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Hartford Casualty Insurance v. Swapp Law PLLC

United States District Court, D. Utah

August 1, 2019




         This matter comes before the court on a Motion for Summary Judgment filed on November 6, 2018 by Counterclaim Plaintiffs Swapp Law, PLLC and James Craig Swapp (collectively, “Swapp Law”). Counterclaim Defendant Hartford Casualty Insurance (“Hartford”) filed an opposition to the motion on January 3, 2019, to which Swapp Law replied on February 1, 2019. Having reviewed the parties' memoranda and associated exhibits as well as the relevant law, the court now DENIES Swapp Law's Motion for Summary Judgment.


         Hartford is an insurance company organized under the laws of Indiana with its principal place of business in Connecticut. Since 2013, Hartford has provided business liability insurance to Swapp Law, a Utah limited liability company, under a policy that was renewed annually (the “Policy”).[1] The Policy covers claims brought against Swapp Law arising from bodily injury, property damage, or personal and advertising injury, provided that such claims do not fall under one of the specified exclusions.

         On August 9, 2017, Swapp Law was named as defendant in the civil action Wilcox, et. al. v. Swapp Law PLLC, et al., Case No. 2:17-cv-275 (E.D. Wash. 2017) (the “Underlying Action”). The Underlying Action alleges that Swapp Law violated the federal Driver's Privacy Protection Act (18 U.S.C. § 2721 et seq.) by purchasing accident reports from the Washington State Patrol and using the personal information gleaned from the reports to mail motorists unsolicited Swapp Law advertisements.

         Swapp Law notified Hartford of the Underlying Action and Hartford acknowledged receipt of the complaint in a letter dated August 15, 2017. This letter stated, in part:

At this time . . . Hartford has not yet made a determination as to whether [Swapp Law] is entitled to coverage in connection with the [Underlying Action]. In the interim, we suggest that you retain your own attorney to protect your interests in this matter. In the event we determine that coverage may exist and we agree to defend this suit, we will reimburse you only for those reasonable legal costs and fees incurred by you for the defense of this action . . . While the issue of what constitutes “reasonable legal costs and fees” may not be apparent to you, the legal community doing defense work in this area is well aware of the acceptable scale. You may wish to contact the undersigned prior to hiring an attorney since charges considered to be above the acceptable scale could result in our not covering your legal costs and fees in their entirety.

         Two days after receiving this letter, Swapp Law signed an engagement letter with the Lane Powell law firm to defend against the Underlying Action. The engagement agreement included the hourly rate of the lead attorney, Barbara Duffy (“Duffy”), as well as the hourly rates of other attorneys and paralegals within the firm.

         On October 5, 2017, Hartford agreed to defend Swapp Law under a reservation of rights, which stated that should it be determined that Hartford has no duty to provide a defense, Hartford would “withdraw from the defense of the [Underlying Action]” and possibly “seek reimbursement of all costs [Hartford] . . . expended in the defense.”

         On February 2, 2018, Rich Humpherys (“Humpherys”), an attorney representing Swapp Law with respect to insurance coverage matters, provided Hartford with the rates charged by the attorneys from Lane Powell doing most of the work on the Underlying Action: Duffy, Ryan McBride (“McBride”), and Aaron Schaer, whose hourly rates were respectively $645, $540, and $310. Humpherys wrote: “I understand from the insured's defense counsel . . . that Hartford's rates for this kind of work is $250/hr., which is only a fraction of [Duffy's] rate.”

         On February 19, 2018, Melissa Siggia (“Siggia”), responding on behalf of Hartford, made “an accommodation on this one case only to accept” the rates charged by Duffy and McBride. Duffy then emailed Siggia to identify additional attorneys and a paralegal who would also be working on the case. “We need to address the rates for these other timekeepers, ” Duffy wrote.

         A week later, Duffy wrote Siggia again: “What is our next step on addressing the other timekeeper rates?” Duffy sent a follow-up on March 13, 2018, stating that “[w]e also need our rates approved and you have only approved two timekeepers.”

         On March 14, 2018, Siggia wrote to Duffy, explaining that Hartford had approved rates for Duffy and McBride, but that all other timekeepers would be billed “at [Hartford's] previously identified rates of $195 per hour for associates and $100 for paralegals.” Following this email, Hartford proceeded to pay the Lane Powell associates and paralegals who worked on the Underlying Action $195 per hour and $100 per hour, respectively.

         On October 12, 2017, one week after agreeing to defend under a reservation of rights, Hartford brought a declaratory judgment action against Swapp Law in this court, seeking a declaration that it had no duty to defend or indemnify Swapp Law in the Underlying Action. On March 22, 2018, Swapp Law answered and filed a counterclaim against Hartford, arguing that Hartford breached its duty to defend by refusing to pay in full the rates charged by Lane Powell. In its ...

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