ABT Building Products Corp. v. National Union Fire Insurance , 472 F.3d 99 ( 2006 )


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  •                                                       Volume 1 of 2
    PUBLISHED
    UNITED STATES COURT OF APPEALS
    FOR THE FOURTH CIRCUIT
    ABT BUILDING PRODUCTS                  
    CORPORATION; ABTCO,
    INCORPORATED,
    Plaintiffs-Appellees,
    v.
    NATIONAL UNION FIRE INSURANCE
    COMPANY OF PITTSBURGH,                            No. 05-1739
    INCORPORATED,
    Defendant-Appellant.
    COMPLEX INSURANCE CLAIMS
    LITIGATION ASSOCIATION,
    Amicus Supporting Appellant.
    
    Appeal from the United States District Court
    for the Western District of North Carolina, at Statesville.
    Richard L. Voorhees, District Judge.
    (CA-01-100)
    Argued: May 25, 2006
    Decided: December 19, 2006
    Before WILKINSON, NIEMEYER, and KING, Circuit Judges.
    Affirmed by published opinion. Judge King wrote the majority opin-
    ion, in which Judge Wilkinson joined. Judge Niemeyer wrote a dis-
    senting opinion.
    2       ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    COUNSEL
    ARGUED: Jeffrey A. Goldwater, BOLLINGER, RUBERRY &
    GARVEY, Chicago, Illinois, for Appellant. Steven John Roman,
    DICKSTEIN, SHAPIRO, MORIN & OSHINSKY, L.L.P., Washing-
    ton, D.C., for Appellees. ON BRIEF: Clay H. Phillips, Carol L.
    Johnson, Sharon Rice, BOLLINGER, RUBERRY & GARVEY, Chi-
    cago, Illinois; John M. Claytor, Elizabeth E. S. Skilling, HARMAN,
    CLAYTOR, CORRIGAN & WELLMAN, Glen Allen, Virginia, for
    Appellant. Robin L. Cohen, DICKSTEIN, SHAPIRO, MORIN &
    OSHINSKY, L.L.P., New York, New York; James H. Kelly, Jr.,
    Susan H. Boyles, KILPATRICK STOCKTON, L.L.P., Winston-
    Salem, North Carolina, for Appellees. Laura A. Foggan, John C.
    Yang, Thomas S. Garrett, WILEY, REIN & FIELDING, L.L.P.,
    Washington, D.C., for Amicus Supporting Appellant.
    OPINION
    KING, Circuit Judge:
    National Union Fire Insurance Company of Pittsburgh, Incorpo-
    rated ("National Union"), seeks appellate relief from the 2004 Judg-
    ment entered against it in the Western District of North Carolina,
    following a jury trial on claims made by its insureds, ABT Building
    Products Corporation and ABTco, Incorporated (collectively "ABT").1
    The Judgment awarded ABT compensatory damages in the sum of
    $2.5 million for National Union’s breach of its duty to defend, declar-
    atory relief on National Union’s indemnity obligations to ABT, treble
    damages under the North Carolina Unfair and Deceptive Trade Prac-
    tices Act (the "UDTPA") in the sum of $11.7 million, and attorneys’
    fees of nearly $2 million under the UDTPA. On appeal, National
    Union makes the following contentions: (1) that the district court
    erred in failing to grant judgment as a matter of law on ABT’s claim
    1
    In February 1999, an entity called Louisiana-Pacific Corporation
    acquired ABT Building Products Corporation and ABTco, Incorporated.
    Although the parties and the court refer to "ABT" and "Louisiana-
    Pacific" interchangeably, we refer to them collectively as "ABT."
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.              3
    that National Union had breached a duty to defend ABT; (2) that the
    court erred in failing to grant judgment as a matter of law on ABT’s
    claim that National Union was obliged to indemnify ABT; (3) that the
    court erred in failing to grant judgment as a matter of law on ABT’s
    claim that National Union had violated the UDTPA; and (4) that the
    court erred in awarding attorneys’ fees to ABT. As explained below,
    we reject each of these contentions and affirm.
    I.
    A.
    On June 14, 2001, ABT initiated this civil action in the Western
    District of North Carolina, alleging in its Complaint five separate
    causes of action against its insurer, National Union. ABT’s claims
    centered on National Union’s conduct relating to a series of underly-
    ing product liability actions involving hardboard siding manufactured
    by ABT (the "underlying actions").2 First, ABT sought a declaration
    that National Union was obliged to indemnify it in connection with
    the underlying actions (the "Indemnification Claim"). Second, ABT
    sought damages for National Union’s alleged breach of its contractual
    obligations, under insurance policies it had issued to ABT, in failing
    to defend ABT in the underlying actions (the "Failure to Defend
    Claim"). Third, the Complaint sought damages for National Union’s
    alleged conduct in its handling of ABT’s claims for defense and
    indemnification, asserting that such conduct was willful, malicious,
    and in bad faith (the "Bad Faith Claim"). Fourth, ABT alleged that
    National Union, as a result of its willful, malicious, and bad faith con-
    duct, was liable to ABT for punitive damages (the "Punitive Damages
    Claim"). Finally, the Complaint alleged that National Union’s con-
    duct in its denial and handling of ABT’s claims for defense and
    indemnification contravened the UDTPA (the "UDTPA Claim"). In
    conjunction with these claims, ABT sought declaratory relief on its
    Indemnification Claim; compensatory damages on its Failure to
    Defend Claim; compensatory and punitive damages on its Bad Faith
    2
    The underlying actions referred to in the Complaint consist of eleven
    separate class action proceedings and twenty-one individual lawsuits,
    which had been instituted on behalf of owners of homes on which ABT-
    manufactured hardboard siding had been installed.
    4       ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    and Punitive Damages Claims; and treble damages, plus attorneys’
    fees and other relief, on its UDTPA Claim.
    After nearly three years of extensive pre-trial proceedings, a jury
    trial was conducted by the district court in Statesville, North Carolina,
    in June of 2004. As explained below, the resulting verdict was in
    favor of ABT and gives rise to this appeal.
    B.
    The evidence presented by the parties in the nine-day jury trial con-
    sisted of the testimony of approximately sixteen witnesses plus an
    array of exhibits. In its evidentiary presentation, ABT emphasized
    two factual underpinnings of its claims against National Union: (1)
    that National Union had failed in bad faith to defend and indemnify
    ABT in connection with the underlying actions; and (2) that National
    Union had intentionally sold and issued to ABT a new liability insur-
    ance policy covering a two-year period for which ABT was already
    insured by National Union, and that the new policy narrowed ABT’s
    coverage and more than doubled its annual premium. The jury, after
    hearing and considering the trial evidence and instructions on the
    applicable legal principles, received and completed a Verdict Form of
    nearly four pages (the "Verdict").3 The Verdict resolved the disputes
    between the parties, largely in favor of ABT. The factual predicate of
    the Verdict, as drawn from the trial evidence, is summarized as follows.4
    1.
    ABT manufactures hardboard siding, a wood-based product that is
    sold and affixed to the exteriors of homes, at a plant it operates in
    western North Carolina. The plaintiffs in the underlying actions,
    which were filed beginning in 1995, had purchased and installed
    3
    The Verdict is found at J.A. 2063-66. (Citations herein to "J.A. ___"
    refer to the contents of the Joint Appendix filed by the parties in this
    appeal.)
    4
    Our statement of the relevant factual underpinnings of this dispute
    summarizes the evidence in the light most favorable to ABT. See Bab-
    cock v. BellSouth Adver. & Publ’g Corp., 
    348 F.3d 73
    , 75 n.1 (4th Cir.
    2003).
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.                 5
    hardboard siding manufactured and sold by ABT. They alleged, inter
    alia, that the siding, when exposed to moisture, humidity, and other
    normal climatic conditions, absorbed moisture and prematurely rotted
    and deteriorated. Many of the plaintiffs also claimed that those prob-
    lems had, in turn, resulted in consequential damages to other parts of
    their homes.
    During the period from January 1, 1997, to January 31, 1998, ABT
    was covered by a commercial general liability insurance policy issued
    by Employers Insurance of Wausau (the "1997 Wausau Policy"). The
    1997 Wausau Policy was ABT’s primary liability insurance policy for
    the period of its coverage, and it provided coverage to ABT for
    defense and indemnity on liability claims made by purchasers of its
    products. The Policy contained a limit of $1 million per occurrence,
    obligated Wausau to defend ABT in connection with covered claims,
    and provided that the expenses Wausau incurred in the defense of any
    lawsuits or claims would be in addition to the $1 million per occur-
    rence limit. Although several of the underlying actions were pending
    when the 1997 Wausau Policy was issued, it did not exclude claims
    relating to defective siding manufactured by ABT.
    During the coverage period of the 1997 Wausau Policy, ABT was
    also insured under a commercial general liability policy issued by
    National Union (the "1997 NU Policy").5 The 1997 NU Policy was
    an umbrella liability policy, requiring National Union to indemnify
    ABT for any liabilities in excess of the limits of ABT’s underlying
    insurance (such as the 1997 Wausau Policy), up to $25 million. Pur-
    suant to the 1997 NU Policy, National Union was obliged to defend
    ABT against covered claims when ABT’s underlying insurance had
    "been exhausted by payment of claims." 1997 NU Policy § II.A.1.
    Under the terms of the 1997 NU Policy, ABT agreed that, even if it
    failed to keep its underlying insurance in full force and effect for the
    coverage period of the Policy, National Union’s defense and indem-
    nity obligations to ABT would be measured as if ABT’s underlying
    insurance had remained in effect (the "Underlying Insurance Clause").
    See id. § VI.I. As relevant, the 1997 NU Policy covered "Property
    Damage . . . caused by an Occurrence." Id. § I.6 It specifically
    5
    The 1997 NU Policy is found at J.A. 1408-45.
    6
    As pertinent here, the 1997 NU Policy defines "Property Damage" as
    "[p]hysical injury to tangible property, including all resulting loss of use
    6       ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    excluded from coverage "Property Damage to Your Product arising
    out of it or any part of it" (the "Your Product Exclusion"). See id. § V.F.7
    And, like the 1997 Wausau Policy, the 1997 NU Policy did not
    exclude the coverage of claims against ABT relating to its manufac-
    ture of hardboard siding.
    The 1997 NU Policy was initially issued for the thirteen-month
    period from January 1, 1997, to January 31, 1998. This coverage
    period was soon identified as erroneous, however, in that National
    Union and ABT had agreed that the Policy would cover a thirty-
    seven-month period. When ABT notified National Union of the cov-
    erage period error, the 1997 NU Policy’s "Endorsement #012" was
    issued by National Union. That Endorsement, in conformity with the
    earlier agreement, extended the coverage period of the 1997 NU Pol-
    icy for the proper thirty-seven-month period, through January 31,
    2000.
    On January 14, 1998, Wausau notified ABT that it planned to can-
    cel ABT’s primary liability insurance coverage under the 1997 Wau-
    sau Policy, which was scheduled to expire seventeen days later, on
    January 31, 1998. In order to comply with the applicable legal
    requirements for its cancellation decision, Wausau was obliged to
    provide ninety days’ notice to ABT. As a result, it issued a "stub," or
    extension, policy that extended the terms of the 1997 Wausau Policy
    for the three-month period from January 31, 1998, to May 1, 1998
    (the "1998 Wausau Stub Policy"). Wausau then issued a new primary
    liability policy to ABT — which excluded from coverage any and all
    claims arising from ABT’s manufacture and sale of hardboard siding
    — effective for the nine-month period from May 1, 1998, through
    January 31, 1999 (the "1998 Wausau Policy").
    of that property." 1997 NU Policy § IV.K.1. It defines an "Occurrence"
    as "an accident, including continuous or repeated exposure to conditions,
    which results in . . . Property Damage neither expected nor intended from
    the standpoint of the insured." Id. § IV.H.1. It also provides that "[a]ll
    such exposure to substantially the same general conditions shall be con-
    sidered as arising out of one Occurrence." Id.
    7
    The 1997 NU Policy defines "Your Product" as "[a]ny goods or prod-
    ucts . . . manufactured [or] sold . . . by . . . you." 1997 NU Policy
    § IV.M.1.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.               7
    2.
    In January 1998, National Union underwriter Paul Rovelli assumed
    responsibility for his company’s ABT account. Initially, Rovelli was
    unaware of National Union’s issuance of Endorsement #012, which
    had extended the 1997 NU Policy’s coverage period from thirteen to
    thirty-seven months. Thus, in early 1998, under the mistaken belief
    that the 1997 NU Policy would expire after thirteen months (on Janu-
    ary 31, 1998), Rovelli began the process of underwriting a new
    National Union policy to provide general liability coverage for ABT.
    The sequence of events that followed Rovelli’s assumption of
    responsibility for the ABT account was revealed to the jury in an
    email that Rovelli had prepared and forwarded to his superiors at
    National Union on February 4, 1998 (the "Rovelli Email," or the
    "Email").8 As he related therein, "after I requested renewal informa-
    tion, I noticed that buried within the policy were two endorsements,
    one giving it a multi-year term from 1/01/97 to [1/31/2000], and the
    other providing annual installments of $58,980." Pl.’s Ex. 46. Rovelli
    was thus aware, early in his underwriting process, that there was no
    need to re-underwrite ABT’s umbrella liability coverage, since the
    1997 NU Policy did not expire for another two years. He nonetheless
    continued the underwriting process, explaining in the Email that "I
    started to look into the file [and] noticed that there were class-actions
    8
    The Rovelli Email was admitted into evidence as Plaintiff’s Exhibit
    46. It specified the following:
    As the policy looked on the system and on the Dec page, I had
    originally assumed it was a one year deal. However, after I
    requested renewal information, I noticed that buried within the
    policy were two endorsements, one giving it a multi-year term
    from 1/01/97 to [1/31/2000], and the other providing annual
    installments of $58,980. I started to look into the file, noticed
    that there were class-actions outstanding. My next step was with
    the broker, who was also unaware that this was a multi-year pol-
    icy. I received and reviewed their annual report and noticed not
    only a reoccurrence of the class-actions but a significant change
    in exposure, which was not given as a caveat in the policy, but
    I underwrote anyway.
    Pl.’s Ex. 46.
    8       ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    outstanding." Id. Although ABT had disclosed to National Union the
    existence of the underlying actions in its application for the 1997 NU
    Policy, Rovelli (in his efforts to re-underwrite ABT’s coverage)
    became concerned that National Union had substantially underesti-
    mated its exposure to defective siding claims.
    Rovelli decided to investigate the matter further and, in so doing,
    contacted the insurance broker that had arranged the 1997 NU Policy
    (Marsh & McLennan, Inc.), requesting further financial information
    on ABT. Rovelli then "received and reviewed [ABT’s] annual report
    and noticed not only a reoccurrence of the class-actions but a signifi-
    cant change in exposure." Pl.’s Ex. 46. Rovelli thus realized, when he
    composed the Email and sent it to his colleagues at National Union,
    that ABT would likely face additional defective siding claims in the
    remaining two coverage years of the 1997 NU Policy, and that there
    was, unfortunately for National Union, no "caveat in the policy"
    allowing National Union to avoid its defense and indemnification
    obligations on those claims. Id.
    Importantly, Rovelli knew at the time he prepared and sent the
    Email that the 1997 NU Policy, even after Endorsement #012 was
    issued, made it appear that its coverage period was only thirteen
    months and would expire on January 31, 1998. As he wrote to his
    superiors in the Email, "the policy looked on the system and on the
    Dec[larations] page" as if it were "a one-year deal." Pl.’s Ex. 46. The
    declarations page, in other words, had not been amended to reflect
    Endorsement #012’s two-year extension of ABT’s coverage period
    under the 1997 NU Policy, and the Endorsement itself was, according
    to Rovelli, "buried within the policy." Id.
    When Rovelli conveyed the foregoing information to his superiors
    at National Union, they immediately grasped the potential magnitude
    of National Union’s defense and indemnity obligations to ABT under
    the 1997 NU Policy. One of those officials, Ken Gregnoli, a Vice
    President for the Excess Casualty Department at AIG (National
    Union’s parent company) testified that "it was obvious to me that the
    umbrella was going to be impacted by these hardboard siding claims."
    J.A. 887. He recalled at trial that his conclusion at the time was that
    National Union was "going to pay substantially." Id. at 887-88.
    Gregnoli further acknowledged in his trial testimony that, in his view,
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.              9
    National Union would also have to pay "a significant amount of
    money into defending these type of claims." Id. at 888-89.
    Rovelli’s superiors shared his understanding that the 1997 NU Pol-
    icy afforded National Union no means of avoiding its liability to ABT
    on the underlying actions. For example, John Schumacher, the Presi-
    dent of AIG’s underwriting affiliate (American Home Assurance
    Company) and the highest-ranking official involved in the decision to
    sell ABT a redundant policy, testified at trial concerning that decision.
    When asked whether insurance companies were entitled to re-
    underwrite coverage in the middle of a multi-year policy period,
    Schumacher testified: "You know, I’ve seen insurance carriers try to
    cancel a policy, not often but occasionally, midterm, and they get
    sued. They get sued big time and generally lose." J.A. 864. Schu-
    macher also testified that he left his position as President of American
    Home in part because some AIG officials had not been forthright with
    policyholders.
    Ultimately, despite knowing that ABT was already covered under
    the 1997 NU Policy for hardboard siding claims through January 31,
    2000, and that National Union could not cancel ABT’s coverage
    under the Policy at an earlier date, National Union decided, as Rovelli
    explained in the Email and reiterated in his trial testimony, to "under-
    wr[i]te anyway." Pl.’s Ex. 46; J.A. 841. National Union thereafter
    required ABT to purchase an umbrella liability insurance policy for
    the twenty-four-month period from January 31, 1998, to January 31,
    2000 (the "1998 NU Policy"). For this new policy — which provided
    overlapping coverage to ABT for the final two years of the 1997 NU
    Policy’s coverage period — National Union charged ABT a premium
    of $135,000 per year, more than double the annual premium it was
    already being charged for the 1997 NU Policy. More significantly, the
    1998 NU Policy eliminated National Union’s duties to defend and
    indemnify ABT with respect to hardboard siding claims. And, despite
    requiring ABT to purchase the 1998 NU Policy, National Union left
    the 1997 NU Policy in effect.
    10       ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    3.
    a.
    In 1997, ABT and the plaintiffs in the underlying actions initiated
    settlement negotiations on the claims against ABT in those actions
    and with respect to other potential defective siding claims. These
    efforts intensified in 1999, and counsel for ABT and the plaintiffs
    agreed that a national class action pending in an Alabama state court
    (styled as Foster v. ABTco, Inc., in the Circuit Court of Choctaw
    County) was the appropriate vehicle by which to resolve their dis-
    putes. During the course of these lengthy settlement negotiations,
    ABT kept Wausau, National Union, and its other insurers fully
    apprised of its efforts, and it provided its insurers with a series of draft
    settlement proposals that were developed in the negotiations process.9
    In connection with these settlement negotiations, an analysis was
    conducted — at the request of ABT’s insurers — to assess the poten-
    tial damages ABT faced in the underlying actions. The expert retained
    for that purpose, Dr. Michael Sullivan, estimated the total cost of the
    proposed settlement to be $41.6 million, and he presented his views
    to ABT and its insurers in the fall of 1999.10 When those present
    asked Sullivan for an estimate of the likely consequential damages if
    the settlement negotiations failed and the underlying actions went to
    trial, Dr. Sullivan opined that such damages to manufactured homes
    alone would be $87.7 million.
    Wausau initially disputed its contractual obligations, under the
    1997 Wausau Policy and the 1998 Wausau Stub Policy, to defend and
    indemnify ABT in the underlying actions. On November 4, 1999,
    9
    Insurers other than Wausau and National Union provided ABT with
    liability coverage for periods before January 1, 1997. Because many of
    the underlying actions related, at least in part, to hardboard siding that
    had been installed before January 1, 1997, ABT’s insurers for those ear-
    lier periods were kept abreast of the settlement negotiations on the under-
    lying claims.
    10
    By the time of the trial of this case, Dr. Sullivan had revised his esti-
    mate of the total cost of the proposed settlement slightly upward, to
    $42.8 million.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.                 11
    however, ABT and Wausau reached a settlement agreement (the
    "Wausau Settlement") under which Wausau agreed to pay ABT the
    sum of $1.5 million "in compromise of disputed claims" (the "Wau-
    sau Settlement Payment"), and to continue to pay its share of defense
    costs through July 31, 1999. Wausau Settlement §§ III, IV.11 Pursuant
    thereto, ABT agreed to pay Wausau’s share of defense costs incurred
    after July 31, 1999. Of the $1.5 million ABT received from Wausau
    under the Wausau Settlement, $1,147,058.83 was allocated to the
    1997 Wausau Policy, and the remaining $352,941.17 was allocated to
    the 1998 Wausau Stub Policy. See id. § VI.
    On September 21, 2000, the Alabama state court approved the set-
    tlement of the underlying actions in the Foster class action litigation
    (the "Foster Settlement").12 The Foster Settlement served as a global
    resolution of the underlying actions and barred any future claims
    against ABT by settlement class members who did not opt out. It
    released all claims against ABT in the underlying actions, including
    claims for consequential damages, in exchange for payments to be
    made by ABT through an agreed-upon claims program. This claims
    program, in which settlement class members may participate at any
    time within twenty-five years of the installation of defective siding,
    requires, inter alia, the submission of a claim to ABT, along with pho-
    tographs sufficient to permit a determination of the square footage of
    a class member’s damaged siding. The Foster Settlement establishes
    a rate of compensation, which it terms "Replacement Cost," that
    includes the costs of all materials, labor, and incidentals necessary to
    replace defective siding with new siding and to repair damage caused
    by the defective siding. See Foster Settlement ¶ 1.48.13 This compre-
    11
    The Wausau Settlement is found at J.A. 1792-1802.
    12
    The Foster Settlement is found at J.A. 1803-2036.
    13
    The term "Replacement Cost" is defined in the Foster Settlement as
    the average cost per square foot of surface area of Siding . . . as
    agreed upon by the Parties with reference to current R.S. Means
    Co. data, including all materials, labor and incidental costs as
    required to remove, replace and repair Siding panels or boards
    that have sustained Damage . . . with new Siding and to repaint
    and otherwise restore the exterior of the Property to the extent
    reasonably necessary to make the repair cosmetically acceptable.
    Foster Settlement ¶ 1.48.
    12      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    hensive "Replacement Cost" is then multiplied by a second number
    called "Compensable Damage" (the square footage of damaged siding
    on a settlement class member’s home) to ascertain the appropriate
    damage payment. See id. ¶¶ 1.16, 1.19.14
    b.
    At the time of the Foster Settlement, National Union had long
    believed that a settlement of the underlying actions would exhaust
    ABT’s underlying insurance coverage and trigger National Union’s
    defense and indemnity obligations under the 1997 NU Policy. Indeed,
    Aimee Tersy, the Director of Excess Casualty Claims for AIG Tech-
    nical Services (National Union’s claims administrator), who was in
    charge of ABT’s claims against National Union during the Foster Set-
    tlement negotiations, testified at trial that "never paying was never a
    consideration. We knew there were damages out there." J.A. 486.15
    National Union was also aware throughout the Foster Settlement
    negotiations of ABT’s efforts to resolve the underlying actions using
    a single, comprehensive class settlement, an approach that promised
    to save ABT and its insurers a substantial amount of money. Ms.
    Tersy testified that she had attended a number of meetings on the pro-
    posed Foster Settlement, and that National Union understood ABT’s
    settlement strategy. According to her evidence, National Union recog-
    nized that the underlying actions must be settled, knew the form the
    settlement likely would take, and knew that ABT needed the partici-
    pation of all its insurers in order for the settlement to succeed. After
    the Foster Settlement was entered into and approved by the Alabama
    court, however, and even though ABT’s other insurers agreed to par-
    14
    The damage award formula used to determine the appropriate pay-
    ment is set forth in the Foster Settlement as follows: "A = [(CD)x(RC)]-
    D, where A is the Damage Payment, CD is the amount of Compensable
    Damage, RC is the Replacement Cost, and D is the applicable Deduc-
    tions." Foster Settlement ¶ 1.19(a).
    15
    Of note, AIG Vice President Gregnoli testified at trial that "it was
    obvious to me that the umbrella was going to be impacted by these hard-
    board siding claims," that National Union was "going to pay substan-
    tially," and that it would have to pay "a significant amount of money into
    defending these type of claims." J.A. 887-89.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.             13
    ticipate therein, National Union ignored ABT’s requests for defense
    and indemnification under the 1997 NU Policy.
    On November 17, 1999, ABT, seeking to resolve its dispute with
    National Union, made a settlement offer to National Union in the sum
    of $3 million, believing at the time that the 1997 NU Policy had
    expired on January 31, 1998. When ABT thereafter realized that the
    1997 NU Policy was actually in effect until January 31, 2000, it made
    a revised settlement offer to National Union, on December 30, 1999,
    in the sum of $5 million. This proposal would have resolved National
    Union’s defense and indemnity obligations to ABT in connection
    with the underlying actions.
    During the course of these events, National Union’s coverage
    counsel, Christopher Aries, advised National Union that a refusal to
    contribute to the Foster Settlement would be "leaving its insured to
    ‘twist in the wind’ and accordingly a Court would not give serious
    consideration to [an] attempt to claim that the settlement amount was
    unreasonable." J.A. 2042. Despite this explicit warning (made in con-
    fidence by Aries) that it could be exposing itself to claims of bad faith
    conduct against its insured, National Union did not respond to ABT’s
    settlement proposals, failed to contribute to ABT’s defense costs, and
    did not indemnify ABT against the underlying actions. Rather,
    National Union delayed resolution of ABT’s claims by repeatedly
    requesting information that ABT had already provided. Finally, on
    May 24, 2001, nearly seventeen months after ABT’s revised offer to
    settle with National Union for $5 million, National Union simply
    closed its file on ABT’s defense and indemnity claims relating to the
    underlying actions — without making a decision on its coverage obli-
    gations to ABT.
    C.
    On June 22, 2004, at the close of ABT’s case-in-chief, National
    Union unsuccessfully moved the trial court for judgment as a matter
    of law, pursuant to Rule 50(a), on each of ABT’s claims. Subse-
    quently, on June 24, 2004, after all the evidence had been presented,
    National Union renewed its motion for judgment as a matter of law,
    and the court again denied the motion. On June 25, 2004, at the con-
    14      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    clusion of the nine-day trial, the jury rendered its Verdict in the mat-
    ter, finding as follows:
    • That National Union had breached its duty to defend
    ABT in the underlying actions;
    • That ABT was damaged by this breach in the sum of
    $2.5 million;
    • That all of the damages alleged in the underlying actions
    resulted from a single "Occurrence," i.e., alleged defects
    in the ABT-manufactured hardboard siding;
    • That the 1997 NU Policy covered the Foster Settlement
    claims arising from "Property Damage" caused by defec-
    tive siding installed during the period from January 1,
    1997, through January 31, 2000;
    • That 22.5% of each Foster Settlement payment repre-
    sents the costs of replacement siding, and 77.5% of each
    such payment represents the costs of all other labor and
    materials;
    • That National Union is responsible for administrative
    costs of $378.06 for each future claim made under the
    Foster Settlement;
    • That National Union owed ABT $1,860,740 in settle-
    ment class counsel fees, notice costs, and claims admin-
    istration fees already incurred;
    • That National Union (in connection with the UDTPA
    Claim) had failed to attempt in good faith to effectuate
    a prompt, fair, and equitable settlement with ABT when
    National Union’s liability to pay for part of the Foster
    Settlement became reasonably clear;
    • That National Union (also in connection with the
    UDTPA Claim) had misrepresented the terms of the
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.            15
    1997 NU Policy for the purpose of changing National
    Union’s coverage obligations in 1998-2000, and that
    ABT had relied on that misrepresentation to its detri-
    ment;
    • That ABT was damaged, in the sum of $3.9 million, by
    National Union’s conduct relating to the UDTPA Claim;
    • That National Union’s conduct constituted bad faith,
    resulting in damages to ABT of $3.9 million; and
    • That National Union’s bad faith conduct was accompa-
    nied by aggravated conduct (such as malice, fraud, or
    oppression) that indicated a reckless indifference to the
    consequences thereof, and that ABT was entitled to
    recover $7.5 million in punitive damages.
    See Verdict.16
    On July 16, 2004, ABT filed a motion for judgment on the jury
    verdict, along with a proposed judgment and a memorandum in sup-
    port thereof (the "ABT Judgment Memorandum"). On September 30,
    2004, after National Union had submitted its opposition to the motion
    for judgment and ABT had filed a reply, the district court entered its
    Judgment against National Union.17 The Judgment entitled ABT to
    recover from National Union $2.5 million on the Failure to Defend
    Claim, $11.7 million on the UDTPA Claim (trebled from the jury’s
    award of $3.9 million), and certain interest.18 The Judgment also
    16
    The jury found in favor of ABT on all the questions submitted to it
    except one: "Did National Union fail to make a reasonable investigation
    of the damages claimed in the homeowner lawsuits against ABT[ ] or the
    coverage provided for those claims under the National Union policy?"
    Verdict pt. B.1.b. On this inquiry, the jury’s answer was "No." Id.
    17
    The district court initially entered its Judgment on September 22,
    2004, and, sua sponte, entered an Amended Judgment on September 30,
    2004, correcting certain clerical errors. Our references to the "Judgment"
    are to the Amended Judgment, found at J.A. 2056-66.
    18
    ABT was required by North Carolina law to make a choice between
    its recovery on the UDTPA Claim and the Verdict’s awards on the Bad
    16      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    included declaratory relief provisions against National Union on the
    Indemnification Claim (the "Declaratory Provisions"), as follows:
    • That ABT is entitled to indemnification from National
    Union for claims under the Foster Settlement that are
    attributable to installations of defective siding during the
    period from January 1, 1997, through January 31, 2000;
    • That National Union’s obligation to indemnify ABT for
    future claims under the Foster Settlement will begin after
    ABT has paid $3 million in settlement costs or claims
    attributable to installations from January 1, 1997,
    through January 31, 2000;
    • That, as of the date of the Verdict, ABT had paid Foster
    Settlement costs of $1,860,740 and claims of $275,598
    (exclusive of the costs of siding);
    • That National Union is obligated to indemnify ABT for
    77.5% of each claim under the Foster Settlement that is
    attributable to installations of defective siding during the
    National Union coverage period; and
    • That National Union is obligated to ABT for $378.06 for
    each applicable claim under the Foster Settlement, to
    cover the administrative costs of handling such claims.
    See Judgment 6.
    Of note, the Declaratory Provisions, consistent with ABT’s pro-
    posed judgment, did not require National Union to indemnify ABT
    Faith and Punitive Damages Claims. See Ellis v. N. Star Co., 
    388 S.E.2d 127
    , 132 (N.C. 1990). In exercising this choice, ABT decided to accept
    the treble damage award of $11.7 million under the UDTPA, instead of
    the $3.9 million award on the Bad Faith Claim and the $7.5 million
    award on the Punitive Damages Claim. The Judgment provides, how-
    ever, that if the UDTPA Claim award is overturned on appeal, ABT may
    elect to recover its awards on the Bad Faith and Punitive Damages
    Claims, and may move to amend the Judgment to reflect that election.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.              17
    for its first $3 million in Foster Settlement payments (the "$3 million
    declaration"). See Judgment 6. The ABT Judgment Memorandum
    explained ABT’s position on this point as follows: The $3 million fig-
    ure was the sum of ABT’s three successive underlying indemnity cov-
    erage limits during the 1997 NU Policy period. The 1997 Wausau
    Policy had a limit of $1 million per occurrence, which applied to that
    Policy’s coverage period of January 1, 1997, through January 31,
    1998. The 1997 Wausau Policy also provided that, if it continued in
    effect beyond January 31, 1998, it would have a separate $1 million
    per occurrence limit for each succeeding twelve-month period. Wau-
    sau cancelled ABT’s coverage for hardboard siding losses in 1998,
    but because of the 1997 NU Policy’s Underlying Insurance Clause,
    National Union’s defense and indemnity coverage obligations are
    measured as if ABT’s hardboard siding coverage under the 1997
    Wausau Policy continued throughout the 1997 NU Policy period.
    That is, a second $1 million limit applies for the period from January
    31, 1998, through January 31, 1999, and a third $1 million limit for
    the period from January 31, 1999, through January 31, 2000. For pur-
    poses of the administrative implementation of the Judgment, ABT
    acknowledged that the aggregate of its underlying indemnity coverage
    during the 1997 NU Policy coverage period was thus $3 million.19 As
    a result, ABT proposed that National Union reimburse it only for the
    excess over $3 million of ABT’s Foster Settlement costs for the
    19
    In its brief on appeal, ABT explains that it proposed the $3 million
    declaration in an effort to simplify the administration of the Declaratory
    Provisions, and that its proposal actually benefitted National Union:
    The three-year indemnity total was proposed by [ABT] (and
    adopted by the Court without objection by National Union) to
    simplify the declaratory judgment payment schedule, even
    though this arrangement delays the start of the payments to
    [ABT]. Technically, year-by-year indemnity calculations should
    be used, with National Union required to start its 1997 policy-
    year indemnity payments as soon as Foster claims for siding
    installed during that year top $1 million, and then to start and
    pay its 1998 and later indemnity contributions after a separate
    calculation is made for each subsequent year. To facilitate the
    administration of these indemnity payments, the [Judgment]
    aggregates the three separate $1 million underlying limits.
    Appellees’ Br. 39.
    18       ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    period of the 1997 NU Policy. The Judgment reflects this concession
    by ABT. See Judgment 6.
    On October 6, 2004, National Union, in its post-trial motions,
    renewed its motion for judgment as a matter of law (pursuant to Rule
    50(b)), and made separate motions for a new trial and to alter or
    amend the Judgment. The district court denied those motions by its
    Order of May 31, 2005 (the "First Order").20 Importantly, the court
    there ruled that National Union’s duty to defend was triggered by
    ABT’s exhaustion of the annual $1 million underlying limit in effect
    during the National Union coverage period (the "$1 million trigger
    ruling"). See First Order 7. In so ruling, the court rejected National
    Union’s position that the court had, by its earlier $3 million declara-
    tion, already decided that the 1997 NU Policy assigned National
    Union no defense obligations until ABT had exhausted all three of its
    successive annual $1 million underlying limits. By another Order
    entered October 6, 2004, the court exercised its discretion under the
    UDTPA to award attorneys’ fees to ABT in the full amount of its
    $1,997,161 request (the "Second Order").21
    National Union has appealed the adverse Judgment entered by the
    district court, and we possess jurisdiction pursuant to 
    28 U.S.C. § 1291
    .
    II.
    We review de novo a district court’s denial of a Rule 50 motion for
    judgment as a matter of law. Bryant v. Aiken Reg’l Med. Ctrs. Inc.
    
