                         UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT


PARK CENTER III LIMITED                 
PARTNERSHIP; PARK CENTER III,
L.L.C.; LENNAR PARK CENTER III
HOLDINGS, INCORPORATED;
ALEXANDRIA, LP, INCORPORATED;
LNR PROPERTY CORPORATION,
                Plaintiffs-Appellees,            No. 01-1649

                 v.
PENNSYLVANIA MANUFACTURERS’
ASSOCIATION INSURANCE COMPANY,
               Defendant-Appellant.
                                        
PARK CENTER III LIMITED                 
PARTNERSHIP; PARK CENTER III,
L.L.C.; LENNAR PARK CENTER III
HOLDINGS, INCORPORATED;
ALEXANDRIA, LP, INCORPORATED;
LNR PROPERTY CORPORATION,
               Plaintiffs-Appellants,            No. 01-1668

                 v.
PENNSYLVANIA MANUFACTURERS’
ASSOCIATION INSURANCE COMPANY,
                Defendant-Appellee.
                                        
           Appeals from the United States District Court
         for the Eastern District of Virginia, at Alexandria.
             Albert V. Bryan, Jr., Senior District Judge.
                          (CA-00-1459-A)
2         PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’
                     Argued: December 6, 2001

                    Decided: February 22, 2002

      Before WILKINSON, Chief Judge, and MICHAEL and
                 TRAXLER, Circuit Judges.



Affirmed in part, vacated in part, and remanded by unpublished per
curiam opinion.


                             COUNSEL

ARGUED: Geoffrey Stetson Gavett, GAVETT & DATT, P.C.,
Rockville, Maryland, for Appellant. Gaspare Joseph Bono, LONG,
ALDRIDGE & NORMAN, L.L.P., Washington, D.C., for Appellees.
ON BRIEF: Douglas A. Datt, Rhoda S. Barish, GAVETT & DATT,
P.C., Rockville, Maryland, for Appellant. Dennis A. Davison, John L.
Watkins, Russell J. Rogers, LONG, ALDRIDGE & NORMAN,
L.L.P., Washington, D.C., for Appellees.



Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).


                             OPINION

PER CURIAM:

   Park Center III Limited Partnership and other entities (collectively
Park Center) brought this diversity action against the Pennsylvania
Manufacturers’ Association Insurance Company (PMA) seeking
recovery on an insurance policy issued to Park Center by PMA. The
insurance policy covered a four-building apartment complex in Alex-
andria, Virginia (the Project), owned by the various Park Center enti-
          PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’               3
ties. The Project was under construction on September 16, 1999,
when Hurricane Floyd struck the greater Washington, D.C., metropol-
itan area, including Alexandria, causing extensive damage. PMA
denied coverage for Park Center’s claimed losses, asserting that the
items damaged by Floyd had already deteriorated and needed replace-
ment prior to Floyd. Park Center sued in federal court seeking cover-
age for its damaged property as well as attorneys’ fees and costs.
Following a three-day bench trial the district court held that the policy
provided coverage to Park Center for most of its claimed losses but
denied its claim for attorneys’ fees. PMA appeals certain aspects of
the district court’s judgment, and Park Center cross-appeals the
court’s denial of attorneys’ fees. We affirm the district court’s judg-
ment for the most part, but we remand for a recalculation of Park
Center’s damages for replacing the two layers of gypsum sheathing
with one layer of gypsum and one layer of Tyvec.

                                   I.

   The PMA policy insuring the Project is an "all risk" policy cover-
ing all physical losses to the covered property except losses specifi-
cally excluded. Policy § A.3. The parties agree that Hurricane Floyd
was a fortuitous event not excluded by the policy.

