Harbor Insurance v. Schnabel Foundation Co.

Citations: 992 F. Supp. 431; 1997 U.S. Dist. LEXIS 21584; 1997 WL 829862Docket: Civil Action No. 87-2212 (HHG)

Court: District Court, District of Columbia; July 29, 1997; Federal District Court

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In the case involving plaintiff Harbor Insurance Company and defendant Schnabel Foundation Company, the court retried the matter after an appellate remand concerning professional negligence related to the installation of a sheeting and shoring system that caused damage to the Sears Building. The court previously found Schnabel liable for the negligence, leading to damages assessed against it. OMNI Construction, the general contractor, incurred significant repair costs for which it sought reimbursement from Harbor, its umbrella liability insurer. The court ordered Harbor to pay OMNI a total of $1,030,727.17, which included various interest and fees.

Harbor's entitlement to attorneys' fees and prejudgment interest on the repair costs remained disputed. Under District of Columbia law, prejudgment interest is mandatory for liquidated debts, defined as easily ascertainable sums due at the time they arose. The parties had agreed that $978,208.60 was the reasonable cost for repairing the Sears Building, a sum that was ascertainable and did not fluctuate during litigation. The court noted that despite Schnabel disputing the claims, this did not affect the entitlement to prejudgment interest, which was stipulated in the Subcontract Agreement between OMNI and Schnabel. The court concluded that prejudgment interest is owed from the date the debts became due, following OMNI's demand for payment made in 1984 and the subsequent filing of the action in 1987.

Prejudgment interest for claims submitted on August 28, November 19, 1986, and May 21, July 14, 1987, begins on August 25, 1987. For later disputed claims, interest starts from the resolution date: September 24, 1987, for agreements made on August 25, 1987, and February 10, 1988, for agreements on January 11, 1988. Harbor seeks reimbursement of $54,876.88 paid to OMNI for investigating and settling a claim related to Sears, along with $653,747 in attorneys’ fees and costs incurred during litigation. The court acknowledges these fees as recoverable since they pertain to claims arising from Schnabel’s negligence, making them recoverable by Harbor as OMNI's subrogee.

Schnabel disputes Harbor's entitlement to these fees, arguing they were not incurred in prosecuting claims against the party responsible for the loss but rather in establishing coverage rights under the insurance policy. The court disagrees, affirming that the fees are recoverable. Generally, attorneys’ fees are not recoverable unless stipulated by contract or statute, but they can be if an indemnity agreement allows for it. The Subcontract Agreement obliges Schnabel to indemnify OMNI for property damage attributed to Schnabel's negligence, including attorneys’ fees. This obligation extends from the indemnity clause in the contract between OMNI and Westminster, which requires OMNI to indemnify Westminster for claims arising from negligent acts of subcontractors. Therefore, Schnabel is required to reimburse OMNI for attorneys’ fees related to enforcing indemnity provisions, as the claims and expenses stem from Schnabel's negligence.

Schnabel did not accept liability, prompting Harbor to initiate legal action to demonstrate that Schnabel's negligence caused damage to the Sears Building. The indemnification provisions indicated that Schnabel would be responsible for attorneys’ fees related to enforcing these provisions. Harbor, as OMNI's subrogee, is entitled to reimbursement for reasonable attorneys’ fees incurred in this indemnity claim, despite Schnabel contesting the reasonableness of fees exceeding $650,000. The Court, citing District of Columbia law, affirmed its discretion in determining the sufficiency of proof for attorneys’ fees and deemed Harbor’s submitted documentation, including time sheets and invoices, adequate for justifying the claimed amounts. 

Further, the Court addressed Schnabel’s contention regarding Harbor's claims for prejudgment interest and attorneys’ fees being barred by a prior ruling on breach of contract claims. The Court clarified that these claims were based on the indemnification provisions of the Subcontract, not on any breach of contract, thus allowing Harbor to recover both prejudgment interest and attorneys’ fees. 

Consequently, the Court issued an order for judgment against Schnabel Foundation Company and in favor of Harbor Insurance Company, awarding Harbor $54,876.88 for attorneys’ fees related to the Sears claim, as well as $603,150 in attorneys’ fees and $50,597 in costs associated with the legal action.

Defendant Schnabel is ordered to pay prejudgment interest at a statutory rate of 6% to Harbor on reasonable repair costs and amounts paid to OMNI for profit and overhead. Specific amounts and commencement dates for interest are detailed, including claims of $124,994.58, $77,167.89, $50,849.95, $41,474.88, $185,468.29, and others, with corresponding overhead and fee markups. The court has determined it does not need to decide on a reimbursement amount paid by Harbor and American Insurance Company to OMNI for overhead and fees. Prejudgment interest is defined as compensation for the use or retention of money. An agreement between OMNI and Westminster for a construction project included a provision for interest on unpaid payments, set at a rate agreed upon by the parties or the prevailing legal rate. The court found Schnabel negligent in its construction practices, resulting in significant damage to the Sears Building, which underpins Harbor's claim for attorneys’ fees related to the resulting damages. The damage to the contract work itself was not contested during the litigation.