    333 F.3d 536
    , 543 (4th Cir. 2003). Pursuant to Rule 50, the issue for
    assessment on appeal is whether there was a legally sufficient eviden-
    tiary basis for a reasonable jury, viewing the evidence in the light
    most favorable to the prevailing party, to find for that party. Fed. R.
    Civ. P. 50(a); Bryant, 
    333 F.3d at 543
    . If reasonable minds could dif-
    fer about the verdict, we are obliged to affirm. Bryant, 
    333 F.3d at 543
    . As with other legal rulings, we review de novo the conclusions
    of law on which a trial court’s denial of judgment as a matter of law
    20
    The First Order is found at J.A. 2249-64.
    21
    The Second Order is found at J.A. 2265-71.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.            19
    is premised. See Benner v. Nationwide Mut. Ins. Co., 
    93 F.3d 1228
    ,
    1233 (4th Cir. 1996). And we are obliged to accord substantial defer-
    ence to a district court’s interpretation of its own judgment. See Home
    Port Rentals, Inc. v. Ruben, 
    957 F.2d 126
    , 131 (4th Cir. 1992).
    We review de novo a trial court’s legal determinations with respect
    to a UDTPA claim. S. Atl. Ltd. P’ship of Tenn., L.P. v. Riese, 
    284 F.3d 518
    , 535 (4th Cir. 2002). We review a jury’s factual findings on
    a UDTPA claim "in the light most favorable to the prevailing party,
    and ‘[i]f, with that evidence, a reasonable jury could return a verdict
    in favor of plaintiffs, [we] must defer to the judgment of the jury,
    even if [our] judgment on the evidence differs.’" 
    Id.
     (quoting Duke v.
    Uniroyal Inc., 
    928 F.2d 1413
    , 1417 (4th Cir. 1991)).
    Finally, we review for abuse of discretion a district court’s award
    of attorneys’ fees under the UDTPA. See 
    N.C. Gen. Stat. § 75-16.1
    ("[T]he presiding judge may, in his discretion, allow a reasonable
    attorney fee to the duly licensed attorney representing the prevailing
    party, such attorney fee to be taxed as a part of the court costs and
    payable by the losing party . . . ."); see also Shell Oil Co. v. Commer-
    cial Petroleum, Inc., 
    928 F.2d 104
    , 108 n.6 (4th Cir. 1991); Blanken-
    ship v. Town & Country Ford, Inc., 
    622 S.E.2d 638
    , 643 (N.C. Ct.
    App. 2005).
    III.
    In its appeal, National Union makes four basic contentions of error.
    First, National Union contends that the district court erred in failing
    to grant judgment as a matter of law on the Failure to Defend Claim.
    Second, National Union maintains that the court erred in failing to
    grant judgment as a matter of law on the Indemnification Claim.
    Third, National Union contends that the court erred in failing to grant
    judgment as a matter of law on the UDTPA Claim. And fourth,
    National Union asserts that the court erred in awarding attorneys’ fees
    to ABT.
    A.
    We first assess National Union’s contention that the district court
    erred in failing to grant its Rule 50(b) motion for judgment as a matter
    20      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    of law on the Failure to Defend Claim. National Union offers two
    independent bases for its position in this respect. First, it maintains
    that the district court erred, in its First Order, in making the $1 million
    trigger ruling. Second, it asserts that the Wausau Settlement Payment,
    which exhausted the 1997 Wausau Policy, was not a "payment of
    claims" within the meaning of the 1997 NU Policy, and thus triggered
    no duty to defend on the part of National Union. We address these
    assertions in turn.
    1.
    We first address National Union’s assertion that the district court
    erred in making its $1 million trigger ruling. National Union main-
    tains that this ruling is inconsistent with the court’s $3 million decla-
    ration and therefore erroneous.22 Although the $3 million declaration
    expressly relates only to National Union’s indemnification duty, it
    also constitutes, according to National Union, a ruling that ABT could
    claim no coverage (for indemnity or defense) under the 1997 NU Pol-
    icy unless it exhausted all three of its successive $1 million annual
    underlying limits. As such, National Union contends, the $3 million
    declaration establishes that the $1.5 million Wausau Settlement Pay-
    ment — exhausting only the first of ABT’s $1 million underlying lim-
    its — was legally insufficient to trigger National Union’s duty to
    defend. And if National Union’s duty to defend never arose, it could
    not have been breached. On that basis, National Union assigns as
    error the court’s denial of its Rule 50(b) motion on the Failure to
    Defend Claim.23
    22
    The $3 million declaration provides that "National Union’s obliga-
    tion to indemnify [ABT] for future Foster settlement claims shall begin
    after [ABT] has paid Foster settlement costs or . . . claims attributable
    to installations during the National Union coverage period equal to the
    $3,000,000 in underlying insurance coverage." Judgment 6 (emphasis
    added).
    23
    National Union also suggests that ABT had a total of $4 million in
    underlying coverage during the 1997 NU Policy’s coverage period, con-
    tending that the 1998 Wausau Stub Policy was subject to its own $1 mil-
    lion limit. That position, however, ignores the Underlying Insurance
    Clause, which provides that National Union’s coverage obligations are
    measured as if ABT’s underlying coverage had remained in full force
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.             21
    National Union’s only authority for its position on the $3 million
    declaration is the Declaratory Provisions themselves; National Union
    regards its reading thereof as self-evident. When National Union pre-
    sented this position in its post-judgment Rule 50(b) motion, however,
    the district court rejected it.24 The court explained that National Union
    had simply over-read the $3 million declaration, which "refers to
    indemnity payments and not to National Union’s defense obligation."
    First Order 7. The court specified that "ABT needed to exhaust [only]
    $1,000,000.00 in underlying coverage before National Union’s duty
    to defend was triggered." 
    Id.
     (emphasis added).25 National Union is
    thus rowing against a strong current on this point, because "[w]hen a
    district court’s decision is based on an interpretation of its own order,
    our review" must be highly deferential. JTH Tax, Inc. v. H & R Block
    E. Tax Servs., Inc., 
    359 F.3d 699
    , 705 (4th Cir. 2004) (observing that
    and effect throughout the coverage period of the 1997 NU Policy, regard-
    less of whether ABT in fact maintained such coverage. See 1997 NU
    Policy § VI.I. As noted above, if ABT’s underlying coverage for hard-
    board siding losses had remained in effect, ABT would have had three
    successive $1 million annual limits, the second of which subsumes the
    period during which the 1998 Wausau Stub Policy was effective.
    Because of the Underlying Insurance Clause, those three $1 million
    annual limits are the only ones pertinent to the calculation of National
    Union’s coverage obligations.
    24
    Until this appeal, National Union consistently maintained that the
    1997 NU Policy, although effective for thirty-seven months and never
    cancelled, covered only the thirteen-month period from January 1, 1997,
    through January 31, 1998. The jury determined otherwise, however, see
    Verdict pts. B.1.a, E.2, and that finding is not challenged on appeal.
    National Union’s present contention that the 1997 NU Policy requires the
    exhaustion of underlying limits for both 1998 and 1999 thus could be
    deemed an expedient afterthought.
    25
    The district court’s ruling that the 1997 NU Policy required ABT to
    exhaust only $1 million in underlying coverage to trigger National
    Union’s defense obligations is consistent with the view of National
    Union’s own officials. For example, Ms. Tersy, the Director of Excess
    Casualty Claims for National Union’s claims administrator, acknowl-
    edged in her trial testimony that she "knew that the Wausau policy that
    was underneath the National Union policy was only for a million dol-
    lars." J.A. 506.
    22      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    "district courts are in the best position to interpret their own orders");
    see also Home Port Rentals, Inc. v. Ruben, 
    957 F.2d 126
    , 131 (4th
    Cir. 1992) ("It is peculiarly within the province of the district court
    . . . to determine the meaning of its own order."); Anderson v. Ste-
    phens, 
    875 F.2d 76
    , 80 n.8 (4th Cir. 1989) ("We are, of course, mind-
    ful of the inherent deference due a district court when it construes its
    own order."). National Union has failed to explain how a position
    premised solely on its reading of the Judgment can, in the face of such
    a deferential standard of appellate review, survive the district court’s
    disavowal of that very position. In effect, National Union has now
    asked us to take the extraordinary step of rejecting the district court’s
    interpretation of its own Declaratory Provisions. Absent any reasoned
    basis for so doing, we must decline National Union’s invitation.26
    2.
    National Union next contends that the $1.5 million Wausau Settle-
    ment Payment does not constitute a "payment of claims" within the
    meaning of the 1997 NU Policy, which requires the exhaustion of
    ABT’s underlying coverage by "payment of claims" in order to trig-
    ger National Union’s duty to defend. 1997 NU Policy § II.A.1. Put
    succinctly, National Union’s position is that the term "payment of
    claims" should be narrowly construed, excluding all payments other
    than those made directly to third-party claimants against ABT to sat-
    isfy judgments or secure the release of claims. By the Wausau Settle-
    26
    Even if the district court had required ABT to exhaust all three of its
    successive annual $1 million underlying limits before it was entitled to
    a defense under the 1997 NU Policy, we would not be bound by such a
    ruling. We review a trial court’s conclusions of law de novo, and, under
    North Carolina law, we would inquire into whether its interpretation of
    the Policy was consistent with the parties’ intent. See Register v. White,
    
