Expedia, Inc. v. Steadfast Ins. Co.

Expedia, Inc. v. Steadfast Ins. Co.

Opinion

En Banc

 [*797] [As amended by order of the Supreme Court August 6, 2014.]

 [**61] 

¶1 Madsen, C.J. — Petitioners seek adjudication of their summary judgment motion concerning their insurers' duty to defend them in cases brought by local taxing authorities. They further request a stay of discovery in the coverage action that may prejudice them in the underlying litigation.

¶2 We hold that the trial court erred by delaying adjudication of Zurich's ¹ duty to defend Expedia. We accordingly vacate the trial court's August 22, 2012 order.² We remand to the trial court to determine Zurich's duty to defend Expedia in each of the 54 underlying cases subject to Expedia's motion. ³ The trial court is further ordered to  [**62]  stay discovery in the coverage action until it can make a factual determination as to which parts of discovery are potentially prejudicial to Expedia in the underlying actions. All discovery logically related to the underlying claims should be stayed until such claims are fully  [***2] adjudicated.

FACTS AND PROCEDURAL HISTORY

¶3 Expedia has been subject to approximately 80 underlying lawsuits by states, counties, and municipalities (collectively,  [*798] taxing authorities) for purportedly failing to collect the right amount of local occupancy taxes from its hotel customers. Expedia tendered most of the suits  [***3] to Zurich, although some were tendered late. Zurich refused to defend Expedia on a number of grounds, including late tender and that the underlying suits may be excluded from the policies' coverage. The trial court has declined to make a determination of Zurich's duty to defend Expedia, instead ordering discovery that Expedia claims may be prejudicial to the underlying actions.

¶4 Expedia applies local occupancy tax rates to the discounted rate it negotiates with hotels rather than the total price paid by the customer, including fees. Whether this is the proper calculation for local occupancy taxes is central to the underlying actions. Many taxing authorities have claimed that Expedia should have applied the tax rate to the retail rate charged to customers rather than the net rate paid to the hotels. The taxing authorities generally seek damages, compensatory damages, or other monetary relief, although some seek equitable relief such as the imposition of constructive trusts.

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