   The apartment buildings were constructed of a light gauge steel
frame covered with two layers of gypsum panels, which were in turn
to be covered with an exterior cladding. Gypsum panels cannot be left
uncovered during the construction process for long periods of time
because they do not withstand extended exposure to weather condi-
tions. The parties dispute precisely how long gypsum panels may be
exposed before they deteriorate to the point that they must be
replaced. PMA presented evidence of a national standard recommend-
ing that gypsum panels not be exposed to the elements for more than
30 days. Park Center presented evidence that this 30-day limit is at
best a rough benchmark that is routinely violated in the D.C. metro-
politan area and that the conditions of particular gypsum panels
depend on the actual weather conditions during the time of exposure.
Park Center also presented evidence that the summer of 1999 was an
exceptionally dry summer in the northern Virginia area.

  When Floyd passed through the area on September 16, 1999, the
gypsum panels had not yet been covered by the exterior cladding and
4         PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’
had been exposed to the elements for 90 days or longer. Several
months before the hurricane, Erkiletain Construction Corporation, the
original general contractor on the Project, had determined that the
gypsum panels on one of the buildings had deteriorated to the point
that they needed to be replaced. Erkiletain’s subcontractor replaced
most of the panels, but then, at the direction of its surety, stopped
working. As a result, all work was halted on the Project as of June
1999. At this point, Park Center decided to replace Erkiletain with
another general contractor, Clark Construction Company. Clark’s
employees inspected the site and determined that the gypsum panels
on all of the buildings could be used with only minor repairs. On Sep-
tember 15, 1999, with Floyd gathering steam off the Florida coast and
spinning its way northward towards Alexandria, Clark and Park Cen-
ter signed their contract.

   The next day, September 16, 1999, Hurricane Floyd passed through
Alexandria. While Floyd’s trip inland over North Carolina had dimin-
ished its force, it nonetheless hammered the Project with heavy rains
and winds up to 55 m.p.h. Following the storm, the Project showed
extensive damage, including collapsed roof trusses on one building,
damage to an electric switchgear, and waterlogged plywood. In addi-
tion, almost all of the gypsum sheathing was saturated and falling
apart. Following Floyd, the City of Alexandria directed Park Center
to remove the damaged sheathing from the Project. PMA’s represen-
tative, Jim Hardy, visited the site on September 29, 1999, and
acknowledged that the gypsum sheathing had to be removed and
replaced.

   Prior to Floyd the builders had determined that many of the ply-
wood panels used in one part of the construction site had become
waterlogged and needed to be replaced. Following Floyd, all of the
plywood needed to be replaced. In its claim Park Center estimated
that 20 to 25 percent of the plywood was not damaged prior to Floyd,
and only that percentage was included in its claim.

   Also, prior to Floyd the buildings of the Project had been heated
as soon as they were entirely enclosed in gypsum panels. The internal
water pipes of those buildings had then been filled with water on the
assumption that they would be protected from the freezing tempera-
tures of the upcoming winter. When the builders had to remove and
          PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’               5
replace the sheathing after Floyd, the buildings could no longer be
heated. To prevent pipe breakage, the builders tried to drain the inte-
rior pipes of all water before removing the sheathing and exposing the
pipes to the cold. The pipes were not designed to be drained, how-
ever, and a number of pipes contained valves that, unbeknownst to the
builders, retained water. In the spring, after the panels had been
replaced and the pipes had been refilled, the builders discovered that
the pipes had frozen at several points and needed repair.

   Park Center filed an insurance claim requesting coverage for the
damage to the trusses, the electrical switchgear, the plywood, the gyp-
sum sheathing, and the pipes. Park Center also sought coverage for
damages from delays on the Project due to Floyd. PMA denied all
elements of the claim, asserting that most of the relevant property had
already deteriorated and needed replacement prior to Floyd and that
the rest of the damage was excluded by the policy.

   The district court, applying Virginia law, held that the policy pro-
vided coverage for most of Park Center’s claims. The parties do not
contest the district court’s choice of Virginia law. Nor does PMA con-
test every aspect of the coverage determination. We discuss only
those parts of the district court’s order that are the subject of appeal.