    599 S.E.2d 549
    , 553 (N.C. 2004). National Union does not maintain that
    the parties actually intended the Policy to operate in the manner now
    urged, and for apparent good reason, since the parties could not plausibly
    have intended an excess insurance policy that would provide ABT no
    coverage until its third year, at the earliest, and none at all unless ABT
    happened to incur more than $1 million in covered losses in each of its
    three annual underlying coverage periods. And such a position is ren-
    dered even more implausible by the events surrounding National Union’s
    issuance of the 1998 NU Policy. See supra Part I.B.2; infra Part III.C.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.            23
    ment, Wausau did not make direct payments to third-party claimants,
    nor did the Settlement satisfy a judgment or secure the release of any
    claims against ABT. Rather, Wausau paid ABT in order for ABT to
    make future payments to third-party claimants, pursuant to the Foster
    Settlement, to resolve the underlying actions. In National Union’s
    view, Wausau’s settlement with ABT therefore was not a "payment
    of claims" under the 1997 NU Policy.
    In North Carolina, the interpretation of an insurance policy provi-
    sion is a question of law. See Wachovia Bank & Trust Co. v. West-
    chester Fire Ins. Co., 
    172 S.E.2d 518
    , 522 (N.C. 1970). We thus
    review de novo the district court’s rejection of National Union’s pro-
    posed interpretation of the term "payment of claims," applying North
    Carolina’s well-established standards for interpreting insurance policy
    provisions. Under North Carolina law, the primary goal in interpret-
    ing an insurance policy is to discern the intent of the parties at the
    time the policy was issued. Register v. White, 
    599 S.E.2d 549
    , 553
    (N.C. 2004). If the terms of the policy are plain, unambiguous, and
    susceptible of only one reasonable interpretation, a court will enforce
    the contract according to its terms. 
    Id.
     If, however, the meaning of
    words or the effect of provisions is uncertain or capable of several
    reasonable interpretations, the doubts must be resolved against the
    insurer and in favor of the policyholder. 
    Id.
    Under the foregoing principles, the question that we must decide
    is whether the term "payment of claims," as used in the 1997 NU Pol-
    icy, clearly fails to exclude the payment of a claim made by an
    insured in anticipation of the insured’s own subsequent payments to
    third-party claimants, or, in the alternative, whether the term "pay-
    ment of claims" is ambiguous on whether it excludes such payments.
    If either of those conditions is met, we are obliged to reject National
    Union’s proposed interpretation of "payment of claims." Because the
    term "payment of claims" clearly does not exclude payments of the
    kind involved here, we are unable to accept National Union’s prof-
    fered interpretation.
    As used in the 1997 NU Policy, the term "payment of claims" is
    a broad one, which does not restrict the recipient or timing of the pay-
    ment in question. National Union, of course, could have sought a
    more restrictive formulation — such as "payment of claims to third
    24      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    parties" or "payment of judgments or settlement agreements enforce-
    able by third parties" — but it did not do so. In this case, the Wausau
    Settlement Payment resolved a claim presented by ABT, Wausau’s
    insured, in anticipation of ABT’s own impending payment of claims
    made by plaintiffs in the underlying actions. Nothing in the term
    "payment of claims" indicates that National Union and ABT intended
    it to exclude such payments. And we are neither inclined nor empow-
    ered to rewrite the 1997 NU Policy to reflect terms that National
    Union now wishes it had obtained from ABT.
    Notably, in sponsoring this narrow construction of "payment of
    claims," National Union seeks to diminish its substantive obligations
    under the 1997 NU Policy by taking advantage of the form of the
    Foster Settlement. If ABT had settled the underlying actions individu-
    ally, by making lump-sum payments to third-party claimants,
    National Union’s defense obligations to ABT would have been trig-
    gered as soon as Wausau’s payments to claimants with defective sid-
    ing installed in 1997 reached $1 million. ABT instead pursued a
    single, comprehensive settlement of all the underlying actions. That
    approach promised to minimize the costs incurred by ABT and its
    insurers, including National Union, but also meant that the underlying
    actions would all be settled at once, so that no underlying insurance
    payments would be made to third-party claimants until the litigation
    was concluded and ABT no longer required a defense. Therefore,
    under National Union’s view that it had no defense duty until ABT’s
    underlying insurance had been exhausted by payment of claims to
    third parties, ABT’s choice to pursue a comprehensive settlement
    excused National Union from its contractual obligation to defend
    ABT.
    Put more broadly, National Union, under its view of the term "pay-
    ment of claims," likely would never be called upon to defend an
    insured in a situation such as ABT’s, where its insured has opted to
    resolve multiple actions in a single settlement of all outstanding
    claims, thus obviating the need for any further defense. Even more
    striking, National Union’s view would mean that it could never be
    required to defend an insured faced with only a single lawsuit, no
    matter how large, since the insured’s underlying insurance would
    make no payments to the third-party plaintiff (or plaintiffs) until the
    lawsuit had been resolved and the need for a defense had passed.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.               25
    National Union’s position effectively would assign it a defense duty
    that would arise in only one circumstance: when its insured has faced
    multiple actions, resolved enough of them to exhaust its underlying
    coverage, and continued to defend the rest.
    In these circumstances, we reject the view that the parties to the
    1997 NU Policy intended the simple term "payment of claims" to
    effect such a dramatic narrowing of National Union’s contractual
    obligations to defend ABT. Cf. W & J Rives, Inc. v. Kemper Ins.
    Group, 
    374 S.E.2d 430
    , 434 (N.C. Ct. App. 1988) (rejecting excess
    insurer’s contention that its duty to defend arose only if primary
    insurance was exhausted through payment of judgment or settlement,
    because "then the duty to defend under this contract would arise only
    after [the insured’s] need for defense was past"). Because the Wausau
    Settlement Payment constituted a "payment of claims" under the 1997
    NU Policy, the district court did not err in rejecting National Union’s
    motion for judgment as a matter of law in this regard.27
    27
    In addition to its narrow view of the term "payment of claims,"
    National Union seeks to rely on Brown v. Lumbermens Mutual Casualty
    Co., 
    390 S.E.2d 150
     (N.C. 1990), to avoid its defense duty. The Brown
    court, in interpreting an ambiguous defense clause in an automobile
    insurance policy, concluded that the insurer’s duty to defend persisted
    until the lawsuit against its insured culminated in a settlement or judg-
    ment, even if the insurer had already paid its policy limits. National
    Union contends that, under Brown, Wausau’s duty to defend ABT was
    never extinguished and National Union’s duty to defend thus never
    arose. That reasoning is flawed, however, since two insurers can possess
    concurrent defense duties to a common insured, see 22 Appleman on
    Insurance § 136.10 (2d ed. 2003), and National Union’s duty to defend
    would have arisen upon the exhaustion of the 1997 Wausau Policy even
    if Wausau’s defense duty continued thereafter. Moreover, the court in
    Brown reached its result by interpreting an ambiguous policy provision
    against the issuing insurer, as North Carolina law requires. See Brown,
    390 S.E.2d at 154. The insurance provision in dispute here is not ambig-
    uous, and, even if it were, Brown would support the district court’s inter-
    pretation of the 1997 NU Policy, not that of National Union.
    26      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    B.
    National Union’s second appellate contention is that the district
    court erred in failing to rule, in connection with the Indemnification
    Claim, that payments made by ABT pursuant to the Foster Settlement
    were not for "Property Damage" caused by an "Occurrence," and that
    such payments thus fall outside the scope of the 1997 NU Policy. Pur-
    suant to the Declaratory Provisions, National Union is obligated to
    indemnify ABT for 77.5% of the Foster Settlement payments. In sup-
    port of its contention on the Indemnification Claim, National Union
    makes two separate assertions. First, it maintains that payments under
    the Foster Settlement to class members are only for the costs of
    replacing the defective siding itself, and therefore, are not for "Prop-
    erty Damage" covered by the 1997 NU Policy. Second, National
    Union contends that the costs of replacing the defective siding, along
    with the consequential damages suffered by homes upon which the
    siding was affixed, are readily foreseeable results of ABT’s "shoddy
    workmanship," and thus not caused by an "Occurrence" under the
    1997 NU Policy. We assess in turn these two aspects of National
    Union’s contention on the Indemnification Claim.
    1.
    First, because the Foster Settlement provides for the computation
    of damage awards on the basis of what it terms the "Replacement
    Cost" of the defective siding, National Union contends that ABT is
    not covered for payments it makes under the Foster Settlement. Pur-
    suant to the Foster Settlement, the term "Replacement Cost" includes
    the costs of all materials, labor, and incidentals necessary to remove
    defective siding, replace it with non-defective siding, and repair dam-
    age to the structure and walls of settlement class members’ homes.
    See Foster Settlement ¶ 1.48. This "Replacement Cost," calculated
    under the formula established by the Foster Settlement, is then multi-
    plied by a second number called "Compensable Damage" (the square
    footage of defective siding on a settlement class member’s home) to
    reach the appropriate damage payment. See id. ¶¶ 1.16, 1.19.
    For purposes of the Indemnification Claim, the term "Replacement
    Cost" as used in the Foster Settlement — and as treated by the district
    court, the jury, and ABT at trial — consists of two separate categories
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.             27
    of costs. The first such category represents the costs of materials used
    to replace the defective siding itself (the "costs of replacement prod-
    uct"), and the second represents all other costs, including labor and
    materials, arising from the repair work on the damaged homes (the
    "the third-party property damages"). The third-party property dam-
    ages category thus consists of consequential damages, including all
    costs of home repairs except those represented by the costs of replace-
    ment product.
    We agree with National Union that the first category of costs, the
    costs of replacement product, does not constitute "Property Damage"
    under the 1997 NU Policy. As the Policy spells out, "Property Dam-
    age" is "[p]hysical injury to tangible property, including all resulting
    loss of use of that property . . . or [l]oss of use of tangible property
    that is not physically injured." 1997 NU Policy § IV.K. Importantly,
    the Your Product Exclusion of the 1997 NU Policy provides that
    "[t]his insurance does not apply to . . . Property Damage to Your
    Product arising out of it or any part of it." Id. § V.F. Under North Car-
    olina law, this language "excludes damages sought for the cost of
    repairing or replacing the insured’s own work or product." W. World
    Ins. Co. v. Carrington, 
    369 S.E.2d 128
    , 130 (N.C. Ct. App. 1988).
    Thus, the Your Product Exclusion excludes the costs of replacement
    product from coverage under the 1997 NU Policy.
    Our conclusion on the foregoing point is not a subject of contro-
    versy in this appeal. The district court acknowledged that, by virtue
    of the Your Product Exclusion, National Union is not required to
    indemnify ABT for the costs of replacement product. ABT presented
    evidence that allocated payments under the Foster Settlement
    between the 22.5%, representing the costs of replacement product,
    and the 77.5%, representing the third-party property damages. Based
    on the jury’s finding that the costs of replacement product make up
    only 22.5% of the Foster Settlement payments and that the third-party
    property damages account for 77.5%, the Declaratory Provisions obli-
    gate National Union to indemnify ABT for 77.5% of each settled
    claim attributable to siding installed on homes during the National
    Union coverage period.
    In challenging the Declaratory Provisions, National Union con-
    tends that, notwithstanding the jury finding to the contrary, the "Re-
    28         ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    placement Cost" component of the Foster Settlement formula is made
    up entirely of the costs of replacement product (excluded from cover-
    age by the Your Product Exclusion), and does not include the third-
    party property damages (covered under the 1997 NU Policy as "Prop-
    erty Damage"). In other words, National Union asserts that the jury
    should have found that the costs of replacement product account for
    100% — not just 22.5% — of the Foster Settlement payments.
    Unfortunately for National Union, its position fails to account for
    the separate categories of damages encompassed by the term "Re-
    placement Cost" (the costs of replacement product and the third-party
    property damages), and it is not supported by the record. ABT pre-
    sented evidence at trial on how both categories of the Foster Settle-
    ment’s "Replacement Cost" were calculated. Phillip Waier, a profes-
    sional engineer retained as a neutral advisor in connection with the
    Foster Settlement, prepared estimates for the costs of removal and
    replacement of the defective siding. According to Waier, the "Re-
    placement Cost" component of the damage award formula includes
    not only the costs of replacement siding, but also the labor, materials,
    and incidentals related to those repairs. Waier also testified that, based
    on sales data provided by ABT, 22.5% of the "Replacement Cost"
    represents the costs of replacement product, while the other 77.5%
    represents the third-party property damages. The jury found Waier’s
    evidence compelling and allocated 22.5% of the "Replacement Cost"
    to the costs of replacement product, and the remaining 77.5% of the
    "Replacement Cost" to the third-party property damages.28
    28
    On the "Property Damage" aspect of the evidence and issues pre-
    sented to the jury, the district court relied on the Your Product Exclusion
    and the definitions in the 1997 NU Policy to frame its jury instructions.
    First, the court instructed the jury on the significance of the Your Product
    Exclusion:
    National Union argues that the "your product" exclusion in the
    policy operates to exclude a percentage of ABT’s costs under the
    Foster settlement . . . . The policy states that, "This insurance
    does not apply for the property damage to your product arising
    out of it or any part of it."
    J.A. 1368. The Court then instructed the jury on the 1997 NU Policy’s
    definitions of "Property Damage" and "Your Product":
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.                   29
    The district court conducted a post-trial independent review of
    these findings, and it concluded that they were "reasonable [and] sup-
    ported by ample evidence." First Order 13. The court thus concluded
    that National Union is obligated to indemnify ABT for the 77.5% of
    the "Replacement Cost" that the jury allocated to the third-party prop-
    erty damages, as such damages satisfy the definition of "Property
    Damage" under the 1997 NU Policy and North Carolina law. Because
    the evidence supports the jury’s findings, and because the court
    applied the appropriate legal principles in making its challenged rul-
    ing, it did not err on the "Property Damage" aspect of the Indemnifi-
    cation Claim.29
    "Property damage" means . . . physical injury to tangible prop-
    erty . . . . "Your product" is defined as . . . any goods or products
    other than real property manufactured, sold, handled, distributed
    or disposed of by you . . . .
    Id. at 1368-69. Finally, the court instructed the jury on its task in apply-
    ing the contract terms to the evidence:
    You will be asked whether [the] your product exclusion in the
    National Union policy operates to exclude a percentage of
    ABT’s costs under the Foster settlement. If you find that a per-
    centage is excluded, you will need to determine what percentage
    of the underlying liability is excluded and that which relates to
    third-party property damage. If it applies, the "your product"
    exclusion excludes coverage only for the actual costs of the
    replacement siding itself. [The] "[y]our product" exclusion does
    not apply to the cost of removing the defective siding and install-
    ing and painting the new siding. Moreover, the "your product"
    exclusion does not apply to the cost of any other work on the
    home, including the repair or replacement of any other compo-
    nent of the wall system or house.
    Id. at 1369-70. Of note, National Union does not claim any appellate
    error on the jury instructions.
    29
    National Union makes a related contention that the Foster Settle-
    ment’s means of distributing the settlement funds precludes any conclu-
    sion that such payments are in part for covered third-party property
    damages. A judicial assessment of post-settlement coverage disputes
    generally turns on the types of underlying claims that have been settled,
    and not necessarily on the agreed-upon mode of distributing settlement
    30      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    2.
    The second prong of National Union’s contention on the Indemni-
    fication Claim is that the damages claimed in the underlying actions
    did not arise from an "Occurrence" within the meaning of the 1997
    NU Policy. Pursuant to the Policy, an "Occurrence" is "an accident,
    including continuous or repeated exposure to conditions, which
    results in Bodily Injury or Property Damage neither expected nor
    intended from the standpoint of the Insured." 1997 NU Policy § IV.H.
    Although the Policy does not define the term "accident," North Caro-
    lina law deems an accident to be "an unforeseen event, occurring
    without the will or design of the person whose mere act causes it; an
    unexpected, unusual, or undesigned occurrence; the effect of an
    unknown cause, or, the cause being known, an unprecedented conse-
    quence of it; a casualty." Waste Mgmt. of Carolinas, Inc. v. Peerless
    Ins. Co., 
    340 S.E.2d 374
    , 379 (N.C. 1986) (internal quotation marks
    omitted). National Union contends that the district court erred in con-
    cluding that the damages claimed in the underlying actions resulted
    from an accident, because the consequences of ABT’s activity in
    manufacturing the defective siding were foreseeable. It asserts that the
    deterioration of the siding was not an accident under the 1997 NU
    Policy, but was instead the expected result of ABT’s "shoddy work-
    manship."
    In support of its contention that the Foster claims did not arise
    from an "Occurrence" within the meaning of the 1997 NU Policy,
    National Union relies on a 1999 North Carolina decision involving a
    construction contractor seeking insurance coverage for its faulty
    workmanship. See Wm. C. Vick Constr. Co. v. Pa. Nat’l Mut. Cas.
    Ins. Co., 
    52 F. Supp. 2d 569
     (E.D.N.C. 1999). The court there held
    that poor workmanship does not, in and of itself, constitute a covered
    "occurrence." See 
    id. at 585
    . As ABT points out, however, the Vick
    funds. See Allan D. Windt, Insurance Claims & Disputes 6.31 (4th ed.
    Supp. 2006) (noting "the existence of coverage should depend on what
    claims were settled; that is, it should depend on why the money was
    paid"). Here, the evidence sufficiently demonstrated that the Foster Set-
    tlement was intended to compensate the class members’ claims for the
    third-party property damages.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.             31
    decision has no applicability here, as it was not ABT’s workmanship
    that resulted in the damages complained of — indeed, ABT never per-
    formed any work on the Foster Settlement class members’ homes —
    it was instead ABT’s defective siding that resulted in the third-party
    property damages.30
    Moreover, the Supreme Court of North Carolina has rejected the
    view that an act of negligence, like ABT’s manufacture of defective
    siding, cannot constitute an "accident" under a liability policy when
    the resulting damage takes place without the insured’s actual foresight
    or expectation. See Iowa Mut. Ins. Co. v. Fred M. Simmons, Inc., 
    128 S.E.2d 19
    , 25-26 (N.C. 1962). In Simmons, a declaratory judgment
    proceeding, the insurer contended that it had no duty to defend a suit
    against its insured, a roofing contractor, for damages caused by rain-
    water that had leaked into a building through a tarp thrown over an
    open roof, because rain was not unusual or unexpected. 
    Id.
     The court
    concluded that the term "accident" in the liability policy did not nec-
    essarily exclude the contractor’s negligent conduct in leaving the roof
    insufficiently covered. See id. at 25. In so ruling, the court explained
    that "[t]o adopt the narrow view that the term ‘accident’ in liability
    policies of insurance . . . necessarily excludes negligence would mean
    that in most, if not all, cases the insurer would be free of coverage and
    the policy would be rendered meaningless." Id. In a post-Simmons
    decision, the North Carolina Court of Appeals observed that courts
    must look to "whether the damage was expected or intended" in deter-
    mining whether an event constitutes an "occurrence." Waste Mgmt. of
    Carolinas, Inc. v. Peerless Ins. Co., 
    340 S.E.2d 374
    , 380 (N.C. 1986).
    The court emphasized that "[w]hether events are ‘accidental’ and con-
    stitute an ‘occurrence’ depends on whether they were expected or
    intended from the point of view of the insured." 
    Id.
     (emphasis added).
    In other words, the issue is not whether an insured should have fore-
    30
    Even if the Vick decision were applicable here, it does not support
    National Union’s position that the Foster claims did not arise from an
    "Occurrence." See 
    52 F. Supp. 2d at 584-86
    . In Vick, the court recog-
    nized that, although the construction company’s improper application of
    a waterproofing system was not an "accident," if Vick had been sued for
    damages to furniture in the building caused by the improperly applied
    system, "such an event may very well [have been] an ‘accident’ trigger-
    ing coverage." 
    Id. at 586
    .
    32         ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    seen the consequences of its conduct, but whether it in fact foresaw
    or intended the resulting damages. See 
    id.
    Although National Union has not specifically addressed the Sim-
    mons decision, it remains good law in North Carolina. See N.C. Farm
    Bureau Mut. Ins. Co. v. Stox, 
    412 S.E.2d 318
    , 325 (N.C. 1992) (hold-
    ing, in light of Simmons, that when term "accident" is not defined in
    policy, even injuries caused by intentional acts can be accidental if
    injury was unintentional or not substantially certain to result from
    intentional act). In these circumstances, there is no evidence that ABT
    expected or intended the homes of the settlement class members to
    suffer damages from the defective siding. Accordingly, we must sus-
    tain the jury’s finding that the damages suffered by the class mem-
    bers’ homes were the result of an accident, and thus constituted an
    "Occurrence" under the 1997 NU Policy.31 We therefore reject
    National Union’s contention that the court erred on the Indemnifica-
    tion Claim in failing to rule that payments made to settlement class
    members were not for property damage caused by an "Occurrence."
    C.
    In its third contention of error, National Union maintains that the
    district court erred in failing to award judgment as a matter of law on
    ABT’s claim that National Union had violated the UDTPA. See 
    N.C. Gen. Stat. §§ 75-1.1
     to -39. The UDTPA Claim arises from two sepa-
    rate aspects of National Union’s conduct: (1) its handling of the
    31
    The trial court’s instruction on the "Occurrence" issue, in pertinent
    part, was as follows:
    You must determine whether the property damage was expected
    or intended from the standpoint of ABT . . . . An act is expected
    or intended only if the resulting injury, as well the act, were
    intentional. In other words, to carry its burden of proof, National
    Union must prove on this issue not only that ABT . . . intended
    to sell siding for homes but that ABT . . . intended to damage the
    homes of its customers. Under North Carolina law an act will be
    considered expected or intended where the policyholder’s moti-
    vation was to cause property damage or when the policyholder
    expects that its acts will cause property damage.
    J.A. 1370.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.          33
    claims against ABT in connection with the underlying lawsuits and
    the Foster Settlement; and (2) its misrepresentations to ABT about the
    1997 NU Policy’s coverage period in order to favorably alter its cov-
    erage obligations in the two-year period from January 1998 to January
    2000. ABT contends that National Union acted in contravention of
    the UDTPA in its handling of ABT’s claim for indemnification by
    failing to settle its dispute with ABT. ABT asserts that National
    Union so acted even though it possessed all the information needed
    for a coverage determination and actually recognized internally that
    it had a duty to indemnify ABT for the underlying claims.
    Put succinctly, the trial evidence was that ABT provided National
    Union with Dr. Sullivan’s report that consequential damages, i.e., the
    third-party property damages from the defective siding, would likely
    be $87.7 million if the case went to trial, and that National Union
    knew that ABT’s primary insurance coverage had been exhausted.
    National Union officials testified that they recognized, as early as
    1998, that the 1997 NU Policy would be implicated in the defective
    siding claims, and they were warned by National Union’s own attor-
    ney that a failure to respond to ABT’s settlement demands could jeop-
    ardize the Foster Settlement and expose National Union to claims of
    bad faith. National Union nevertheless made no effort to respond to
    ABT’s settlement demands, and it closed its ABT file without ever
    responding. After National Union recognized that the 1997 NU Policy
    would be implicated, it induced ABT to purchase the 1998 NU Pol-
    icy, at double the premium ABT was already obliged to pay, for the
    purpose of limiting National Union’s liability for the claims lodged
    against ABT, even though ABT was already covered by the 1997 NU
    Policy. Based on this evidence, the jury found that National Union
    had failed "to attempt in good faith to effectuate a prompt, fair and
    equitable settlement with [ABT] when National Union’s liability to
    pay for a part of the Foster claims became reasonably clear." Verdict
    pt. B.1.c. The jury also found that National Union had induced ABT
    to negotiate and buy the 1998 NU Policy on terms less favorable to
    ABT than those of the 1997 NU Policy, and that ABT relied upon this
    misrepresentation to its detriment. 
    Id.
     pt. B.1.a.
    On appeal, National Union mounts a two-pronged attack on the
    Judgment entered on the UDTPA Claim. First, it contends that its lia-
    bility never became reasonably clear, and thus its duty to attempt to
    34      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    effectuate a prompt, fair, and equitable settlement with ABT never
    arose. Second, National Union asserts that ABT could not, as a legal
    matter, have detrimentally relied on its misrepresentation that the
    1997 NU Policy was for a term of only thirteen months.
    1.
    Before assessing these appellate contentions, it is important to
    briefly review the UDTPA and the applicable legal principles govern-
    ing the UDTPA claim. In order to recover under the UDTPA, a party
    is obliged to show the following: "(1) that the defendant engaged in
    conduct that was in or affecting commerce, (2) that the conduct was
    unfair or ‘had the capacity or tendency to deceive,’ and (3) ‘that the
    plaintiff suffered actual injury as a proximate result of defendant’s
    deceptive statement or misrepresentation.’" Gilbane Bldg. Co. v. Fed.
    Reserve Bank of Richmond, 
    80 F.3d 895
    , 902 (4th Cir. 1996) (quoting
    Pearce v. Am. Defender Life Ins. Co., 
    343 S.E.2d 174
    , 180 (N.C.
    1986)). We have recognized that, under North Carolina law, the con-
    duct sufficient to constitute an unfair or deceptive trade practice "is
    a somewhat nebulous concept," and depends on the circumstances of
    the particular case. 
    Id.
     One thing is clear, however: "[O]nly practices
    that involve ‘[s]ome type of egregious or aggravating circumstances’
    are sufficient to violate the U[D]TPA." S. Atl. Ltd. P’ship of Tenn. v.
    Riese, 
    284 F.3d 518
    , 535 (4th Cir. 2001) (quoting Dalton v. Camp,
    
