues. In fact, Zidell argues that, under ORS 742.061, it is entitled to an award of attorney fees for time spent on those declaratory judgment issues after the court's summary judgment ruling — fees that the trial court declined to award and that are the subject of Zidell's fourth assignment of error on cross-appeal. The crux of Zidell's contention, both in response to London's assignment of error and in support of its own assignment on cross-appeal, is that, once an insured obtains recovery that exceeds the insurer's tender, ORS 742.061 entitles the insured to recover all of its attorney fees incurred in litigating the policy, including coverage issues.
The Supreme Court, it turns out, has already considered and rejected the same argument — in the context of Zidell's petition for attorney fees in that court. In ZRZ prima facie Realty V, the court explained that Zidell was not entitled to appellate attorney fees for work related to the duty to indemnify:
ZRZ Realty V, 351 Or. at 266-67, 266 P.3d 61.
In light of the court's reasoning in ZRZ Realty V, we conclude that Zidell cannot recover attorney fees for work on the duty to indemnify, because it has not yet shown an independent entitlement to attorney fees on that matter. Id. at 267, 266 P.3d 61. Thus, the trial court correctly declined to award Zidell attorney fees for post-summary judgment work on the duty to indemnify, but the trial court erred in not imposing that same limitation on recovery for work performed before its summary judgment ruling. That is, Zidell has not established an independent right to recover attorney fees related to the duty to indemnify, which, at this stage of the litigation, precludes recovery under ORS 742.061 for work performed before or after July 23, 1999. We therefore remand with respect to the initial attorney fee award, which was included in the general judgment, for the trial court to reconsider the apportionment and award of attorney fees in light of that error.
In its ninth assignment of error, London argues that Zidell received a windfall because the court awarded attorney fees in an amount that exceeds what Zidell is obligated to pay under its fee agreement. Specifically, London asserts that Zidell agreed to pay its attorneys based on a fixed hourly rate plus a percentage of any net recovery arising out of claims against third parties. Yet, when Zidell sought attorney fees, it urged the trial court to award fees in an amount equal to the market rates that its attorneys might have billed rather than the rates they had actually billed Zidell. That higher rate was justified, according to Zidell, because the contingent fees had not been calculated or paid to Zidell's attorneys. In London's view, the court's award at that higher rate gave "Zidell a recovery far greater than the amount Zidell agreed to compensate its attorneys. There is no evidence that Zidell will be required to pay its attorneys the difference." See Associated Oregon Veterans v. DVA, 308 Or. 476, 481, 782 P.2d 418 (1989) (holding, under a provision of a contract awarding a "reasonable fee," that the prevailing party was "not entitled to more than it spent on attorney fees").
Suffice it to say that, under the circumstances of this case, we are not persuaded that the trial court awarded an amount that exceeds Zidell's obligation to its attorneys or that the court abused its discretion or somehow committed an error of law in determining a reasonable rate for the work performed by Zidell's attorneys. The lodestar method that the trial court used is a commonly applied and permissible approach
By the time that attorney fee issues were litigated, the London insurers were the last adverse parties still litigating against Zidell. In response to Zidell's statement of attorney fees, London argued that, because various insurers shared the obligation to defend Zidell and then settled with Zidell during the course of litigation, some of the money recovered from those settling insurers should be allocated to attorney fees, thereby reducing the amount of attorney fees that Zidell could recover from London. The trial court agreed with London, and the parties then stipulated to the amount of a credit, reserving the right to appeal the court's earlier ruling. The trial court's order states:
Zidell now argues on cross-appeal, as it did below, that London is "fully responsible for Zidell's reasonable attorney fees" and that a set off for fees incurred by settling defendants "conflicts with both the language and the legislative purposes of the attorney fees statute, ORS 742.061." London responds that, unless there is some settlement credit, Zidell's approach would yield a windfall as opposed to a "reasonable amount" of attorney fees under ORS 742.061. Both sides are correct, to a point.