   The parties presented extensive evidence to the district court on the
condition of the gypsum panels prior to Floyd. The evidence con-
sisted of numerous pre- and post-Floyd photographs of the Project
and the testimony of various persons who had examined the Project
at some point prior to Floyd. Based on its evaluation of this evidence,
the court determined that while a small portion of the gypsum sheath-
ing was damaged and needed some repair prior to Floyd, the vast
majority of the paneling was usable until the additional damage
caused by Floyd. The court also found that given the extent of the
damage caused by Floyd, it was cheaper to replace the gypsum
sheathing in its entirety rather than to conduct spot repairs. Accord-
ingly, the court awarded the entire cost of replacing the two layers of
gypsum sheathing to Park Center.

   In addition, the district court held that the policy provided coverage
for the burst pipes. The court determined that the burst pipes were a
direct result of Floyd, even though the damage was also caused by
6         PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’
freezing temperatures, a cause excluded by the policy. Finally, the
court held that the policy provided coverage for the claimed damage
to the percentage of the plywood that was useable before Floyd.

                                    II.

   On appeal PMA raises a number of challenges to the district
court’s decision, both as to factual and legal matters. We, of course,
review the district court’s factual findings for clear error and its legal
conclusions de novo. See Anita’s New Mexico Style Mexican Food,
Inc. v. Anita’s Mexican Foods Corp., 201 F.3d 314, 316 (4th Cir.
2000).

                                    A.

   As an initial matter, PMA argues that the district court erred by
failing to issue adequate conclusions of law as required by Rule 52(a)
of the Federal Rules of Civil Procedure. Rule 52(a) requires that in
a bench trial "the court shall find the facts specially and state sepa-
rately its conclusions of law . . . ." Fed. R. Civ. P. 52(a). The rule also
provides that "[i]t will be sufficient if the findings of fact and conclu-
sions of law . . . appear in an opinion or memorandum of decision
filed by the court." Id. Here, in addition to the district court’s order
of judgment, the court separately issued findings of fact and a memo-
randum opinion adequately stating its factual and legal conclusions
and the reasons for its decision. PMA challenges the court’s failure
to include a specific factual or legal finding in support of each and
every aspect of the analysis, for example, on who bore the burden of
proving coverage under the policy. Such specificity is not required by
Rule 52(a). The district court’s memorandum opinion and findings of
fact are clearly sufficient to inform the parties of the bases of the
court’s decision and to permit review of the decision on appeal.
Accordingly, PMA’s argument under Rule 52(a) is without merit.

                                    B.

  More substantively, PMA raises various challenges to the court’s
determination that most of the gypsum panels did not need replace-
ment prior to Floyd and its corresponding conclusion that the damage
          PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’              7
to the panels was a covered loss. First, PMA argues that the court
erred in failing to apply an objective standard in determining whether
the panels needed replacement prior to Floyd. Second, PMA points to
the 30-day national standard for gypsum panel exposure to the ele-
ments and numerous photographs of pre-Floyd damage to the panels
and asserts that the district court’s factual determination that most of
the panels did not need replacement prior to Floyd was clearly errone-
ous. Third, PMA argues that the district court erred by failing to
reduce Park Center’s recovery by the value of the panels that were
already damaged prior to Floyd. We address these contentions in turn.

   PMA argues that the district court committed a legal error by rely-
ing on the subjective evaluation of the condition of the gypsum panels
offered by Park Center’s four witnesses instead of the objective mea-
sure of the condition of the panels provided by the 30-day national
standard for exposure introduced by PMA’s expert. We disagree.
While the proffered 30-day standard may have had some evidentiary
value, the question before the district court was not how long gypsum
panels in general may safely be exposed to the elements, but whether
these particular gypsum panels, given the specific weather conditions
they had been exposed to, had actually deteriorated so as to require
replacement. To answer that question, the district court properly con-
sidered not only the 30-day standard but the testimony of four indi-
viduals who had personally inspected the panels. PMA’s own expert
testified that while the 30-day standard is a "flag" after which gypsum
panels should be "looked at[,] possibly tested," the standard is "not an
automatic cutoff of the product" indicating that the builder should
"take it down and replace it." Thus, according to PMA’s own expert,
the testimony of individuals who had actually inspected the gypsum
panels was more relevant to determining their condition than the mere
fact that the panels had been exposed to the weather for more than the
30-day period. The court’s refusal to rely exclusively on the proposed
30-day standard was proper.