    548 S.E.2d 704
    , 711 (N.C. 2001)). Generally, a trade practice will
    only be deemed "unfair when it offends established public policy as
    well as when the practice is immoral, unethical, oppressive, unscrupu-
    lous, or substantially injurious to consumers." Marshall v. Miller, 
    276 S.E.2d 397
    , 403 (N.C. 1981).
    Of importance to a judicial assessment of whether a North Carolina
    insurer’s conduct was unfair or had the capacity or tendency to
    deceive is North Carolina’s Insurance Unfair Trade Practices Act (the
    "IUTPA"). See 
    N.C. Gen. Stat. §§ 58-63-1
     to -70. As relevant here,
    the IUTPA, which applies only to the insurance industry, precludes
    an insurer from, among other conduct, "[n]ot attempting in good faith
    to effectuate prompt, fair and equitable settlements of claims in which
    liability has become reasonably clear." 
    Id.
     § 58-63-15(11)(f). The
    IUTPA also bars an insurer from "[m]aking . . . any . . . statement
    misrepresenting the terms of any policy issued or to be issued . . . for
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.             35
    the purpose of inducing or tending to induce such policyholder to
    lapse, forfeit, or surrender his insurance." Id. § 58-63-15(1). Signifi-
    cantly, the Supreme Court of North Carolina has authorized trial
    courts to look to the IUTPA for examples of conduct that constitute
    unfair or deceptive acts or practices under the UDTPA. See Gray v.
    N.C. Ins. Underwriting Ass’n, 
    529 S.E.2d 676
    , 681-83 (N.C. 2000).
    In North Carolina, a violation of section 58-63-15(11)(f) of the
    IUTPA constitutes an unfair or deceptive trade practice under the
    UDTPA — as a matter of law — because such conduct is "inherently
    unfair, unscrupulous, immoral, and injurious to consumers." Id. at
    683. Of importance, the Supreme Court of North Carolina has held
    that a violation of section 58-63-15(1) of the IUTPA also constitutes
    a violation of the UDTPA. See Jefferson-Pilot Life Ins. Co. v. Spen-
    cer, 
    442 S.E.2d 316
    , 318 (N.C. 1994).
    Under the UDTPA, the "occurrence of the alleged conduct, dam-
    ages, and proximate cause are fact questions for the jury." S. Atl. Ltd.
    P’ship of Tenn., L.P. v. Riese, 
    284 F.3d 518
    , 534 (4th Cir. 2002)
    (internal quotation marks omitted). On the other hand, "whether
    [such] conduct was unfair or deceptive is a legal issue for the court."
    
