Schools Insurance Association of Washington (SIAW), represented by Soha & Lang, P.S. attorneys Paul Rosner and J. William Ashbaugh, prevailed in a 3-0 decision by the Washington Court of Appeals in Bremerton Sch. Dist. v. Sch. Ins. Ass’n of Wash., No. 85811-4-I, 2024 Wash. App. LEXIS 1726 (Ct. App. Aug. 26, 2024)
The case originates from a lawsuit brought by Joseph Kennedy seeking reinstatement as football coach, claiming the Bremerton School District’s decision not to renew his contract was a violation of his First Amendment rights and Title VII of the Civil Rights Act. SIAW defended the school district under a reservation of rights. Kennedy’s case was dismissed by the Western District of Washington and the Ninth Circuit.
The U.S. Supreme Court, in Kennedy v. Bremerton School District, 597 U.S. 507 (2022), reversed the Ninth Circuit, and ordered the Western District of Washington to enter a summary judgment for declaratory and injunctive relief in favor of the plaintiff Joseph Kennedy. Kennedy then sought attorney’s fees under 42 U.S.C. § 1988. Ultimately Kennedy and the school district reached a settlement on attorney’s fees for approximately $1.77 million, of which SIAW contributed $300,000. The school district then sued SIAW seeking indemnity for the remainder of the settlement. SIAW won at the trial court on summary judgment. The district then filed an appeal.The Court of Appeals affirmed the trial court’s dismissal on summary judgment. At issue on appeal was the application of an exclusion which precludes coverage for “[r]elief or redress in any form other than monetary damages, or for any fees, costs or expenses which an Insured may become obligated to pay as a result of any adverse judgment for declaratory relief.” The Court of Appeals agreed with SIAW that a fair and reasonable interpretation of the exclusion would remove coverage for attorney’s fees in the underlying matter.
The Court of Appeals then turned to the school district’s arguments. First the school district argued that the exclusion only precluded coverage for cost or expenses required to implement an adverse declaratory or injunctive relief judgment, rather than the attorney’s fees related to the judgment. The court held that the school district’s interpretation was not reasonable, as it ignored the plain meaning of the exclusion.
The district also argued that SIAW’s reservation of rights letter did not specifically mention that attorney’s fees would not be covered by the policy to demonstrate that SIAW effectively agreed with the school district’s interpretation. The court noted that this ignores the purpose of a reservation of rights letter and that the letter expressly stated that it is not “a waiver of any policy defense” and that the letter included the entirety of the language of the exclusion in question, giving the district ample notice that SIAW may rely on that exclusion.
The court similarly dismissed the district’s argument that attorney fees under 42 U.S.C. § 1988 were not dependent on the award of declarative relief and were an “intervening act.” The court disagreed, noting that Kennedy can only request the fees under 42 U.S.C. § 1988 because he had prevailed in the declarative and injunctive relief.
The court also dismissed the district’s argument that their interpretation was more consistent with the purpose of providing coverage for civil rights lawsuits, and that it was ambiguous on with respect to the term “monetary damages.” The court noted that the parties are free to contract as they wanted, and exclusions are normal. Also, the court noted that when viewed as the whole policy the term “monetary damages” was clearly separate from attorney fees.
After weighing the arguments, the court agreed with SIAW that “the only reasonable interpretation of the exclusion excludes coverage for an award of attorney fees and costs resulting from an adverse judgment for declaratory or injunctive relief.
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