In an as-yet-unpublished decision in the long-running Ash Grove v. Liberty Mutual case the court recently granted the policyholder's request for prejudgment interest on defense costs recovered at trial. Ash Grove (Case No. 09-239-HZ) involves reimbursement of legal fees and costs incurred in defense of claims associated with the Portland Harbor Superfund Site. After pretrial rulings established that Ash Grove's carriers had a duty to defend, the case went to trial nearly a year ago on some remaining issues about the scope of the duty to defend, and damages. Following a bench trial, the court held that the carriers' duty to defend began in January, 2008, when notice was initially given. The court awarded Ash Grove over $1.8 million in defense costs from that point through the end of 2012.
In a post-trial motion, Ash Grove asked the court to award prejudgment interest at the statutory rate (9%) running from the date that the company paid each of the monthly invoices. This was an issue of first impression in Oregon, at least on these facts. Nationally, some courts had held that where an insurance carrier contests the reasonableness of defense costs, the amount is not "readily ascertainable" (which is the near-universal test for awarding prejudgment interest) until the court has resolved those disputed issues, and thus prejudgment interest cannot be awarded. That was the situation in Ash Grove - the carriers hotly contested nearly all of the company's defense costs. The Ash Grove trial court rejected the carriers' view, instead siding with a contrary line of cases holding that a carrier's contentions about reasonableness of defense costs does not make the amount not "reasonably ascertainable." The Ash Grove court also noted that without an award of prejudgment interest the policyholder would not be made whole.
Previously, the only cases in Oregon in which the court had awarded prejudgment interest on defense costs occurred in cases in which the reasonableness of defense costs was not disputed. This new ruling should increase the pressure on carriers to settle disputes over defense costs before trial.
Note: We have been privileged to act as local counsel for Ash Grove in this case. Past results in any particular are no guarantee of future performance or result in any other case. Neither this posting nor any other posting in this blog should be taken as legal advice. See other disclaimers at bottom.