    Id.
     Thus, when a jury has found a defendant to have committed
    infringing conduct, the trial court must then itself determine, as a
    legal matter, whether such conduct constituted an unfair or deceptive
    trade practice. 
    Id.
    Sections 58-63-15(11)(f) and -15(1) of the IUTPA are each impli-
    cated here, as the jury found that National Union had engaged in two
    specific acts forming the basis of the UDTPA Claim: (1) failing to
    attempt in good faith to effectuate a prompt, fair, and equitable settle-
    ment with ABT when its liability to pay under the 1997 NU Policy
    became reasonably clear; and (2) misrepresenting to ABT the terms
    of the 1997 NU Policy in order to favorably alter its coverage obliga-
    tions for the two-year period from January 1998 to January 2000.
    Importantly, the district court concluded post-trial that there was
    "ample and compelling support in the record" for the jury’s finding
    that National Union had, by virtue of its violations of sections 58-63-
    11(f) and -15(1) of the IUTPA, violated the UDTPA. First Order 9.
    On appeal, National Union attacks the jury’s findings in this regard,
    as well as the court’s conclusions, maintaining that the jury’s findings
    are "clearly erroneous," and seeking reversal on the UDTPA Claim.
    36      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    2.
    National Union first challenges the jury’s finding, and the district
    court’s corresponding ruling, that National Union failed "to attempt
    in good faith to effectuate a prompt, fair and equitable settlement with
    [ABT] when National Union’s liability to pay for a part of the Foster
    claims became reasonably clear," in contravention of section 58-63-
    15(f) of the IUTPA. Verdict pt. B.1.c. In support of this contention,
    National Union maintains that it never possessed a duty to indemnify
    ABT under the 1997 NU Policy, and thus was never obliged to
    attempt to effectuate a prompt, fair, and equitable settlement.
    In pursuing this contention of error, National Union maintains that
    the district court’s post-trial ruling — that ABT was required to pay
    $3 million in claims under the Foster Settlement before National
    Union had a duty to indemnify ABT for additional payments under
    the Settlement — established that National Union’s duty to indemnify
    was never triggered, and National Union’s liability to ABT was thus
    never "reasonably clear." See Judgment 6. In support of its contention
    that it could not have violated section 58-63-15(11)(f) of the IUTPA
    because its duty to indemnify was never triggered, National Union
    points to various court decisions supporting the proposition that a
    UDTPA claim cannot succeed if the claimed losses are excluded from
    coverage. See, e.g., Rogers v. Unitrim Auto & Home Ins. Co., 
    388 F. Supp. 2d 638
    , 643 (W.D.N.C. 2005) (recognizing that when plain-
    tiffs’ loss fell outside scope of coverage, plaintiffs could not succeed
    on UDTPA claim). The decisions on which National Union relies,
    however, involve situations readily distinguishable from the circum-
    stances here. In this case, the district court did not conclude that the
    defective siding claims against ABT were excluded from coverage
    under the 1997 NU Policy. To the contrary, it ruled that the third-
    party property damages were covered by the Policy, and that National
    Union is obliged to indemnify ABT upon exhaustion of the underly-
    ing primary coverage limits.
    We are thus faced with a somewhat unique situation, where it has
    been established that the insurer has a duty to indemnify that has not
    actually been triggered, but inevitably will be. Although National
    Union recognized early in the Foster Settlement negotiations that its
    duty to indemnify ABT would arise, it contends that its liability to
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.             37
    ABT was never reasonably clear and that it had no duty under the
    IUTPA to seek to settle with its insured. In making this point,
    National Union urges us to equate reasonably clear liability with the
    triggering of an insurer’s duty to indemnify. Under the 1997 NU Pol-
    icy, National Union agreed that it "will pay on behalf of the Insured
    those sums in excess of the Retained Limit that the Insured becomes
    legally obligated to pay by reason of liability imposed by law." 1997
    NU Policy § I. Thus, National Union relies on the proposition that its
    duty to indemnify ABT under the 1997 NU Policy arises when two
    events occur: (1) the underlying limits are exhausted; and (2) ABT
    becomes legally obligated to pay. If we were to accept National
    Union’s contention on this point — that it has no duty to attempt to
    effectuate a good faith settlement until its insured is legally obligated
    by a final judgment or settlement agreement — we would substan-
    tially undermine section 58-63-15(11)(f) of the IUTPA, which does
    not require a final judgment before an insurer has a duty to attempt
    to effectuate a settlement.
    The issue for us to assess, therefore, is not whether National Union
    had a present duty to indemnify, but whether its "liability [had
    become] reasonably clear" under the IUTPA. 
    N.C. Gen. Stat. § 58-63
    -
    15(11)(f). National Union contends, in support of its decision not to
    settle with ABT, that ABT’s $5 million settlement demand was prem-
    ised only on liability projections, and did not rely on any specified
    sums presently due. The trial evidence, however, which the jury and
    district court accepted, was that National Union’s liability was reason-
    ably clear. Every primary and excess carrier of ABT — other than
    National Union — settled with ABT after receiving Dr. Sullivan’s
    report indicating that the third-party property damages from the
    defective siding would likely be about $87.7 million if the case went
    to trial. Ms. Tersy, the Director of Excess Casualty Claims for
    National Union’s claims administrator, acknowledged at trial that
    National Union had received Dr. Sullivan’s report containing the
    information that ABT’s other insurance carriers had relied on in mak-
    ing their settlement decisions, and she admitted that National Union
    had learned from Wausau that coverage under the 1997 Wausau Pol-
    icy had been exhausted. The evidence also established that National
    Union’s officials were convinced (even before receiving Dr. Sulli-
    van’s report) that the 1997 NU Policy would be implicated in the
    defective siding claims. Indeed, Vice President Gregnoli of AIG
    38      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    (National Union’s parent) testified that, as early as 1998, during the
    underwriting process for the 1998 NU Policy, National Union knew
    that the 1997 NU Policy was going to be implicated in the defective
    siding claims. Under the evidence, National Union’s realization that
    it was obliged to provide coverage to ABT pursuant to the 1997 NU
    Policy was the impetus for its scheme — by misrepresentations and
    fraudulent conduct — to secure ABT’s purchase of the 1998 NU Pol-
    icy.
    Notwithstanding the substantial trial evidence supporting National
    Union’s early recognition that it would be liable to ABT for indemni-
    fication on the defective siding claims, National Union failed to
    account for its utter lack of response to ABT’s settlement demands.
    National Union could have acted reasonably under the circumstances
    — for example, it could have conducted an independent analysis of
    what the third-party property damages might be, or it could have
    advised ABT to wait for the actual costs of the claims in the underly-
    ing actions to be ascertained. National Union did neither — nor any-
    thing else — it instead simply closed its file on ABT without
    rendering a coverage decision. Viewed in the proper light, this evi-
    dence provides ample support for the jury’s finding that National
    Union’s indemnification liability was "reasonably clear" and that
    National Union nonetheless failed to attempt in good faith to effectu-
    ate a settlement with its insured.
    In North Carolina, a violation of section 58-63-15(11)(f) of the
    IUTPA constitutes an unfair or deceptive trade practice under the
    UDTPA, as a matter of law. Gray, 529 S.E.2d at 683. Because the
    evidence supports the jury’s finding that National Union engaged in
    conduct violating section 58-63-15(11)(f) of the IUTPA, and because
    such a violation is "inherently unfair" and a violation of the UDTPA,
    the district court’s ruling that National Union violated the UDTPA
    was not erroneous.32
    32
    In a related contention, National Union maintains that, even if its lia-
    bility to ABT was reasonably clear, ABT was unable to establish the
    aggravating circumstances required to support the UDTPA Claim. This
    assertion is also without merit. It is true, of course, that a bad faith
    refusal to settle a claim cannot rest merely "on honest disagreement or
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.               39
    3.
    By its Verdict, the jury also found that National Union had violated
    the UDTPA by misrepresenting to ABT the terms of the 1997 NU
    Policy. More specifically, the jury found that National Union induced
    ABT to negotiate and buy the 1998 NU Policy on terms less favorable
    to ABT, and that ABT relied upon this misrepresentation to its detri-
    ment. Verdict pt. B.1.a. Such conduct contravened the IUTPA provi-
    sion prohibiting insurers from "[m]aking . . . any . . . statement
    misrepresenting the terms of any policy issued or to be issued . . . for
    the purpose of inducing or tending to induce such policyholder to
    lapse, forfeit, or surrender his insurance." 
    N.C. Gen. Stat. § 58-63
    -
    15(1).
    On appeal, National Union does not dispute the jury’s finding that
    it misrepresented to ABT the coverage period of the 1997 NU Policy.
    Nor does National Union dispute that the purpose of this misrepresen-
    tation was to induce ABT to purchase another policy at twice the pre-
    mium for a period during which ABT was already covered, and to
    limit National Union’s liability for the defective siding claims.
    Instead, National Union asserts that, as a matter of law, ABT could
    not have detrimentally relied upon National Union’s misrepresenta-
    tion, because ABT had already obtained Endorsement #012, clarify-
    ing that the actual coverage period for the 1997 NU Policy was thirty-
    seven months. National Union therefore contends that ABT cannot
    establish National Union’s misrepresentation caused its injury.
    As we have observed, under North Carolina law "what constitutes
    proximate cause between a deceptive act and a plaintiff’s damages
    remains ambiguous." Gilbane Bldg. Co. v. Fed. Reserve Bank of Rich-
    mond, 
    80 F.3d 895
    , 903 (4th Cir. 1996). To be sure, however, proxi-
    innocent mistake." Dailey v. Integon Gen. Ins. Corp., 
    331 S.E.2d 148
    ,
    155 (N.C. Ct. App. 1985); see also Olive v. Great Am. Ins. Co., 
    333 S.E.2d 41
    , 46 (N.C. Ct. App. 1985). Under the evidence here, however,
    the district court was justified in ruling that National Union’s failure to
    settle was more than "honest disagreement or innocent mistake," and was
    instead a violation of section 58-63-15(11)(f) and "inherently unfair"
    under North Carolina law.
    40      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    mate cause may be established by evidence of reliance, and here, the
    evidence readily supports a finding of reliance by ABT. See 
    id.
    First, the Rovelli Email, corroborated by Rovelli’s testimony, dem-
    onstrated that he knew, before underwriting the 1998 NU Policy, that
    the 1997 NU Policy extended coverage to ABT through January 31,
    2000, and that there was no policy provision permitting National
    Union to cancel its coverage early. Nonetheless, National Union mis-
    represented to ABT that it had to buy the 1998 NU Policy, and ABT
    in fact purchased the Policy, paying double its annual premium for
    less coverage. It is nonsensical that ABT would have contemplated
    the purchase of another insurance policy, doubling its premium and
    narrowing its coverage, if it had known that it already had coverage
    under the 1997 NU Policy. And the jury found against National Union
    on this point, concluding that ABT relied on National Union’s mis-
    representation that ABT had to purchase the 1998 NU Policy, and
    would not have done so in the absence of National Union’s misrepre-
    sentation. See Verdict pt. B.1.a. The involvement of ABT in procur-
    ing Endorsement #012 thirteen months earlier did not excuse National
    Union’s misrepresentation of coverage to ABT. National Union is not
    entitled to successfully assert, when ABT did as National Union
    requested, that ABT could not rely on National Union’s misrepresen-
    tation because it already knew of the falsehood. This is precisely the
    kind of conduct the IUTPA aims to deter. We thus agree with the dis-
    trict court that the evidence before the jury provided "ample and com-
    pelling support" for a finding of detrimental reliance. First Order 9.
    Of course, an insurer has no duty under North Carolina law, in the
    absence of a request, to keep its insured apprised of the meaning and
    effect of all the provisions in its policy. See, e.g., Hardin v. Liverpool
    & London & Globe Ins. Co., 
    127 S.E. 353
    , 355 (N.C. 1925) ("We
    cannot approve the position that, in the absence of a request, it was
    the agent’s legal duty to explain the meaning and effect of all the pro-
    visions in the policy."). The circumstances here, however, are not that
    ABT had unvoiced misconceptions about the meaning of the provi-
    sions of the 1997 NU Policy that it expected National Union to first
    intuit, and then clarify for ABT. Instead, the evidence is that National
    Union engaged in a scheme to provide unsolicited, false information
    to ABT, for the specific purpose of inducing ABT to purchase insur-
    ance for a period for which National Union was already providing
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.            41
    coverage to ABT, in order to minimize National Union’s liability for
    the defective siding claims.
    As we have emphasized, the Supreme Court of North Carolina has
    decided that a violation of section 58-63-15(1) of the IUTPA consti-
    tutes a violation of the UDTPA. See Jefferson-Pilot Life Ins. Co. v.
    Spencer, 
    442 S.E.2d 316
    , 318 (N.C. 1994). The trial evidence sup-
    ported the jury’s finding that National Union engaged in conduct con-
    stituting a violation of section 58-63-15(1), and that ABT relied on
    National Union’s misrepresentations to its detriment. Verdict pt.
    B.1.a. Because a violation of this provision of the IUTPA is a viola-
    tion of the UDTPA, the district court did not err in concluding that
    National Union contravened the UDTPA when it misrepresented the
    terms of the 1997 NU Policy to induce ABT to purchase the 1998 NU
    Policy. National Union’s challenge to the Judgment on the UDTPA
    Claim must therefore be rejected.
    D.
    Finally, National Union challenges the district court’s award of
    attorneys’ fees to ABT under the UDTPA. See Second Order. Under
    North Carolina law, a court is entitled to award attorneys’ fees against
    the losing party in a suit alleging a violation of the UDTPA. See 
    N.C. Gen. Stat. § 75-16.1
    . A court can do so upon finding willfulness on
    the part of the party committing the violation, plus an unwarranted
    refusal to resolve the matter which forms the basis of the suit. See 
    id.
    Thus, in order to award attorneys’ fees to ABT, the district court was
    obliged to find the following: (1) that National Union had violated the
    UDTPA; (2) that it did so willfully, and engaged in an unwarranted
    refusal to fully resolve the matter forming the basis of the suit; and
    (3) that the attorneys’ fees being sought were reasonable. See 
    id.
    National Union premises its challenge to the attorneys’ fees award
    on its contention that the district court erroneously concluded that it
    had violated the UDTPA, and thus had no statutory authority to make
    an award of fees under the UDTPA. To the contrary, however, the
    jury’s findings and the court’s conclusions were amply supported by
    the evidence and the law. See supra Part III.C. In these circumstances,
    42      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    we are unable to say that the court abused its discretion in making an
    award of attorneys’ fees.33
    IV.
    Pursuant to the foregoing, the Judgment of the district court is
    affirmed.
    AFFIRMED
    33
    In awarding attorneys’ fees, the court found that National Union had
    willfully contravened the UDTPA and engaged in an unwarranted refusal
    to fully resolve its dispute with ABT. The court also determined that the
    costs and fees sought by ABT were reasonable, and it spelled out its fac-
    tual findings pursuant to North Carolina law. See United Labs., Inc. v.
    Kuykendall, 
    437 S.E.2d 374
    , 381-82 (N.C. 1993). More specifically, the
    court observed that the litigation against National Union involved com-
    plex issues requiring significant legal work, including a nine-day jury
    trial. The court found ABT’s counsel to be skilled and competent, and
    it found their hourly rates to be "reasonable, customary and comparable"
    for the representation involved. Second Order 3, 5. Finally, the court
    noted that ABT had obtained an "extraordinarily high degree of success,"
    a factor that weighed strongly in favor of making the attorneys’ fees
    award. Id. at 6.
    Volume 2 of 2
    44      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    NIEMEYER, Circuit Judge, dissenting:
    ABT Building Products Corp. and its subsidiary, ABTco, Inc., a
    manufacturer of hardboard siding, (collectively "ABT"), commenced
    this action against National Union Fire Insurance Company
    ("National Union"), for breach of an umbrella policy issued by
    National Union to ABT for the period January 1, 1997, through Janu-
    ary 31, 2000. ABT claimed that National Union failed to provide a
    defense to it for numerous underlying actions and to indemnify it for
    amounts that it agreed to pay in a global settlement of those actions.
    The underlying actions involved allegations that defective hardboard
    siding produced by ABT caused damage to homes in which the prod-
    uct was installed during a period of over 20 years. As an excess
    insurer, National Union declined to defend the underlying actions or
    to participate in the global settlement because, it contended, ABT had
    not exhausted the limits of its primary insurance policies either before
    or after the global settlement. In its complaint, ABT alleged breach
    of contract and unfair trade practices under North Carolina’s Unfair
    and Deceptive Trade Practices Act, 
    N.C. Gen. Stat. § 75-1.1
     et seq.,
    in support of its request for a declaratory judgment, damages, punitive
    damages, treble damages, and attorneys fees.
    The jury returned a verdict in favor of ABT, and based on the ver-
    dict, the district court entered judgment in favor of ABT for an
    amount in excess of $14 million plus attorneys fees of just under $2
    million. The majority now affirms that judgment by essentially rewrit-
    ing National Union’s umbrella policy and ignoring the preconditions
    to any duty of National Union under the umbrella policy. The record
    in this case conclusively shows that:
    (1) During the relevant period when National Union was
    ABT’s excess insurer, ABT had obtained three consecutive
    primary insurance policies from Employers Insurance of
    Wausau ("Wausau") providing coverage for the payment of
    damage claims up to $1 million for each occurrence and
    supplemental payments for attorneys fees and costs, for a
    total amount of coverage during the period of at least, as
    conceded by the parties, $2 million, plus a $1 million self-
    insured retention, and attorneys fees and costs.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.           45
    (2) By its terms, National Union’s umbrella policy did not
    provide coverage to ABT until ABT had "exhausted" its pri-
    mary insurance from Wausau "by payment of claims" made
    against ABT.
    (3) As of the date of the verdict in this case, June 25, 2004
    (over four years after National Union’s policy expired),
    ABT and its primary insurance carriers had paid out on 469
    homeowners’ claims attributable to the relevant period the
    following amounts:
    (a) $275,598 in damages, paid to the claimants;
    (b) $80,012 in the costs of the replacement hard-
    board siding itself, paid to the claimants;
    (c) $1,448,709 in attorneys fees;
    (d) $234,719 in class action notice costs;
    (e) $177,312 in administrative costs.
    There is absolutely no evidence in the record of any more monies paid
    by ABT or its primary insurer in respect of homeowners’ claims made
    for occurrences during the relevant period of National Union’s policy,
    a fact that the jury confirmed in its verdict form.
    Under no reasonable calculation do these numbers demonstrate that
    the payments made, even as late as 2004, had exhausted the primary
    coverage provided by Wausau to ABT, and even at this time, the pre-
    conditions for National Union’s coverage under its umbrella policy
    have not been demonstrated. Indeed, the data indicate that ABT may
    never have to pay claims that exhaust its primary Wausau policies for
    the period January 1, 1997, through January 31, 2000, the period of
    coverage afforded by National Union’s umbrella policy. As of 2004,
    the payment of damage claims covered by the primary insurance
    totaled just under $276,000, less than one-tenth of the underlying lim-
    its.
    46      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    As will be shown herein, the majority rewrites National Union’s
    policy to require it to participate in defense and settlement discussions
    on the slim possibility that claims in the future could exhaust the pri-
    mary limits of Wausau’s insurance coverage. But in doing so, the
    majority has done violence to the policy language; directly assaulted
    the longstanding expectations of the insurance industry in issuing
    excess policies; and erected a new, indecipherable standard for future
    conduct by excess insurers. I roundly dissent.
    I
    A
    In 1992, ABT acquired the building products division of Abitibi-
    Price Corporation, which had manufactured and sold hardboard siding
    in North Carolina since 1970 for use on the exterior of mobile and
    stand-alone homes to protect against the elements. Beginning in 1995,
    numerous individual and class-action lawsuits were filed against ABT
    by homeowners who had purchased and installed hardboard siding
    manufactured by ABT and its predecessor Abitibi, claiming that
    "when exposed to moisture, humidity, and other normal climatic con-
    ditions, [the hardboard siding] absorbed moisture and prematurely
    rotted, buckled, swelled, cracked, or otherwise deteriorated." They
    alleged that they had suffered damage to their homes when the siding
    was installed, beginning in 1974, and that the damage would continue
    as long as the ABT siding "remained affixed."
    ABT and the homeowner claimants entered into negotiations,
    beginning in 1997, and agreed to settle all of the claims through a lead
    class action entitled Foster v. ABTco. Inc., No. CV-95-151-M (Ala.
    Cir. Ct.), which had been filed in 1995. The settlement was reached
    and approved by the Alabama circuit court in September 2000 (the
    "Foster Settlement"). Under its terms, all persons who had ABT’s
    hardboard siding installed during the 25-year period from May 15,
    1975, through May 15, 2000, released their court claims against ABT
    in exchange for the ability to present a limited claim for a specified
    sum and other benefits under a claims program established in the Fos-
    ter Settlement. The settlement itself created a "siding repair program"
    that included the right of eligible class members also to file claims for
    a payment by ABT of an amount specified by a "Compensation For-
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.         47
    mula." In addition, the settlement established a new 25-year "En-
    hanced Warranty," which included procedures for reviewing and
    compensating future claims. Finally, the settlement required ABT to
    pay the homeowners’ attorneys their fees and the costs of the class
    actions.
    Before executing the Foster Settlement, ABT sought coverage for
    the homeowners’ claims from at least four insurers other than
    National Union: Firemens’ Fund Insurance Company for the period
    October 20, 1992, to October 20, 1993; Standard Fire Insurance Com-
    pany for the period October 20, 1993, to October 20, 1994; Farming-
    ton Casualty Company for the period from October 20, 1994, to
    January 1, 1997; and Wausau for the period January 1, 1997, to Janu-
    ary 31, 1999.
    Wausau’s policies provided the insurance that underlay National
    Union’s umbrella policy. Wausau issued a policy to ABT for the 13-
    month period from January 1, 1997, to January 31, 1998 (the "1997
    Wausau Policy"), which did not exclude claims for defective hard-
    board siding. In January 1998, however, Wausau gave ABT a notice
    of cancellation of the 1997 Wausau Policy, indicating that in the
    future Wausau would exclude coverage for hardboard siding. To com-
    ply with a 90-day notice requirement for policy cancellation, Wausau
    issued a "stub policy" (the "1998 Wausau Stub Policy"), providing
    ABT coverage for the three-month period from January 31, 1998, to
    May 1, 1998, under the same terms as were contained in the 1997
    Wausau Policy. When the 1998 Wausau Stub Policy ended, Wausau
    issued a new policy to ABT, providing coverage from May 1, 1998,
    to January 31, 1999 (the "1998 Wausau Policy"), which excluded
    coverage for hardboard siding claims.
    Wausau’s three policies included the same general terms and con-
    ditions for the three separate periods covered. Each provided that
    Wausau would "pay for damages" up to $1 million for each occur-
    rence during the policy period or $2 million in the aggregate, plus
    "supplementary payments" representing the costs and expenses that
    Wausau incurred in investigating, defending, and settling claims. The
    Wausau policies provided coverage limits under the following terms:
    The Limits of Insurance of this Coverage Part apply sepa-
    rately to each consecutive annual period and to any remain-
    48      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    ing period of less than 12 months, starting with the
    beginning of the policy period shown in the Declarations,
    unless the policy period is extended after issuance for an
    additional period of less than 12 months. In that case, the
    additional period will be deemed part of the last preceding
    period for purposes of determining the Limits of Insurance.
    Wausau initially refused to defend ABT in the Foster litigation,
    and both sides filed declaratory judgment actions to determine their
    rights with respect to the homeowners’ claims. In November 1999,
    Wausau and ABT executed a settlement agreement, in which ABT
    agreed to release Wausau from its obligations under the three policies
    for the homeowners’ lawsuits in exchange for Wausau’s single pay-
    ment to ABT of $1.5 million. There is no suggestion that at the time
    of settlement, any homeowners’ claims had been paid or settled. The
    parties, however, allocated the settlement amount to the 1997 Wausau
    Policy and the 1998 Wausau Stub Policy, both of which covered hard-
    board siding claims, assigning, through some undisclosed allocation
    formula, $1,147,058.83 to the 1997 Wausau Policy and $352,941.17
    to the 1998 Wausau Stub Policy. Under the settlement, Wausau also
    agreed that its obligation to participate in defending the homeowners’
    lawsuits extended only through July 31, 1999.
    While negotiating its settlement with Wausau and possible settle-
    ments with other insurers, ABT also demanded that National Union
    provide a defense and indemnification in the Foster litigation under
    its umbrella policy issued in 1997. That policy provided excess cover-
    age during a 13-month period from January 1, 1997, to January 31,
    1998, with limits of $25 million per occurrence and $25 million in the
    aggregate. It provided coverage for the payment of damages for "in-
    jury [to third parties] that takes place during the policy period and is
    caused by an Occurrence." When ABT received the umbrella policy
    from National Union, it realized that the coverage period was incor-
    rect, and accordingly it added an endorsement to extend its coverage
    from January 1, 1997, to January 31, 2000.
    In late 1997, underwriters at National Union decided to issue a new
    policy to ABT, notwithstanding the endorsement that had already
    extended coverage of ABT’s existing policy to January 31, 2000.
    National Union sent notice to ABT, misstating that its existing policy
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.            49
    would expire on January 31, 1998, the expiration date of the original
    1997 policy. Thereafter, National Union issued and ABT purchased
    a subsequent commercial umbrella policy to cover the period from
    January 31, 1998, to January 31, 2000. This policy increased the lim-
    its to $50 million per occurrence and $50 million in the aggregate,
    and it also increased the premium. Because of the existence of the
    endorsement in the 1997 policy, however, the parties agree that in this
    litigation only the amended 1997 National Union umbrella policy is
    controlling for purposes of reviewing coverage liability. Thus, refer-
    ences to National Union’s policy are to the umbrella policy that it
    issued on January 1, 1997, and amended by endorsement to extend to
    January 31, 2000.
    Under the terms of its umbrella policy, National Union agreed to
    cover only "those sums in excess of the retained limit that the Insured
    becomes legally obligated to pay by reason of liability imposed by
    law . . . because of Bodily Injury, Property Damage, Personal Injury
    or Advertising Injury that takes place during the Policy Period and is
    caused by an Occurrence." The policy defines "Retained Limit" as
    "the total of applicable limits of the underlying policies listed in the
    Schedule of Underlying Insurance and the Limits of any other under-
    lying insurance providing coverage to the Insured." The Schedule of
    Underlying Insurance listed ABT’s Wausau policy and its per-
    occurrence and aggregate limits of $1 million and $2 million, respec-
    tively.
    The excess policy also provided that if the underlying insurance
    lapsed, National Union would "only be liable to the same extent" that
    it would have been if the underlying policy had been maintained and
    renewed without material change. Thus, in addition to at least three
    separate $1 million limits of coverage in the Wausau policies,
    National Union could act as though there was an additional $1 million
    in underlying coverage by virtue of the lapsed coverage provision for
    the period January 31, 1999, to January 31, 2000. The parties do not
    dispute, however, that at least $3 million was available in underlying
    limits from the primary Wausau policies, and the judgment entered by
    the district court so provides.
    In addition to agreeing to indemnify ABT for "damage claims"
    exceeding ABT’s primary insurance, the umbrella policy imposed on
    National Union a duty to defend, subject to the following conditions:
    50      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    [National Union] shall have the . . . duty to defend any claim
    or suit seeking damages covered by the terms and conditions
    of this policy when:
    The applicable limits of Insurance of the underly-
    ing policies in the Schedule of Underlying Insur-
    ance and the Limits of Insurance of any other
    underlying insurance providing coverage to the
    Insured have been exhausted by payment of claims
    to which this policy applies.
    (Emphasis added).
    In a letter dated December 30, 1999, after ABT had settled with
    Wausau, ABT requested that National Union also enter into a settle-
    ment with ABT to dispose of the claims made by homeowners against
    ABT arising from the Foster litigation. Initially, ABT demanded that
    National Union pay ABT $3 million to pay the claims that would be
    made under the Foster Settlement program. This proposal was based
    on the mistaken belief that National Union’s policy only covered the
    period from January 1, 1997, to January 1, 1998. When ABT’s coun-
    sel discovered that National Union also provided coverage for the
    period 1998 to 2000, ABT increased its demand to $5 million, claim-
    ing that the higher amount reflected National Union’s "pro-rata expo-
    sure" to the claims covered by the Foster Settlement program. The
    projection accompanying the letter predicted $37.8 million in future
    claims, of which counsel allocated $3.52 million to National Union.
    The basis for these sums and for the allocation was not disclosed.
    In January 2000, National Union’s claims handler assigned to the
    ABT policy, Aimee Tersy, accompanied by Christopher Aries, who
    was retained by National Union as outside coverage counsel, met with
    ABT representatives to discuss the situation. Tersy explained that
    National Union required additional information to determine whether
    ABT had exhausted its primary insurance coverage through payment
    of covered claims, as required by the terms of National Union’s
    umbrella policy. Tersy also requested documentation supporting
    ABT’s estimates of consequential damages, as distinct from damages
    incurred to pay for the replacement hardboard siding itself, because
    National Union’s policy covered consequential damages only.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.           51
    Shortly after the meeting with ABT, Aries, who was then a junior
    associate with Lester, Schwab, Katz & Dwyer, LLP, sent a draft let-
    ter, dated February 9, 2000 (the "Aries letter"), advising National
    Union of its legal options with respect to the claims made against
    ABT. Aries laid out three options for National Union. First, Aries
    advised National Union that it could settle with ABT by paying out
    an indeterminate sum, noting that "it is very difficult, it [sic] not
    impossible, to accurately value the amount of a National Union con-
    tribution, this resulting from a combination of factors, most notably
    the early stage of the underlying class litigations, [and] the ‘divide
    and conquer’ strategies used by [ABT] in keeping all its insurers sep-
    arate." Second, National Union could request further details about the
    settlement and explain that it "cannot evaluate its exposure on the
    information currently provided by the insured." Third, National Union
    could deny coverage based on ABT’s failure to exhaust the limits of
    its primary coverage. Aries predicted that if National Union adopted
    the second or third options, either "the settlement of the underlying
    litigation will burst, whether solely on National Union’s decision not
    to participate, or for other reasons" or, alternatively, ABT would file
    a coverage action against National Union. Aries wrote that, "[i]n the
    latter scenario, National Union would be at a distinct disadvantage,
    for the equities involved . . . would look unfavorable upon National
    Union leaving its insured to ‘twist in the wind’ and accordingly a
    Court would not give serious consideration to our attempt to claim
    that the settlement amount was unreasonable."
    After independently assessing the claims against ABT, National
    Union rejected Aries’ advice as legally unsound, and Aries’ letter
    never became the position of National Union. This became obvious
    not only from National Union’s decision not to follow it, but also
    from the letter itself, which was an incomplete draft, riddled with
    grammatical and spelling errors. Rather than settle or deny coverage
    outright, on February 11, 2000, National Union refused ABT’s
    demand for payment, explaining that ABT had not provided the infor-
    mation necessary for National Union to evaluate ABT’s demand.
    Over three months later, on May 24, 2001, when it had received no
    response to its requests for information and had no new evidence of
    exhaustion or documentation to support ABT’s damages projections,
    National Union "closed" ABT’s file without a coverage determination
    and with no further notice to ABT.
    52      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    Despite National Union’s refusal to participate in the Foster Settle-
    ment (and contrary to Aries’ prediction in his draft letter), the home-
    owners’ claims were settled in the Foster Settlement, which
    established the compensation program described above and the result-
    ing claims procedure for damaged homeowners.
    In June 2004, shortly before the jury below returned its verdicts,
    ABT prepared a document entitled "Foster Settlement Fees/Costs to
    Date (corrected June 22, 2004)," which listed all monies paid under
    the Foster Settlement and which was submitted to the jury. That doc-
    ument argued that National Union’s share of the Foster Settlement
    costs as of June 2004 was: $1.45 million in attorneys fees; $234,719
    in class action notice costs; $177,312 in administrative costs; and
    $275,598 in "Foster claims paid to date." There is no evidence that
    ABT paid any claims other than those paid under the Foster Settle-
    ment.
    B
    In June 2001, ABT filed the five-count complaint in this case,
    seeking (1) a declaratory judgment that National Union had a duty to
    defend and indemnify ABT in the Foster litigation; (2) damages for
    breach of contract based on National Union’s refusal to defend or
    indemnify ABT; (3) damages for bad faith denial and handling of
    claims; (4) punitive damages for National Union’s willful and wanton
    conduct in discharging its contractual and fiduciary duties; and (5)
    treble damages for unfair and deceptive trade practices that violated
    
