Home Indem. Co. v. City of Marianna

• Decision Date: 05 December 1988
• Docket Number: No. 88-196,88-196
• Citation: 297 Ark. 268,761 S.W.2d 171
• Parties: The HOME INDEMNITY COMPANY, Appellant, v. CITY OF MARIANNA, Arkansas, et al., Appellees.
• Court: Arkansas Supreme Court

Page 171

761 S.W.2d 171

297 Ark. 268

The HOME INDEMNITY COMPANY, Appellant, v. CITY OF MARIANNA, Arkansas, et al., Appellees.

No. 88-196.

Supreme Court of Arkansas.

Dec. 5, 1988.

Tom F. Lovett, Brian P. Boyce, Little Rock, for appellant.

Robert J. Donovan, Marianna, for appellees.

GLAZE, Justice.

The appellee has been (and continues to be) involved in defending a federal lawsuit wherein a group of black voters charged that the appellee's city boundaries violated the Voting Rights Act of 1965 and the one man, one vote rule. ¹ This state litigation ensued in connection with determining whether the appellant or others had the obligation to defend the federal lawsuit. After several hearings and appeals, we affirmed the Lee County Circuit Court's decision which held that under the terms of a public officials error and omissions liability policy (E & O policy) issued to appellee, appellant was obligated to defend appellee's interests in the federal suit. See Home Indemnity Co. v. City of Marianna, 291 Ark. 610, 727 S.W.2d 375 (1987); see also City of Marianna v. Arkansas Municipal League, 291 Ark. 74, 722 S.W.2d 578 (1987); City of Marianna v. Arkansas Municipal League, 289 Ark. 473, 712 S.W.2d 305 (1986).

Upon the court's last remand of this cause, the parties encountered a further dispute concerning the terms of the E & O policy, viz., whether the appellant was required, under a supplementary payments provision, to pay all costs taxed against the insured, the appellee, in the federal lawsuit. ² In holding the appellant was obligated to pay the costs taxed against appellee, the trial court further awarded appellee the sum of $100,675.62 for the appellee's cost of defending the federal suit and the sum of $70,906.62 for the costs the federal court assessed against appellee for attorneys' fees awarded the plaintiffs who instituted, and prevailed in, the federal suit. In this appeal, appellant claims the trial court erred in finding the supplemental payments provision was a part of the coverage given appellee under the E & O policy. It further contends the trial court was wrong in finding that the attorneys' fees, incurred by the appellee in defending the federal litigation, were reasonable and that the court improperly relied upon oral testimony when determining the reasonableness of those fees since the fees issue was submitted pursuant to a motion for summary judgment. We affirm the trial court in all respects.

Appellant first argues the E & O policy issued to appellee should not be read to include the supplemental payments provision, which requires the appellant to pay all the costs taxed against the appellee for defending the federal suit. Undisputably, some confusion existed as to coverage, due to the manner in which the E & O policy was issued. James L. Winchell, claims adjuster for the appellant, opined that the policy jacket, which was attached to and contained the E & O policy, was one which related to a general liability policy--a policy that covers bodily injury or property damage. However, the policy jacket, on its face, specified the appellee as the insured and reflected the premium payment paid for E & O coverage under policy number GL1396972. The jacket also contained a supplementary payments provision which stated that, in addition to the policy's limit of liability, appellant was obligated to pay all costs taxed against the appellee in any suit the appellant defended on the appellee's behalf. The confusion arose in this matter when both an attachment and an amendatory endorsement were added and made a part of the policy. The first attachment, entitled "coverage part," contained another supplementary payment provision but, unlike the jacket's provision, it provided the payments would not be in addition to the policy limits. Subsequently, an amendatory endorsement was added and it specifically replaced the supplementary payments provisions in the attachment and provided that "supplementary payments do not apply to insurance afforded by this coverage part." While the amendatory endorsement clearly amended or cancelled any supplemental payments provision in the E & O coverage attachment, the endorsement made no mention of the supplemental provision set forth in the jacket policy. Thus, the question arose as to whether the amendatory endorsement voided both supplemental payments provisions contained in the policy jacket and the first attachment even though the endorsement failed to refer to the one contained in the jacket.

We recognize that a contract of insurance is to be construed like other contracts, with the different clauses read together and an interpretation given that would harmonize all parts. See Continental Casualty Co. v. Davidson, 250 Ark. 35, 463 S.W.2d 652 (1971). However, an interpretation that will harmonize all parts is not always possible when there is ambiguity in the insurance policy because of two conflicting...