At the same time that this case was moving through the appellate courts, London was litigating an equitable contribution action against some of the settling insurers. See Certain Underwriters v. Mass. Bonding and Ins. Co., 235 Or.App. 99, 104-06, 230 P.3d 103 (2010), modified on recons., 245 Or.App. 101, 260 P.3d 830 (2011) (describing parallel courses of underlying coverage case and contribution case). One of the issues in the contribution action was whether London and the settling insurers owed a common obligation to Zidell under ORS 742.061, thereby making it inequitable for those settling insurers to escape liability for attorney fees. In the course of addressing that issue, we explained that liability for attorney fees under ORS 742.061 is different from the duty to defend: "Unlike the duty to defend, which is a shared obligation that arises independent of completed litigation, liability for attorney fees under ORS 742.061 is a statutory obligation that arises only after the insured prevails at trial." 245 Or.App. at 107, 260 P.3d 830.
That observation concerning ORS 742.061 informs our analysis here as well. Under the
That said, we agree with London that ORS 742.061 requires that any attorney fee recovery be reasonable. See Strawn, 353 Or. at 217, 297 P.3d 439 (stating that, for purposes of ORS 742.061, "the touchstone for the amount of the award is * * * reasonableness"). In determining the reasonableness of a fee, the trial court shall consider "[s]uch other factors as the court may consider appropriate under the circumstances of the case." ORS 20.075(1)(h), (2). In the particular circumstances of this case, the potential for a windfall — that is, double payment of the same attorney fees — is a factor that the court can consider in setting a reasonable attorney fee.
As previously noted, the parties stipulated, in light of the court's prior rulings, to an amount of attorney fees. Because we have remanded the attorney fee award for further consideration in light of the erroneous inclusion of fees related to the duty to indemnify (London's eighth assignment of error), the parties will have an opportunity to revisit their stipulated amount, which also included some credit for the settling insurers, and the trial court will have an opportunity to consider the reasonableness of the new attorney fee award in light of any potential windfall to Zidell.
In its tenth assignment of error, London contends that the trial court erred in awarding Zidell attorney fees "for time its attorneys spent correcting their improper billing statements." Zidell's attorneys "block billed" their time; they failed to allocate time between work devoted to particular defendant insurers or to particular tasks. Consequently, London argues, Zidell was required to review painstakingly those billing statements and recreate a division of labor before submitting its attorney fee petition. The problem, according to London, is that it bore the brunt of the block-billing mistake by Zidell's attorneys, because Zidell later sought and was awarded, by way of a supplemental judgment, attorney fees for the time spent preparing the initial petition.
Zidell, for its part, argues that we should not second guess the trial court's determination of what was reasonable regarding the preparation of the attorney fee petition, which took into account a number of factors. We agree with Zidell. The trial court, in its findings and conclusions regarding the supplemental fee request, explained:
In applying those factors and reaching the conclusion that it did, the trial court implicitly rejected London's argument that Zidell's block billings inflated the amount of fees reasonably and necessarily incurred in preparing the petition. There is evidence in the record to support that implicit determination, particularly concerning the complexity of this case, and, specifically, the attorney fee process.
To summarize: We now reject London's second and third assignments of error as they pertain to the implied fortuity policies. We decline to revisit London's fourth assignment of error regarding the bumbershoot policies because, in the current posture, a decision as to whether those policies cover "expected but unintended" damage would have no effect on the rights of the parties. We also decline to reach Zidell's first assignment of error on cross-appeal, because the questions posed by that assignment would benefit from a better-developed record on remand. We reject on the merits Zidell's second assignment of error on cross-appeal, which concerns defense costs under ship dismantling policies.
As for attorney fees, we conclude, based on London's eighth assignment of error, that the initial attorney fee award in the judgment must be remanded because it includes fees for work performed concerning the duty to indemnify, a matter on which Zidell was not entitled to fees. On remand, the trial court also can consider, in setting a reasonable attorney fee award, the amounts that Zidell received for attorney fees from settling insurers; but, as Zidell correctly argued in its fifth assignment of error on cross-appeal, London is not necessarily entitled to a set off for those amounts. We reject London's ninth assignment of error regarding the billing rates used to calculate a reasonable fee award. And, finally, we reject London's tenth assignment of error — its challenge to the supplemental award of fees.
On appeal and on cross-appeal, reversed in part and remanded for further proceedings.