    N.C. Gen. Stat. § 75-1
     et seq. In its bad faith and unfair trade prac-
    tices counts, ABT alleged that National Union "failed to acknowledge
    and act reasonably promptly on communications with respect to the
    claims at issue"; "failed to adopt and apply reasonable standards for
    the prompt investigation of claims asserted against [ABT]"; "failed
    and refused to provide coverage . . . based on an unreasonable inter-
    pretation of the policy"; and "did not attempt to effectuate a prompt,
    a fair and equitable resolution of the claims."
    In its answer, National Union advanced the defenses that it never
    had a duty to defend or indemnify ABT because (1) ABT had not
    exhausted the limits of its primary insurance, and (2) the underlying
    homeowners’ claims were not based on "property damage" resulting
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.             53
    from an "occurrence" but rather were primarily based on damage to
    siding itself, which the policy did not cover.
    Following trial, a jury returned a verdict against National Union in
    the amount of $2.5 million in damages for breach of duty to defend;
    $3.9 million in damages for unfair trade practices; and $7.5 million
    in punitive damages. Although the jury found that National Union
    made a reasonable investigation of the homeowners’ claims against
    ABT, it nevertheless held that National Union "misrepresented the
    terms of its 1997 policy for the purposes of changing National
    Union’s insurance coverage obligations in 1998-2000" and that ABT
    detrimentally relied on that misrepresentation; that National Union
    failed "to attempt in good faith to effectuate a prompt, fair and equita-
    ble settlement"; and that National Union’s conduct demonstrated "bad
    faith," accompanied by "aggravated conduct . . . that indicates a reck-
    less indifference to the consequences." This constituted a two-fold
    finding — that National Union had violated North Carolina’s Unfair
    and Deceptive Trade Practices Act both by misrepresenting the terms
    of the policy and by refusing, in bad faith to settle. The jury did not
    break out the damages for those two violations.
    The jury found that the hardboard siding claims all flowed from a
    single "occurrence" under the umbrella policy, and that the per-
    occurrence limits thus controlled the allocation of loss among insur-
    ers.
    The jury also found that National Union’s share of the Foster Set-
    tlement costs was $1,448,709 for attorneys fees, $234,719 for class
    action notice costs, and $177,312 for claims administration fees, total-
    ing $1.86 million. It found that National Union was liable for 77.5%
    of future claims by homeowners and that 22.5% of such claims repre-
    sented the cost of replacing hardboard siding. It also concluded that
    National Union would be liable for $378.06 for administrative costs
    for each future claim settled. The division of damages for future
    claims was made in recognition that National Union’s policy covered
    property damage but not replacement costs.
    Acting pursuant to North Carolina’s Unfair and Deceptive Trade
    Practice Act, 
    N.C. Gen. Stat. § 75-16
    , the district court trebled the
    $3.9 million damages amount returned in the verdict to $11.7 million.
    54      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    ABT elected to recover the trebled damages, rather than punitive
    damages, and the court entered judgment against National Union in
    the amount of $2.5 million for breach of duty to defend and $11.7
    million in trebled damages for bad faith claims handling and unfair
    trade practices.
    The district court also issued a declaratory judgment that National
    Union would be obligated to indemnify ABT for future Foster Settle-
    ment claims "beginning once ABT has paid Foster Settlement costs
    or claims attributable during the National Union coverage period
    equal to $3 million in underlying insurance coverage." The court
    found that as of the date of the verdict, ABT had paid Foster Settle-
    ment claims of $275,598 (exclusive of the cost of siding) and
    $1,860,740 in attorneys fees, class action notice costs, and administra-
    tive costs falling within National Union’s coverage period. The court
    held that when the "claims attributable to installations during the
    National Union coverage period equal the $3 million, National Union
    would then have a duty to indemnify ABT for 77.5% of the future
    payments, plus $378.06 for administrative cost of each claim."
    The district court denied National Union’s post-trial motions for
    judgment as a matter of law, a new trial, and remittitur, and ordered
    National Union to pay $1,997,161 in ABT’s attorneys fees and costs.
    From the district court’s judgment, totaling more than $16 million
    and obligating National Union to pay future claims, National Union
    filed this appeal.
    II
    Under North Carolina law, which the parties agree is controlling,
    insurance policies are contracts interpreted according to ordinary prin-
    ciples of contract law. Gaston County Dyeing Machine Co. v. North-
    field Ins. Co., 
    524 S.E.2d 558
    , 563 (N.C. 2000); Brown v.
    Lumbermens Mut. Cas. Co., 
    390 S.E.2d 150
    , 153 (N.C. 1990); see
    also N. C. Ins. Guar. Ass’n v. Century Indem. Co., 
    444 S.E.2d 464
    ,
    467 (N.C. App. 1994). Thus, a court has a "duty to construe and
    enforce insurance policies as written, without rewriting the contract
    or disregarding the express language used. The duty is a solemn one,
    for it seeks to preserve the fundamental right of freedom of contract."
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.              55
    Fidelity Bankers Life Ins. Co. v. Dortch, 
    348 S.E.2d 794
    , 796 (N.C.
    1986).
    An insurance company’s duty to defend is part of its contractual
    obligation and is defined by the language of the insurance policy. See
    Lumbermens Mut., 390 S.E.2d at 152. Although the duty to defend is
    broader than the duty to indemnify, see Waste Mgmt. of Carolinas,
    Inc. v. Peerless Ins. Co., 
    340 S.E.2d 374
    , 377 (N.C. 1986), North Car-
    olina courts have joined numerous other jurisdictions in holding that
    an excess insurer’s duty to defend is triggered only when the limits
    of primary insurance have been exhausted. See, e.g., Fieldcrest Can-
    non v. Fireman’s Fund Ins. Co., 
    493 S.E.2d 658
    , 660 (N.C. Ct. App.
    1997) (holding that the insurer was "an umbrella" excess coverage
    carrier, and as such, its duty to defend could not be triggered unless
    and until the primary insurers’ coverage limits were paid); see also
    Barry R. Ostrager & Thomas R. Newman, Handbook on Insurance
    Coverage Disputes 188 (5th ed. 1992) ("The traditional view is that
    an excess insurer is not required to contribute to the defense of the
    insured so long as the primary insurer is required to defend").
    The language of National Union’s umbrella policy in this case pro-
    vides no different standard, obligating National Union to defend ABT
    in the homeowners’ hardboard claims only after the limits of the
    underlying insurance had been exhausted. Precisely, the language pro-
    vides that National Union’s duty to defend does not arise until the
    applicable limits of the underlying Wausau policies "providing cover-
    age to [ABT] have been exhausted by payment of claims to which this
    policy applies." The claims to which National Union’s policy applies
    are claims for damages made against ABT "by reason of liability
    imposed by law or assumed by contract by [ABT] . . . because of . . .
    property damage . . . that takes place during the Policy Period and is
    caused by an Occurrence." As a "liability" policy, the National Union
    policy insures against claims made by others against ABT. This dis-
    tinguishes a liability policy from a first-party policy, such as a fire or
    health insurance policy, under which the insured itself is the claimant.
    In its umbrella policy, National Union had not only a duty to
    defend after underlying limits were exhausted, but also a duty to
    indemnify ABT for payments made in respect to damage claims.
    Again, National Union’s duty to indemnify arises only "for that por-
    56      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    tion of damages in excess of [ABT’s] Retained Limit" which is
    defined as the greater of either:
    1. The total of the applicable limits of the underlying poli-
    cies listed in the Schedule of Underlying Insurance and
    the applicable limits of any other underlying insurance
    providing coverage to the Insured; or
    2. The amount stated in the Declarations as Self-Insured
    Retention as a result of any one Occurrence not covered
    by the underlying policies listed in the Schedule of
    Underlying Insurance nor by any other Underlying
    Insurance provided coverage to the Insured.
    These contractual conditions for National Union’s duty to defend
    and to indemnify have not been demonstrated under any hypothesis
    or calculation, even today. While any one of the Wausau policies pro-
    vides ABT with $1 million in limits to pay homeowners’ damage
    claims (not including the cost of siding, which is not covered), it is
    undisputed that only $276,000 has been paid to such claimants. Even
    if we were to include the costs of siding, $80,012, which is not cov-
    ered by either National Union or Wausau’s policies, only one-third of
    the underlying limits of one policy has been exhausted.
    To escape the inevitable conclusion, the majority has ignored the
    specific language of the umbrella policy and lifted out of context the
    term "payment of claims," which defines the precondition to cover-
    age, in order to hold that Wausau’s $1.5 million payment in settle-
    ment of its obligations to ABT exhausted the underlying limits in
    National Union’s policy, even though ABT used at most $276,000 of
    the money to pay homeowners’ claims. Without any analysis of the
    policy language, the majority declares that the term "payment of
    claims" includes both Wausau’s $1.5 million settlement with ABT
    and ABT’s obligation to pay future claims. It states:
    As used in the 1997 NU Policy, the term "payment of
    claims" is a broad one, which does not restrict the recipient
    or timing of the payment in question. National Union, of
    course, could have sought a more restrictive formulation —
    such as "payment of claims to third parties" or "payment of
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.            57
    judgments or settlement agreements enforceable by third
    parties" — but it did not do so. In this case, the Wausau Set-
    tlement Payment resolved a claim presented by ABT, Wau-
    sau’s insured, in anticipation of ABT’s own impending
    payment of claims made by plaintiffs in the underlying
    actions. Nothing in the term "payment of claims" indicates
    that National Union and ABT intended it to include such
    payments. And we are neither inclined nor empowered to
    rewrite the 1997 NU Policy to reflect terms that National
    Union now wishes it had obtained from ABT.
    This ruling is a remarkable reformation of National Union’s
    umbrella policy, a liability insurance policy that insures ABT for its
    liability to third persons. If the majority cared about the policy lan-
    guage, under no stretch of the imagination could it have concluded
    that Wausau’s payment of its settlement with ABT was the "payment
    of claims to which this policy applies." The plain language required
    that the policy limits be exhausted by payments to injured parties in
    respect of their claims.
    The indemnity provision, which is incorporated into the defense
    provision, provides coverage for "sums . . . that the Insured becomes
    legally obligated to pay . . . because of bodily injury, property dam-
    age, personal injury or advertising injury." Naturally, the "claims to
    which this policy applies" are claims that fit in the categories listed.
    It is nonsensical to refer to sums paid to ABT in this fashion. As a
    liability policy, the policy clearly contemplates sums paid out by ABT,
    or at least on ABT’s behalf, by virtue of ABT’s legal obligation to
    third parties. Notably, the majority does not even quote this provision
    of the contract.
    Moreover, the underlying Wausau policy covered "bodily injury"
    and "property damage." ABT suffered neither of those injuries, and
    so the Wausau-ABT settlement payment cannot be painted as a pay-
    ment of claims to implicate the excess layer of coverage.
    A fuller textual analysis, which has been traditional in this court’s
    interpretation of contracts, see Coleman v. Nationwide Life Ins. Co.,
    
