                      United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 03-3854
                                  ___________

Pacific Insurance Company,             *
                                       *
             Appellant,                *
                                       * Appeal from the United States
      v.                               * District Court for the
                                       * District of Minnesota.
Burnet Title, Inc.,                    *
                                       *
             Appellee.                 *
                                  ___________

                             Submitted: June 14, 2004
                                Filed: August 19, 2004
                                 ___________

Before LOKEN, Chief Judge, HEANEY and BYE, Circuit Judges.
                              ___________

BYE, Circuit Judge.

       Pacific Insurance Company appeals the district court's1 partial grant of
summary judgment in favor of Burnet Title, Inc. The district court held Pacific had
a duty to defend Burnet in a class action suit which alleged Burnet overcharged
clients for closing costs and failed to disclose material information in settlement
statements during real estate transactions. We affirm.




      1
      The Honorable John R. Tunheim, United States District Judge for the District
of Minnesota.
                                           I

       Pacific issued an Errors and Omissions (E&O) insurance policy to Burnet
which provided coverage for negligent acts, errors, or omissions in the rendering of
or failure to render professional services. The policy defined professional services
as "services performed or advice given in the Insured's capacity as a Title Agent, Title
Abstractor and Escrow Agent." An endorsement to the policy further provided that
professional services included loan origination, loan processing, loan underwriting,
and loan closing services.

       While the E&O policy was in effect, Teresa Boschee brought a class action
lawsuit against Burnet on behalf of herself and others similarly situated. Boschee had
refinanced her mortgage through Burnet. In the class action suit, she accused Burnet
of overcharging closing costs and of failing to disclose material information on her
settlement statement. Specifically, Boschee alleged Burnet routinely charged
customers $25 for each instance of courier delivery involved in a loan closing even
though the actual charge by the third-party courier performing the delivery service
was less than $25. Boschee further alleged Burnet violated the Real Estate Settlement
Procedures Act (RESPA), 12 U.S.C. §§ 2601-2617, by (a) failing to disclose on the
settlement statement the actual cost of the courier services and (b) charging an
unearned fee.

       On January 28, 2000, Burnet made its First Notice of Claim under the E&O
policy and provided Pacific with a copy of the Boschee complaint. Burnet requested
that a particular law firm, with which it had an established relationship, defend it in
the Boschee suit. Pacific acknowledged the claim in a fax dated February 4, 2000,
and approved Burnet's choice of counsel. The fax did not contain a reservation of
rights under which Pacific reserved the right to contest its duty to defend Burnet in
the Boschee suit.



                                          -2-
       On October 26, 2000, after several months had passed during which Pacific
provided Burnet a defense in the Boschee suit, Pacific sent Burnet another letter
acknowledging the claim. This letter also did not specifically reserve Pacific's right
to contest its duty to defend, but did note the Boschee complaint included some
allegations of intentional, willful conduct, and generally referenced both Minnesota's
public policy against indemnification for such conduct and a policy exclusion for acts
that were "fraudulent, criminal, or involved concealment and intentional
misrepresentation."

        Nine months later, on July 18, 2001, Pacific sent Burnet another letter. For the
first time, Pacific referred to specific policy language regarding intentional or
fraudulent conduct which it believed excluded coverage for an award of damages in
the Boschee suit and "reserve[d] the right to deny coverage to Burnet Title and/or its
agents should facts become known to us warranting this action in the future." With
respect to its duty to defend, Pacific said:

      Notwithstanding the above Reservation of Rights, Pacific Insurance
      Company will continue to defend you in this matter. . . . Please be
      advised that Pacific's defense of this matter is without prejudice, and is
      not intended to waive any rights or obligations of either the insured or
      Pacific under any of Pacific's insurance policies. Pacific Insurance
      Company hereby reserves all of its rights and defenses under the policy.

