Horvitz & Levy secured affirmance of a district court order rejecting Yahoo!’s claim to millions of dollars of insurance coverage for which it never bargained.
Yahoo! was sued in several class actions alleging that its email platform violated consumer privacy rights. Yahoo! tendered defense of the lawsuits to National Union, which declined coverage. Years later, after Yahoo! had defended and settled the class actions, Yahoo! requested reconsideration of the coverage denial. National Union agreed to accept the tender after all, but reminded Yahoo! that the “fronting” policy for which Yahoo! specifically negotiated required Yahoo! to reimburse National Union for all defense and settlement costs advanced by National Union.
Yahoo! sued National Union for breach of contract and bad faith, arguing National Union’s incorrect rejection of the original tender voided Yahoo!’s reimbursement obligations, thus requiring National Union to pay all of Yahoo!’s defense and settlement costs without any right of reimbursement. On summary judgment, the district court rejected that argument, applying the standard rule of contract damages that the nonbreaching party is entitled to the benefit of its bargain, not more. The court ruled Yahoo!’s contract damages amounted to the time value of the money for the interval between when National Union should have advanced the costs and when Yahoo! would have been obliged to reimburse National Union.
Yahoo!’s bad faith claim proceeded to a jury trial. Horvitz & Levy worked closely with the trial team to prepare dispositive motions during and after trial to challenge the bad faith claim and Yahoo!’s claimed damages, as well as to preserve objections to the Brandt (attorney) fee jury instructions. The jury found for Yahoo! and awarded it over $600,000 in Brandt fees, but no other bad faith damages. Yahoo! appealed the contract damages award, and National Union appealed the Brandt fee award.
On appeal, agreeing with the district court and Horvitz & Levy’s arguments, the Ninth Circuit concluded that the district court’s damages measurement correctly put Yahoo! in the position it would have been in had both sides fully performed, and that Yahoo! was not entitled to the multimillion-dollar windfall it sought. The Ninth Circuit declined to disturb the Brandt fee award.