    969 F.2d 54
    , 57-58 (4th Cir. 1992) ("Courts are not at liberty to disre-
    gard the plain language of a plan in order to demand that the insurers
    58      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    provide coverage for which no premium has been paid — or ever will
    be — paid"), and which has not been attempted by the majority in this
    case, also precludes the majority’s conclusions. The general duty-to-
    defend provision is contained in Part II of the policy entitled "De-
    fense." Section A provides the duty to defend once the underlying
    insurance has been exhausted by the payment of claims, and Sections
    B and C talk about the claims referred to in that Section. Part II(B)
    provides:
    When we assume the defense of any claim or suit:
    1. We will defend any suit against the insured seeking
    damages on account of bodily injury, property damage,
    personal injury or advertising injury even if such suit is
    groundless, false or fraudulent, but we have the right to
    investigate, defend and settle the claim as we deem
    expedient.
    2. We will pay the following, to the extent that they are
    not included in the underlying policies listed in the
    schedule of underlying insurance or in any other insur-
    ance providing coverage to the insured:
    *      *      *
    b. premiums on appeal bonds required by law to
    appeal any claim or suit we defend, but we are
    not obligated to apply for or furnish any such
    bond;
    c. all costs taxed against the insured in any claim
    or suit we defend.
    Part II(C) refers to "claim" similarly:
    In all other instances except A. above, we will not be obli-
    gated to assume charge of the investigation, settlement or
    defense of any claim made, brought or proceeding instituted
    against the Insured.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.             59
    These provisions within Part II of the policy employ the word "claim"
    five different times. In each case, it simply could not be more clear
    that "claim" is the claim of a third party against the insured and not
    a claim by the insured against its insurance carrier.
    ABT and the majority twist this use of "claim" beyond all recogni-
    tion by using the word "claim" to cover claims by the insured against
    the primary carrier. This simply cannot be squared with the word’s
    use in the rest of the "Part II Defense" provision. Indeed, the majori-
    ty’s reading requires "claim" to have a different meaning in two
    places on the very same page of the insurance policy. The majority
    thus converts a traditional liability policy insuring the insured against
    claims made by third parties against the insured into a first-party pol-
    icy in which the insured itself becomes the claimant.
    The majority chastises National Union for not specifically restrict-
    ing the meaning of "payment of claims" to third parties. Well, of
    course, contracting parties can contract their way out of arbitrary judi-
    cial interpretations of their language, and in light of today’s decision,
    they apparently must. But the judiciary should, as in all interpreta-
    tions, attempt to give words that have been employed their fair mean-
    ing, rather than yearn for a clarity of language that would eliminate
    the need for interpretation altogether.
    This textual reading of "claims" is bolstered by the terms of the
    Foster Settlement agreement itself. That agreement defines "claim" as
    "a request for payment for Damage or for reimbursement of an
    Unreimbursed Repair submitted to the claims office under this Settle-
    ment Agreement." A payment of "a claim" simply could not occur
    prior to the Foster Settlement, under the very terms of that agreement.
    Similarly, the language of the settlement between Wausau and ABT
    releases "claims, demands, actions, lawsuits or proceedings of every
    kind and nature . . . against ABT . . . arising from the design, manu-
    facture, testing, marketing, warranty, and/or sale by ABT of hard-
    board siding." The claims being released by that settlement are the
    very claims allegedly insured by Wausau and by National Union —
    i.e. the hardboard siding claims made by homeowners.
    Nor can the $1.5 million paid by Wausau to ABT in settlement of
    their disputes be portrayed as an "indirect" payment of claims to third
    60      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    parties. The third-party homeowners may well have suffered those
    injuries, and payments to them, if within the coverage of insurance,
    would be "payments of claims" that would use up underlying insur-
    ance limits. But the $1.5 million settlement between Wausau and
    ABT was not paid to those injured parties; it was paid to ABT. Nor
    did the settlement provide that funds be set aside for the payment of
    injured party claims. Of course, while ABT would be enriched by the
    $1.5 million payment and thereby better be able to pay third-party
    claims as they were made, there is no evidence that the $1.5 million
    was in fact paid to the injured parties. Indeed, those injured parties
    were required by the Foster Settlement still to prove their claims
    using the settlement process established a year later. To the date of
    trial, 469 homeowners made such claims, and ABT has paid only
    $276,000 for damages in respect to them.
    Moreover, Wausau could not exhaust its responsibilities under its
    primary policies simply by paying ABT for possible future claims that
    have not been made and might never be made. According to the
    majority, whether or not a nickel ever goes to actual injured claim-
    ants, National Union’s coverage is implicated once the primary
    insurer settles, and National Union is thus saddled with the obligation
    to pay for any mistakes the primary carrier makes in evaluating future
    liability. This interpretation runs directly counter to North Carolina
    law:
    It is true that in each of the above cases the insurer tendered
    its policy limits into court and awaited determination of lia-
    bility, . . . while here [the insurer] paid its policy limit
    directly to the claimant in return for a release of the insurer.
    This, we believe, is a distinction without material difference.
    The result under both procedures, vis-à-vis the insured, is
    the same. The claim against the insured remains outstand-
    ing, because there has been neither a judgment nor settle-
    ment disposing of that claim.
    Brown v. Lumbermens Mut. Cas. Co., 
    390 S.E.2d 150
    , 155 (N.C.
    1990) (emphasis added). Thus, the insurer in that case could not
    escape its duty to defend until the underlying claim had been
    resolved. Merely tendering its limits to the insured did not cut off its
    obligation. The primary insurer here, Wausau, similarly could not
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.           61
    escape its duty to defend merely by tendering payment to the insured,
    and it did not even try to do so. It knew that it had an obligation to
    defend until its policy limits were exhausted by the payment of claims
    to third parties. For this reason, the underlying limits of insurance
    could not be exhausted by the Wausau Settlement, and any obligation
    on the part of National Union had to await exhaustion by payment of
    claims to third parties.
    The fact remains from any fair reading of National Union’s
    umbrella policy that its duty to defend does not arise until ABT has
    exhausted the underlying limits of $1 million for each policy by the
    payment of claims to the homeowners in respect to their hardboard
    claims, and to date that condition has not been satisfied.
    III
    Even if ABT had demonstrated that the $1.5 million settlement
    payment made by Wausau to ABT went to the payment of third-party
    claims under Wausau’s policy, it still would fall far short of demon-
    strating that National Union’s duty to provide excess coverage was
    triggered. For National Union to have a duty to defend or to indem-
    nify, ABT must demonstrate that the underlying coverage has been
    exhausted for at least one of the policy periods.
    The $1.5 million paid by Wausau to ABT was to discharge Wau-
    sau’s liability under at least two policies, the 1997 Wausau Policy and
    the 1998 Wausau Stub Policy. Because the 1997 Wausau Policy cov-
    ered a period of 13 months, its $1 million per-occurrence limit had to
    be exhausted twice, once for the first 12 months and once for the 13th
    month. As the policy itself provides:
    The Limits of Insurance of this Coverage Part apply sepa-
    rately to each consecutive annual period and to any remain-
    ing period of less than 12 months, starting with the
    beginning of the policy period shown in the declarations,
    unless the policy period is extended after issuance for an
    additional period of less than 12 months. In that case, the
    additional period will be deemed part of the last preceding
    period for purposes of determining the Limits of Insurance.
    62      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    True, Wausau and ABT could have extended the policy period stated
    in the declarations by amending the date of expiration to May 1, 1998,
    and thereby limited the application of the quoted provision to two
    applications of the $1 million occurrence limit. But instead they
    agreed to the issuance of a second policy, the 1998 Wausau Stub Pol-
    icy, with a new policy number, new declarations, new premiums, and
    a policy period covering the period January 31, 1998, through May
    1, 1998. That policy also had a $1 million per occurrence coverage
    limitation. It is noteworthy that both Wausau and ABT treated the
    1998 Wausau Stub Policy as a separate policy for purposes of settling
    their coverage dispute. To exhaust the coverage under the 1997 Wau-
    sau Policy, Wausau would have had to pay claims exceeding $2 mil-
    lion, and to exhaust the coverage under the 1998 Stub Policy it would
    have had to pay claims exceeding $1 million. (This does not even
    address the 1998 Wausau Policy and National Union’s protection
    under the lapsed coverage provision of its policy).
    Thus, if the $1.5 million settlement amount paid by Wausau to
    ABT represented a payment of claims to third parties, as required by
    the National Union policy in order to exhaust underlying coverage,
    the coverage under the 1997 Wausau Policy still would not have been
    exhausted. A $1.5 million payment of claims does not exhaust $2 mil-
    lion of coverage.
    To avoid this, the majority opinion must either ignore the contrac-
    tual language or rewrite it so that the 1997 Wausau Policy includes
    only one $1-million limitation for the entire 13 months and an addi-
    tional $1-million liability for the 1998 Stub Policy, for a total of $2
    million. The majority then applies the $1.5 million payment to only
    one of the policies to demonstrate that the underlying coverage was
    exhausted. While it is not clear how the majority is avoiding the con-
    tractual language, it might alternatively be allocating the $1.5 million
    payments to the two policies in the same ratio as the settlement of the
    coverage dispute between Wausau and ABT did — $1,147,058.83 to
    the 1997 Wausau Policy and $352,941.17 to the 1998 Wausau Stub
    Policy. Because the $1.1 million amount allocated to the 1997 Wau-
    sau Policy was greater than the $1 million coverage, the majority
    holds that ABT exhausted its underlying coverage, thereby entitling
    it to a defense and indemnity from the National Union umbrella pol-
    icy.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.            63
    The majority states no basis and has no basis, however, to make
    such an allocation. The settlement agreement making the allocation
    did not do so based on when injuries were sustained, when occur-
    rences occurred, or when claims were made. Indeed, the agreement
    settling the coverage dispute between Wausau and ABT states to the
    contrary:
    Such allocations shall not be an admission that any coverage
    or defense or indemnity is or is not afforded by any insur-
    ance policy to which such allocation is made, nor is it an
    admission that any "accident," "Occurrence," or "property
    damage," as those terms are used in any such policies, did
    or did not take place or potentially during the policy period
    of any such policy.
    Moreover, ABT has never demonstrated, even up to now, the dates
    of occurrences for purposes of assigning homeowners’ claims to par-
    ticular policies. Yet, that is precisely what it must do in order to
    exhaust coverage under any given policy. Each Wausau policy under-
    takes to pay damage claims made against ABT only if the property
    damage "occurs during the policy period," and only those claims can
    trigger the umbrella coverage.
    Finally, the majority cannot even conclude that the allocation of
    $1.1 million to the 1997 Wausau Policy exhausts the posited $1 mil-
    lion coverage for the payment of claims under that policy. Because
    the $1 million in coverage was a limitation for only the payment of
    damage claims to third parties and because the policy provided for
    "supplemental payments" with respect to defense costs, one would
    have to conclude that the $1.1 million payment allocable to the 1997
    Wausau Policy was for the payment of claims and not defense costs
    incurred by ABT before it settled with Wausau. Such a conclusion is
    both illogical and unsupported. It is illogical because the parties
    would not allocate $1.1 million for claims when the policy only cov-
    ered $1 million in claims. Moreover, in the context of the facts of this
    case, it would appear that all of the $1.1 million in fact went to
    defense costs because at the time Wausau and ABT settled, ABT had
    not paid one dollar with respect to claims made by homeowners. This
    is confirmed by the fact that ABT paid all claims of homeowners
    through the claims procedure established almost a year later in the
    64      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    Foster Settlement. Accordingly, one would have to conclude, con-
    trary to what the majority held, that the $1.1 million allocation made
    in the settlement agreement between Wausau and ABT did not even
    exhaust the first dollar of the $1 million limitation for the first 12
    months of the 1997 Wausau Policy.
    In short, the majority opinion conducts none of the analyses neces-
    sary to determine whether underlying coverage had been exhausted.
    Had it done so, it would necessarily have had to conclude that Wau-
    sau’s underlying coverage has not been exhausted, even to this date,
    and therefore that National Union’s duty to defend and to indemnify
    has not yet arisen.
    IV
    To eliminate any possibility that National Union’s duty to defend
    and indemnify may have been triggered in this case, we make the
    extreme assumption that the entire $2.1 million in defense costs and
    payments of claims allocated to National Union by ABT at trial is to
    be applied to exhaust Wausau’s underlying insurance. At trial, ABT
    summarized all the payments made under the Foster Settlement that
    must be "charged" to National Union, indicating that they represent
    a pro rata amount based on National Union’s policies’ coverage of the
    37-month period from January 1, 1997, to January 31, 2000. The
    "charges" included not only amounts paid to homeowner claimants
    but also for attorneys, costs, and administration, as follows:
    Attorneys fees                       $1,448,709
    Class action notice costs               234,719
    Administration of claims costs          177,312
    Payments to claimants                   275,598
    Total                         $2,136,338
    To consider this $2.1 million sum as going toward the exhaustion
    of underlying insurance, we are forced to ignore the policy language
    contained in the underlying Wausau policies that
    1) The $1 million limit in each policy is exhausted only by
    the payment of claims, not the payment of costs and
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.            65
    attorneys fees which are payable in addition to the $1
    million limit; and
    2) each $1 million limit covers the payment of claims only
    for occurrences during the policy period.
    As we have already shown, these contractual provisions limit us to
    consideration of only $276,000 in actual payments to claimants.
    Those payments, of course, do not exhaust any $1 million limit,
    regardless of how ABT determines which claims apply to which poli-
    cies.
    Generously, though, we consider the full $2.1 million sum and
    apply it to Wausau’s policies. Because ABT has provided no data
    about the dates of occurrences for a contractually-required allocation
    among policies, we must adopt some other method of allocation.
    There are two possible methods. One is a pro rata method, whereby
    the claims are allocated among policy periods to see if the limits in
    any given period have been exhausted. See, e.g., Insurance Co. of
    North Am. v. Forty-Eight Insulations, Inc., 
    633 F.2d 1212
    , 1224 (6th
    Cir. 1980). Another is the "all sums" method, where the total limits
    are compared with total payouts. See, e.g., Keene Corp. v. Insurance
    Co. of North Am., 
    667 F.2d 1034
    , 1047 (D.C. Cir. 1981). If the total
    payouts are greater than the total aggregated limits, then the policy is
    exhausted.
    In general, the pro rata approach seems to best capture the wishes
    of ABT and tenor of the majority opinion. Thus, for the purpose of
    demonstration, we assume that the claims were evenly distributed
    throughout the policy period. Since the 1997 Wausau Policy period
    was 13 months long, it is the most likely period during which ABT
    might have exhausted its limits. A pro rata allocation would thus
    result in allocating an amount of $750,605.24 in claims, administra-
    tive fees, and costs to the 13-month period ($2,136,338 37 x 13). This
    amount clearly does not exceed the underlying $2 million per-
    occurrence limits of the Wausau policy or even the $1 million limit
    urged by ABT. And if ABT’s payments of claims is the only sum allo-
    cated pro rata, ABT paid only $96,831.73 for Foster claims arising
    during the 1997 coverage period. When this correct calculation is per-
    66      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    formed, ABT has not exhausted even one-tenth of its underlying cov-
    erage in any policy period.
    Although ABT concedes that its payments for costs and claims are
    properly allocated by using the pro rata method, its position would not
    be improved if we were to apply the total-payments aggregative
    approach. Under this method, ABT’s total Foster payments, which
    amount to $2,136,338, are compared to the aggregate of policy limits
    underlying National Union’s 37-month coverage period.
    The underlying insurance provided coverage under the 1997 Wau-
    sau Policy of $2 million — $1 million for the 12 months from January
    1, 1997, to January 1, 1998, and $1 million for the 1 month from Jan-
    uary 1, 1998, through January 31, 1998. There was another $1 million
    of coverage for the 1998 Wausau Stub Policy. And finally there was
    $1 million self-insured retention from the lapse of siding coverage
    from the 1998 Wausau Policy, for a total of $4 million.
    The parties disagree about whether ABT had $3 million or $4 mil-
    lion in its primary coverage layer 1997 through 2000, but we need not
    resolve that factual dispute in determining whether ABT exhausted
    the aggregate value of its primary policies.1 Even if ABT had only $3
    million worth of coverage, it did not make payments of claims —
    generously interpreted as including costs and fees — exceeding that
    amount for National Union’s 37-month coverage period. And since,
    on this approach, ABT failed to exhaust $3 million worth of coverage,
    it never triggered National Union’s duty to defend using the "all-
    sums" method.
    The majority states with some astonishment that if payment of
    claims actually means payment of the claims of injured individuals,
    National Union "likely would never be called upon to defend an
    insured in a situation such as ABT’s, where its insured has opted to
    resolve multiple actions in a single settlement of all outstanding
    claims" or in a situation where there was only one lawsuit, and liabil-
    ity would be assigned at the end of that lawsuit. Far from being an
    1
    National Union has conceded that in determining whether it had a
    duty to defend, the difference between the $3 million and $4 million
    amounts is irrelevant. Reply Br. at 10 n.2.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.              67
    anomaly in National Union’s case, this dynamic is the essence of the
    excess insurer concept. Indeed, at oral argument, even counsel for
    ABT conceded that if there was one large case, no duty to defend
    would attach until after the case was over. What is baffling to the
    majority is that the excess insurer does not need to "get in the game"
    until after the primary limits are exhausted. Yet, that is ubiquitously
    understood in the insurance industry and even by the adverse litigants
    in this case.
    The primary insurer has the primary responsibility for defending
    claims brought against its insured. It has the primary responsibility for
    investigating those claims. It has the primary responsibility for paying
    defense costs, and must do so, in some cases, after its policy limits
    have been exhausted. Brown, 390 S.E.2d at 155. The excess insurer’s
    contractual obligation is to pay defense costs and indemnify the
    insured after the primary insurer’s limits have been exhausted. "Over-