  We now turn to the court’s factual determination. As noted above,
both parties presented extensive evidence in their attempts to establish
whether and to what extent the gypsum panels had deteriorated and
needed replacement prior to Floyd. After careful review of this evi-
dence, we have no doubt that the district court’s factual determination
was not clearly erroneous. As the court pointed out, the 40 to 50 pho-
8         PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’
tographs revealing isolated damage to certain panels prior to Floyd
are fairly insignificant in light of the over 17,000 panels that required
replacement post-Floyd. Indeed, the post-Floyd photographs show the
nearly complete destruction of almost all visible panels, whereas the
damage in the pre-Floyd photographs can be found only after a care-
ful, panel by panel search through the pictures. Additionally, as noted
above, the district court placed more weight on the testimony of four
witnesses who had personally inspected the gypsum panels than on
the 30-day national standard. Far from being clearly erroneous, this
treatment of the evidence strikes us as proper. Finally, the court
pointed out the significant fact that Clark Construction, the new gen-
eral contractor for the Project, had examined the gypsum sheathing
and planned to use it, with minor repairs, until Floyd hit. Accordingly,
the district court’s determination that most of the gypsum panels did
not require replacement prior to Floyd was not clearly erroneous.

   Finally, PMA argues that the district court erred by failing to
reduce Park Center’s recovery by the value of the five to ten percent
of the panels that were admittedly damaged prior to Floyd. Park Cen-
ter’s witnesses testified that while a small percentage of the gypsum
paneling was damaged prior to Floyd, that damage would have been
remedied with spot repairs to specific areas of panels, not wholesale
replacement of the panels. In contrast, the district court found that
after Floyd it was more cost effective to simply replace all of the
sheathing, even the few panels that might have been salvageable,
rather than to conduct a panel-by-panel evaluation and repair. If Floyd
had simply added to the number of panels that needed spot repairs,
Park Center would not be entitled to coverage for those repairs that
were needed prior to Floyd. However, the damage caused by Floyd
was so extensive that it rendered such panel-by-panel repairs more
costly than wholesale replacement. Therefore, the district court did
not err in awarding Park Center the cheaper cost to replace all of the
panels.*

   *PMA also argues that the district court’s failure to deduct a percent-
age of the costs to account for pre-existing damage illustrates that the
court improperly shifted the burden to establish coverage (or non-
coverage) to PMA, rather than placing that burden on Park Center. We
attribute the district court’s silence on the specific issue of who bore the
initial burden of proof as a mere failure to mention the obvious rather
than an unspoken attempt to improperly shift the burden. PMA’s conten-
tion on this point has no merit.
          PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’                  9
   In sum, there was no error in the district court’s determination that
the damage necessitating replacement of the gypsum panels was
caused by Floyd, not by pre-existing deterioration, and that no deduc-
tion for pre-existing damage was necessary.

                                    C.

   Assuming that the relevant damage to the gypsum panels was
caused by Floyd, PMA argues that the costs to replace those panels
are nonetheless excluded by a specific provision of the policy. PMA
also argues that the same provision excludes coverage for the frozen
pipe damage.