       On February 6, 2002, more than two years after Pacific first received the
Boschee complaint and reviewed its allegations, Pacific wrote Burnet another letter
which stated "[w]e wish to advise you of [our] position that none of the claims
asserted in the Boschee class action fall within the scope of the policy issued by
Pacific." The letter cited three reasons the claims were not covered. First, Pacific
reiterated its position that the complaint alleged intentional rather than negligent acts.
Second, for the first time, Pacific referred to the policy's definition of "damages,"
which expressly excluded "the return or reimbursement of fees for 'professional

                                           -3-
services.'" Pacific contended the "claims asserted against Burnet Title in the Boschee
class action do not constitute 'damages' as defined since they seek the return of
overcharged fees." Third, for the first time, Pacific referred to a policy exclusion for
conversion which applied to any "act, error or omission, claim, or suit arising out of
or anyway related to any conversion of funds or other property." The February 2002
letter also purported to "reserve the right to seek reimbursement of all attorney's fees,
litigation expenses and costs of suit . . . that are incurred in the defense of
non-covered claims."

        One week later, Pacific filed a declaratory judgment action against Burnet in
federal district court seeking a declaration that it has no duty to defend or indemnify
Burnet in the Boschee suit. Pacific originally filed the action in California; it was
later transferred to Minnesota. In the spring of 2003, the parties filed cross-motions
for summary judgment addressing both issues of defense and indemnification.

      On September 24, 2003, the district court entered partial summary judgment
in Burnet's favor on the duty-to-defend issue, then later certified the issue for
immediate appeal under Fed. R. Civ. P. 54(b). See John Deere Ins. Co. v. Shamrock
Indus., 929 F.2d 413, 419 (8th Cir. 1991) (holding district court did not err in issuing
Rule 54(b) certification on a duty-to-defend issue). Pacific filed a timely appeal.

                                           II

       "We review all issues related to the district court's interpretation of insurance
policies de novo." Am. Simmental Ass'n v. Coregis Ins. Co., 282 F.3d 582, 586 (8th
Cir. 2002) (citing United Fire & Cas. Co. v. Fidelity Title Ins. Co., 258 F.3d 714, 718
(8th Cir. 2001)). We apply state law in this diversity case. Lefler v. Gen. Cas. Co.
of Wis., 260 F.3d 942, 945 (8th Cir. 2001). Minnesota law requires the insurer to
defend "when any part of the claim against the insured is arguably within the policy's
scope." Metro. Prop. & Cas. Ins. Co. v. Miller, 589 N.W.2d 297, 299 (Minn. 1999).

                                          -4-
"[T]he insurer's obligation to defend is determined by comparing the allegations of
the complaint with the relevant policy language." Garvis v. Employers Mut. Ins. Cas.
Co., 497 N.W.2d 254, 256 (Minn. 1993).

       The district court held the allegations of the Boschee complaint implicate
professional services negligently performed by Burnet and therefore triggered a duty
to defend. Pacific contends there are three reasons why the claims alleged in the
Boschee complaint are not arguably within the policy's scope and do not trigger a
duty to defend. We address each reason in turn.

       First, Pacific notes the claims made in the Boschee complaint all result from
Burnet overcharging clients for courier services performed by third parties. Pacific
contends the E&O policy only provides coverage for claims arising out of the
negligent performance of professional services involving the specialized knowledge
or skill required of real estate service providers, and the act of overcharging is a
ministerial task rather than a professional service. Pacific relies upon Medical
Records Associates v. American Empire Surplus Lines Insurance Co., 142 F.3d 512,
514-17 (1st Cir. 1998), which addressed whether overcharging for copies of patients'
medical records was a "professional service" within the meaning of an E&O policy
and concluded it was not.

       This case differs from Medical Records because the Boschee complaint alleges
more than overcharging. The complaint also alleges Burnet owed "real estate
transaction fiduciary duties," App. 26, and violated RESPA by failing to disclose
material facts on settlement statements, App. 27, 32, 34, 37, 38. Indeed, in its letter
dated July 18, 2001, Pacific itself described the Boschee complaint as alleging a
substantive violation of RESPA related to Burnet's duty to disclose material facts in
settlement statements. "The complaint alleges that Burnet Title Company allegedly
violated the Real Estate Settlement Practices [sic] Act by failing to disclose to buyers



                                          -5-
that settlement charges from third parties were less than the amounts eventually
charged to buyers for these same services." App. 164 (emphasis added).