    all, it is the primary insurer’s duty to assume all defense costs. A true
    excess insurer is specifically intended to come into play only when
    the limits of underlying primary coverage are exhausted." Eric Mills
    Holmes, Holmes’ Appleman on Insurance § 145.4[B]. Until that hap-
    pens, the excess insurer is entitled to stand by, because none of its
    contractual obligations have been implicated. Once the dust has set-
    tled, the excess insurer may of course be required to repay the pri-
    mary insurer for defense costs incurred on its behalf, just as the
    primary insurer may sometimes have to pay the insured for defense
    costs expended. This is not an anomaly, but the appropriate division
    of labor between different layers of insurance. The primary insurer
    has the closest relationship with the insured and the best facilities for
    resolving claims. The excess insurance contract is specifically struc-
    tured to avoid responsibility for these ground-level considerations,
    and the excess insurer is entitled to rely on its contract. In many cases,
    that will mean that the insured or the primary insurer will advance
    defense costs that are later attributable to the excess insurer, which the
    excess insurer will of course repay. See W & J Rives, Inc. v. Kemper
    Ins. Group, 
    374 S.E.2d 430
    , 434 (N.C. Ct. App. 1988).
    Since no one can plausibly argue that the underlying insurance in
    this case was exhausted, or indeed has been exhausted, the majority’s
    view of the case can only be justified if the duty to defend is much
    broader than the duty to indemnify. Waste Mgmt. of Carolinas, 340
    68      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    S.E.2d at 377 ("Generally speaking, the insurer’s duty to defend the
    insured is broader than its obligation to pay damages incurred by
    events covered by a particular policy."). This is the law for primary
    insurers. It is not the law for excess insurers. Primary insurers often
    have to provide a defense before liability is determined. Thus, the
    duty to defend and the duty to indemnify cannot be coterminous.
    Excess insurers, however, have different contractual arrangements
    and different economic functions. When the excess insurer comes on
    the scene, liability has already been determined. The role for the
    excess insurer is much more limited — it has not signed up to be in
    the trenches with the insured, litigating claims. Rather, it makes pay-
    ments once those claims have entered its layer of coverage.
    [I]f during settlement negotiations the primary insurer is
    allowed to force the excess insurer to cover part of the pri-
    mary’s insurance exposure, the coverages and rate structures
    of the two different types of insurance — primary and
    excess — would be distorted, and excess insurance premi-
    ums would have to be adjusted.
    Valentine v. Aetna Ins. Co., 
    564 F.2d 292
    , 298 (9th Cir. 1977). In this
    case, the contract of excess insurance provides that which is standard
    in the industry — that National Union does not have any duty to
    defend until the primary insurance is exhausted by the payment of
    claims.
    The leading treatise makes clear that excess insurance has a very
    particular function, which is to provide coverage for extremely rare
    events at an affordable premium.
    Umbrella policies serve an important function in the indus-
    try. In this day of uncommon, but possible, enormous ver-
    dicts, they pick up this exceptional hazard at a small
    premium. Assuming one’s automobile . . . policy [has] lia-
    bility limits of $1000,000 or even $5,000,000, the umbrella
    policy may pick up at that point and cover for an additional
    million, five million, or ten million.
    8C John Alan Appleman, Insurance Law and Practice § 5071.65 (2d
    ed. 1981). Because excess insurance is so inexpensive, insureds
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.              69
    should not expect the kind of comprehensive defense and indemnity
    they receive from their primary CGL policies.2 Though it is outland-
    ish to the majority that the excess insurer need not pick up the defense
    tab until the primary limits have been exhausted, that is precisely
    what the parties contracted for and what they should receive.
    The majority, by pursuing a textually indefensible reading of the
    policy, may succeed by its benevolence in helping the policyholder
    here. But this decision and others like it will spell a tale of woe for
    policyholders in the long run. When courts do not enforce contractual
    language as written, the only way for insurers to stay in business is
    to raise premiums. The ultimate effect is to make unavailable the
    inexpensive additional coverage given by excess insurers who can
    count on reliable judicial interpretations of their policies.
    Equally troubling, the majority’s opinion encourages insured par-
    ties to pursue the "divide and conquer strategy" apparently employed
    by ABT in the instant case. ABT, in the Foster litigation, moved all
    of the siding claims into a private facility for resolution. While negoti-
    ating the Foster Settlement process, it negotiated settlements with its
    insurers, a varying mix of primary and excess insurers covering some
    25 years of hardboard siding failures. It did not, however, disclose the
    amounts of settlements to any of its other insurers. In fact, as it told
    National Union in this case, it would not reveal the terms of any of
    its settlements.
    The goal of using this method is to extract the maximum possible
    coverage from the insurers. Because ABT claims that its settlement
    of the coverage dispute with Wausau exhausted the policy limits, it
    could claim to National Union that National Union had first-dollar
    payment obligations on all remaining claims, and that its duty to
    defend kicked in immediately, even though the underlying limits had
    not been exhausted in any concrete sense. This strategy carries the
    attendant risk that ABT will be compensated out of all proportion to
    2
    In this case, ABT paid $72,000 in premiums for the 1997 Wausau
    Policy, which provided $1 million of coverage for each "Occurrence"
    and $2 million in the aggregate, whereas it paid only $59,000 in premi-
    ums for the National Union Umbrella policy, which provides $25 million
    of excess coverage for each "Occurrence" and in the aggregate.
    70      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    its actual losses in the case. Most perniciously, it vastly expands the
    defense duties of excess insurers, who contracted to act as a backstop
    if claims exceeded underlying coverage, not to take on the duty to
    defend as soon as the primary insurer settled a coverage dispute. If the
    projected claims never emerge in reality, and they may not, then ABT
    will have realized an incredible windfall of insurance payments with-
    out underlying liability.
    V
    ABT also contends that National Union acted in bad faith and in
    violation of North Carolina’s Unfair and Deceptive Trade Practices
    Act, which requires an insurer to act "in good faith to effect a prompt,
    fair and equitable settlement when its liability became reasonably
    clear," see 
    N.C. Gen. Stat. § 58-63-15
    (11)(f). ABT argues that the
    jury had sufficient evidence before it to conclude that "[b]y the winter
    of 1999, National Union’s liability under its policy was far more than
    ‘reasonably clear,’" and that, rather than settle with ABT, "National
    Union made a conscious choice, to turn its back on its policyholder
    and to close its case file in the hopes that ABTco would go away."
    And the majority now accepts this view without conducting any anal-
    ysis of National Union’s duties under the terms of its policy.
    Whether National Union violated the provisions of the Unfair and
    Deceptive Trade Practices Act on which ABT relies depends entirely
    on whether its liability to defend ABT was "reasonably clear."3 Hav-
    ing already concluded that National Union had absolutely no liability
    to defend ABT in the Foster litigation until ABT had affirmatively
    established exhaustion of underlying insurance through the payment
    of claims, ABT’s claim of unfair trade practices with respect to
    National Union’s failure to settle is readily dismissed. Because ABT
    had not exhausted its underlying policy limits, National Union was
    3
    ABT concedes, perhaps unwittingly, that the jury’s verdict on the
    unfair trade practices claim "was based on the fact that National Union
    failed to attempt in good faith to effectuate a settlement ‘when liability
    to pay for a part of the Foster claims became reasonably clear.’" Because
    the jury’s premise — that National Union’s liability became "reasonably
    clear" — was erroneous as a matter of law, its conclusion that National
    Union engaged in unfair trade practices was equally invalid.
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.              71
    not liable to ABT and could not have violated the Unfair and Decep-
    tive Trade Practices Act by refusing to defend or indemnify ABT.
    If it is clear that an insurer had no liability, an action for unfair
    trade practices cannot go forward. See Rogers v. Unitrim Auto &
    Home Ins. Co., 
    388 F. Supp. 2d 638
    , 643 (W.D.N.C. 2005) (holding
    that because the insureds’ "loss was excluded from coverage . . . their
    claim for unfair and deceptive trade practices must also necessarily
    fail"); Central Carolina Bank Trust Co. v. Sec. Life of Denver Ins.
    Co., 
    247 F. Supp. 2d 791
    , 802 (M.D.N.C. 2003) (holding that where
    liability was not "reasonably clear," insured could not recover on
    unfair and deceptive trade practices claim).
    Since it was reasonably — indeed manifestly — clear that National
    Union had no obligation to defend or indemnify ABT, National Union
    did not act unfairly in refusing to settle. On the contrary, in requesting
    that ABT supply evidence that it had exhausted its underlying cover-
    age through the payment of claims, National Union acted exactly as
    was required under the terms of its policy.
    Because ABT has presented nothing, even now, that suggests that
    the underlying insurance policies have been exhausted, the majority
    points to ABT’s statistician’s report, which suggested that the home-
    owners’ claims arising from injuries over a 25-year period could
    reach up to $87.7 million. This forward-looking report was prepared
    on the basis of numerous assumptions and did not take into account,
    indeed could not have taken into account, the slowness and difficulty
    of the claims-resolution facility created by the Foster Settlement, as
    well as other unforeseeable events. Most egregiously, the majority
    writes as though $87 million was closely related to the scope of
    National Union’s liability. Yet, National Union provided insurance
    for only three years, and then only for damages exceeding the $3 or
    4 million level of primary insurance. In using the $87-million figure,
    the majority overlooks the projection sent out by ABT charging
    National Union with liability for the three years of at most $3.52 mil-
    lion. Regardless of which projection is used, however, the point
    remains that the majority imposes on National Union an immediate
    obligation to begin settlement talks as soon as it receives such projec-
    tions, which were nothing more than the naked assertion of future lia-
    72      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    bility by the obviously self-interested insured. The majority thus
    equates potential liability with actual liability.
    It is apparently of no moment to the majority that no money had
    actually been paid on claims; that intervening events had drastically
    reduced the likely liability; or that no proof of claim had ever been
    presented to the excess insurer. Indeed, at the time the majority says
    that National Union "should" have started defending, National Union
    had not even been provided the terms of the Wausau-ABT settlement
    of their coverage dispute and so could not have been aware of the
    payments the majority believes triggered its coverage obligation. All
    of this makes obvious why the insurance industry, including National
    Union’s excess policy, requires exhaustion of underlying insurance by
    the actual payment of claims.
    The majority points to the settlements that ABT entered into with
    other insurers as evidence that settlement talks were appropriate. It
    does so without one whit of evidence of what the policies of those
    other insurers said, what information they received, or what claims
    had been paid that they were responsible for indemnifying. It also
    ignores the possibility that a wait-and-see attitude is, if not the most
    polite behavior, contractually justified and legally reasonable.
    The majority gives two suggestions for how National Union should
    have behaved, even if its payment obligation, if any, would only
    develop years later. First, it suggests that National Union should have
    conducted an independent analysis of what third-party property dam-
    ages might be. This suggestion is strange in the insurance world. The
    filing of a proof of claim, as is required by most insurance contracts,
    is the duty of the policyholder. To require the insurer to conduct an
    independent investigation turns this burden of proof on its head. The
    suggestion also ignores the fundamental division of labor between
    excess and primary insurers. The majority grafts investigation duties
    onto the contract of the excess insurer, despite uncontested trial evi-
    dence that such investigation simply is not what excess insurers do.
    As Aimee Tersy testified:
    We monitor as an excess carrier. We use the term investiga-
    tion loosely in this respect. As an excess carrier we don’t go
    out and investigate claims. We don’t go to plants and see
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.              73
    how a product is made necessarily in the beginning because
    this is something the primary carriers do. They have the
    responsibility of going out there and doing the leg work,
    meaning how does this work, what the damages are.
    Second, the majority says that National Union "could have advised
    ABT to wait for the actual costs of the claims in the underlying
    actions to be ascertained." This rule is a form of Emily Post jurispru-
    dence, imposing a requirement of communication when there is sim-
    ply nothing to communicate about. National Union told ABT that
    they "were working on it and asked for more information." It is horn-
    book law that "because an excess insurer has no [first-dollar] contrac-
    tual obligation to defend its insured, it logically follows that an excess
    insurer also has no obligation to issue a reservation of rights letter
    until its contractual duty is invoked." Eric Mills Holmes, Holmes’
    Appleman on Insurance § 145.2 (2d ed. 1996). National Union simply
    had no duty to say anything to ABT until the preconditions to its cov-
    erage were met. "An excess carrier owes no duty to the insured nor
    to the primary carrier either to defend the insured or to enter into set-
    tlement negotiations." Certain Underwriters of Lloyd’s v. Gen. Acci-
    dent Ins. Co., 
    699 F. Supp. 732
    , 740 (S.D. Ind. 1988), aff’d 
    909 F.2d 228
     (7th Cir. 1988).
    Moreover, the majority is flat wrong that National Union did noth-
    ing. Uncontested evidence at trial shows that on June 8, 1998, over
    a year before ABT’s settlement proposal to National Union, National
    Union sent a letter to ABT which read:
    Please be advised that the referenced National Union policy,
    excess policy, is an umbrella policy. By the terms of such
    policy, the applicable underlying limits must exhaust before
    any liability for defense or indemnity may attach. We under-
    stand that at the present time underlying coverage has not
    been exhausted. Therefore, any request for defense or
    indemnity at this time is premature.
    ABT was thus fairly placed on notice that National Union wanted
    proof of exhaustion. And ABT never contended that National Union
    was not entitled to exhaustion or that it was National Union’s respon-
    sibility to determine coverage before exhaustion.
    74      ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    The majority’s view insists that the insurer constantly indulge its
    insured with letters, conversation, and consultation, even when no
    credible coverage has been invoked. Under ABT’s view, it could have
    asked National Union to do any number of irrelevant tasks, and
    National Union would have had an obligation to respond. It can cite
    no authority for this freestanding obligation of social engagement
    with the insured. In fact, no such obligation is generally understood
    to exist:
    Excess insurance is routinely written in the insurance indus-
    try with the expectation that the primary insurer will con-
    duct all of the investigation, negotiation and defense of
    claims until its limits are exhausted . . . Thus, the primary
    insurer acts as a sort of deductible and the excess insurer
    does not expect to be called upon to assist in these details.
    The duty of the primary insurer is not divisible or limited to
    those suits that are within the policy limits and the insuring
    agreement creates a duty to defend any suit regardless of the
    amount claimed against the insured and the excess insurer
    is a third party beneficiary of that agreement.
    7C John Alan Appleman Insurance Law and Practice, § 4682 (1979).
    Underlying the majority’s entire opinion is its holding that National
    Union should have settled the unspecified claims as soon as it
    received the loss projections from ABT. Surely, this rule should also
    include a formula for determining "how much?" Embedded in such
    projections as that given to National Union are a host of factual and
    legal assumptions, some of great complexity. In this case, the formula
    would have to include how many houses were damaged? How many
    people were going to bring claims? How would that vary over time?
    How did the number of claims depend on the settlement process that
    was being adopted? How much of the cost of repair could be allocated
    as property damage? How much underlying coverage was there?
    These questions would have to be answered, or at least brought
    within some rational boundaries, before any meaningful settlement
    could be discussed. Moreover, while a primary insurer in this case is
    liable for but a few million dollars, the excess carrier could be liable
    for as much as $25 million or even $50 million. Under these circum-
    ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.              75
    stances, the reasonable rule would be that the excess carrier is entitled
    to demand real proof that its limits are implicated. As National
    Union’s claims handler said:
    All along I wanted documentation on the damages sustained
    by the plaintiffs. I had received forecasts, estimates based on
    a sampling that was conducted, the Sullivan report, but I did
    not receive documentation backing that information. And it
    is my job to analyze the documentation and come to a con-
    clusion and I had not received that information, so therefore
    I could not offer any amount towards a settlement, including
    the fact, you can add that, too, is the fact that there were
    exhaustion issues which we needed to determine and clarify
    before our policy came into play.
    The majority’s approach insists that the insurer and the policyholder
    engage in professional chat even when there is nothing to chat about.
    Foisting this obligation on the excess insurer is a brand new rule that
    imposes completely unexpected and unnecessary costs on the excess
    insurer, which will inevitably percolate to insureds.
    VI
    There is no reason to defend National Union’s business manners
    and sometimes poor business practices. Undoubtedly, it should not
    have misrepresented to its insured that it needed to purchase a new
    extended policy when in fact the insured had an adequate policy for
    the extended period. It probably should have made clear to ABT that
    it did not agree with the assertions made by a junior associate attorney
    in his draft of an advisory letter. It probably should have communi-
    cated in more detail with its insured. All of these are matters of busi-
    ness courtesy, and, in the case of the misrepresentation, a matter of
    legal responsibility. Nothing in National Union’s behavior, however,
    is a basis for forfeiting its benefit in the crystal clear language of its
    insurance contract with ABT.
    The majority’s decision today ignores the straightforward language
    of the insurance policy governing this case. In doing so, it seriously
    undermines the expectations of commercial actors who expect to be
    able to rely on the terms of the agreements they reach. It also strikes
    76        ABT BUILDING PRODUCTS v. NATIONAL UNION FIRE INS.
    a heavy blow against the freedom of contract that underlies a market
    economy. Finally, it puts in question a long line of our cases resolving
    contractual issues, in which we have celebrated construing contracts
    in accordance with their terms.
    I would reverse the judgment of the district court.
    

Document Info

Docket Number: 05-1739

Citation Numbers: 472 F.3d 99

Judges: Wilkinson, Niemeyer, King

Filed Date: 12/19/2006

Precedential Status: Precedential

Modified Date: 11/5/2024

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Olive v. Great American Insurance Co. , 76 N.C. App. 180 ( 1985 )

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