   The relevant exclusion section of the policy, § B.3, provides that
the insurer "will not pay for a ‘loss’ or damage caused by or resulting
from . . . deterioration, . . . changes in or extremes of temperature, or
dampness or dryness of atmosphere." PMA points out that Park Cen-
ter’s own witnesses acknowledged that some of the gypsum panels
were already damaged prior to Floyd due to deterioration from expo-
sure to dampness in the atmosphere. PMA argues that under Virginia
law a loss caused in part by a covered cause of loss (here, Hurricane
Floyd) and in part by an excluded cause of loss (here, deterioration
from weather conditions) is excluded in its entirety. In support of this
argument, PMA cites Lower Chesapeake Assocs. v. Valley Forge Ins.
Co., 532 S.E.2d 325 (Va. 2000).

   PMA is correct that Lower Chesapeake illuminates this issue, but
Lower Chesapeake supports, not contradicts, the district court’s deci-
sion here. The insurance policy in Lower Chesapeake was similar, in
relevant part, to the policy here. Specifically, the policy contained an
exclusion provision, also denoted as § B.3, stating that the insurer
"will not pay for a ‘loss’ caused by or resulting from . . . wear and
tear [or] . . . gradual deterioration." Id. at 330. In addition to the § B.3
exclusion provision, in § B.1 the policy provided that the insurer "will
not pay for a ‘loss’ caused directly or indirectly[,] . . . regardless of
any other cause or event that contributes concurrently or in any
sequence to the ‘loss,’ [by] . . . surface water [or] waves." Id. at 329-
330.

  In Lower Chesapeake the property at issue was a set of docks dam-
aged by Hurricane Fran. The docks had been allowed to deteriorate
10        PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’
significantly over the years, and the district court found that the dam-
age to the docks was caused at least in part by this deterioration. Id.
at 331. Additionally, the damage was caused in part by Fran’s wind
and pounding waves. Id. In addition to the direct damage caused by
the waves, the waves also caused the boats moored to the docks to
pitch violently, tearing the metal cleats from the wooden docks. Id.
at 327. The Virginia Supreme Court explained that while multiple
causes contributed to the loss, coverage for the damage was totally
excluded because one of the causes, the waves, was a § B.1 cause. Id.
at 331. By the plain terms of the § B.1 exclusion, any loss caused
even in part by one of the listed § B.1 causes was completely
excluded from coverage.

   In the case at hand, as in Lower Chesapeake, the policy contains
an analogous § B.1 exclusion as well as an analogous § B.3 exclusion.
Section B.1 completely excludes coverage for a loss caused in any
way, "directly or indirectly," "regardless of any other cause or event
that contributes concurrently or in any sequence," by the factors enu-
merated in § B.1. However, PMA does not contend that the damage
to the Project was caused, even in part, by any of the § B.1 factors,
as was the case in Lower Chesapeake. Rather, the only contributing
causes of the damage other than Floyd itself was deterioration and
atmospheric dampness. But, as noted above, deterioration and atmo-
spheric dampness are not listed under § B.1, but under § B.3. Section
B.3 does not contain the broad exclusionary language of § B.1.
Accordingly, damage caused in part by a § B.3 factor and in part by
a covered factor is not excluded in its entirety. Rather, only the dam-
age attributable to the § B.3 factor is excluded; the rest of the damage
is covered. As explained in part II.B, supra, this is precisely how the
district court determined the award. Thus, we affirm the district
court’s determination that the damage to the gypsum panels was not
excluded by any of the policy’s exclusion provisions.

   PMA also claims that the damage to the pipes is excluded by the
policy. The damage to the pipes was caused by sub-zero temperatures,
which froze the trapped water, breaking the pipes. PMA correctly
notes that § B.3.d of the policy excludes losses caused by "[c]hanges
in or extremes of temperature" and argues that the damage to the
pipes is therefore clearly excluded.
          PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’              11
   Of course, one cause is not exclusive of other causes, and here, just
as the pipe breakage was caused by exposure to freezing tempera-
tures, the exposure of the pipes was caused by the damage done by
Hurricane Floyd. The pipes were exposed to the cold only because the
building could not be heated during the removal and replacement of
the panels, which was necessitated by the damage done by Floyd. The
breakage to the pipes was caused both by a covered cause, Floyd, and
by an excluded cause, extremes in temperature.