        Part of Congress's purpose in passing RESPA was to insure consumers were
provided with "greater and more timely information on the nature and costs of the
settlement process." 12 U.S.C. § 2601(a). The statutory obligation imposed upon
real estate service providers to provide accurate information in settlement statements
is distinct from the mere act of overcharging for services. Cf. Haug v. Bank of Am.,
N.A., 317 F.3d 832, 838 (8th Cir. 2003) (noting RESPA does not directly target
overcharging, but was intended to "regulate the underlying business relationships and
procedures [of real estate service providers] of which the costs are a function."
(quoting 1974 U.S.C.C.A.N. 6548)). We conclude an allegation that a real estate
service provider failed to disclose costs accurately on settlements statements relates
to its professional rather than ministerial conduct, and is the type of professional
misconduct usually covered by an E&O policy. Thus, the Boschee complaint's
allegations regarding substantive violations of RESPA are arguably within the scope
of the E&O policy and trigger a duty to defend.

       Next, Pacific argues the Boschee complaint only alleges intentional and willful
acts on Burnet's part, and therefore Pacific had no duty to defend because the policy
only covers negligent acts, errors, or omissions. We disagree. The Boschee
complaint alleged Burnet violated RESPA, but did not specifically accuse Burnet of
intentionally violating RESPA. Where a complaint does not distinguish between
intentional and negligent conduct it can "reasonably be construed to include both."
Reinsurance Ass'n of Minn. v. Timmer, 641 N.W.2d 302, 312 (Minn. Ct. App. 2002).
Moreover, proof of intent is not necessarily required to establish a violation of
RESPA. See, e.g., In re Old Kent Mortgage Co. v. Yield Spread Premium Litig., 191
F.R.D. 155, 166 (D. Minn. 2000) (analyzing RESPA's kickback/split fee/referral
provisions and finding no support for the "proposition that subjective intent is a factor
in determining liability under RESPA"). In other words, it is possible for a real estate

                                          -6-
service provider to engage in intentional conduct but without intending to violate
RESPA, and thus negligently violate RESPA. Cf. Nowacki v. Federated Realty
Group, Inc., 36 F. Supp. 2d 1099, 1104-05 (E.D. Wis. 1999) (holding E&O insurer
had duty to defend where the underlying complaint against insured alleged a "mixture
of intentional and negligent acts" and insured could be found to have violated RESPA
through error or omission). Because Burnet could have violated RESPA negligently,
and the Boschee complaint can be reasonably construed as alleging a negligent
violation of RESPA, the complaint's allegations are arguably within the scope of the
E&O policy and trigger a duty to defend.

       Finally, Pacific argues the Boschee complaint does not seek "damages" as that
term is defined in the policy. More specifically, Pacific maintains the policy excludes
from the definition "fines, sanctions or penalties against any insured, or the return or
reimbursement of fees for 'professional services.'" App. 81. The Boschee plaintiffs
sought "actual damages, along with prejudgment interest, penalties, treble damages,
attorneys fees, costs, expenses and any other remedy available." App. 42. Since the
actual damages sought were the return or reimbursement of the overcharged fees (and
thus do not count as damages under the policy) and the district court found the treble
damages were a "penalty" (and Burnet did not cross-appeal that determination), the
fighting issue between the parties is whether the prayer for attorney fees constitutes
"damages" within the meaning of the policy.

       Burnet argues, and the district court determined, in the context of a claim for
attorney fees under RESPA, the award of attorney fees is not a "cost" and therefore
falls within the meaning of "damages." This is because RESPA distinguishes
between "attorney fees" and "costs." See 12 U.S.C. § 2607(d)(5) ("In any private
action brought pursuant to this subsection, the court may award to the prevailing party
the court costs of the action together with reasonable attorneys fees." (Emphasis
added)). We agree with the district court's analysis. Cf. Sokolowski v. Aetna Life &
Cas. Co., 670 F. Supp. 1199, 1208-10 (S.D.N.Y. 1987) (construing ERISA's similar

                                          -7-
distinction between "costs" and "fees" and concluding attorney fees sought pursuant
to ERISA constituted "damages" within the meaning of an insurance policy). Thus,
the Boschee complaint alleges damages covered by the policy for purposes of
triggering a duty to defend.

      For the reasons stated, we affirm the district court in all respects.2
                      ______________________________




      2
        On appeal, Burnet raised the additional issue whether Pacific timely reserved
a right to seek reimbursement of the fees it already spent defending the Boschee
action. Having affirmed the district court, we do not address this issue.

                                         -8-