   Section B.3 does not explain the outcome when a covered cause of
loss (Floyd) results in an excluded cause of loss (exposure to freezing
temperature). If "freezing temperature" was a § B.1 excluded cause,
the damage here would clearly be excluded, for § B.1 clarifies that the
insurer "will not pay for a ‘loss’ caused directly or indirectly[,] . . .
regardless of any other cause or event that contributes concurrently or
in any sequence to the ‘loss.’" In contrast, § B.3 contains no such
clearly applicable language. It only addresses the converse, providing
that when "an excluded cause of loss . . . results in a Covered Cause
of Loss," the latter will be covered. Under Virginia law, "language
setting forth exclusions that limit coverage under a policy . . . [must]
clearly and unambiguously define[ ] the scope of the exclusions."
Lower Chesapeake, 532 S.E.2d at 331. If an exclusionary provision
"may be understood in more than one way, we will interpret the pol-
icy in a manner that provides coverage." Id. at 331-32. In light of
these principles, and in the absence of any clear language in § B.3
dictating exclusion in this multiple-cause situation, we affirm the dis-
trict court’s holding that the damage caused by the frozen pipes is
covered under the policy. The damage to the panels caused by Floyd,
a covered cause of loss, was a cause of the damage to the frozen
pipes; absent clear contractual language to the contrary, that damage
is not excluded because it was also caused by freezing temperature,
an excluded cause of loss.

                                   D.

   PMA next challenges the district court’s award of costs for the
replacement of plywood damaged by Floyd. Park Center concedes
that much, but not all, of the plywood already needed replacement
prior to Floyd. Park Center explains that it filed a claim for only a
small percentage of the plywood, the amount it estimated was useable
12        PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’
pre-Floyd. PMA presented no evidence that all of the plywood needed
replacement prior to Floyd. Rather, PMA argues that the claimed per-
centage was simply invented out of the blue and that Park Center
failed to provide sufficient evidence for the district court to reason-
ably ascertain how much plywood was usable prior to Floyd.

   To recover under Virginia law, a plaintiff must produce some evi-
dence "to enable the [factfinder] to form a reasonable estimate of
what portion of the damage" is attributable to the defendant. Hale v.
Fawcett, 202 S.E.2d 923, 925 (Va. 1974). At the same time, a defen-
dant "should not be allowed to escape all liability simply because the
precise amount of the damages for which he is responsible is uncer-
tain. Where the existence of a loss has been established, the quantum
may be fixed when the facts and circumstances are such as to permit
of an intelligent and probable estimate thereof." Jefferson Standard
Life Ins. Co. v. Hedrick, 27 S.E.2d 198, 202 (Va. 1943).

   Here, the only testimony regarding the percentage of plywood that
was usable prior to Floyd came from James W. Reed, a senior project
manager for Clark Construction. Reed explained that Clark Construc-
tion came up with the estimate after Floyd had hit, in consultation
with Jim Hardy, a PMA representative who visited the site following
Floyd. In this case, as in Hedrick, "[p]ositive and distinct damages
have been established" and the "approximate amount was based upon
the estimates of those who were qualified to pass upon the nature and
extent of the damages." Id. at 203. We conclude that Reed’s testi-
mony provided a sufficient basis for the court to approve the estimate,
and we affirm the district court’s award of the costs to replace the
claimed percentage of the plywood.

                                  E.

   Finally, PMA contends that the district court applied an erroneous
method of valuation in setting the amount of Park Center’s award for
the damage to the gypsum panels. Prior to Floyd, the builders had
installed two layers of gypsum paneling. Due to the damage caused
by Floyd, both layers had to be removed and replaced. For whatever
reason, Park Center chose to replace the two layers of damaged gyp-
sum sheathing with only one layer of gypsum sheathing and one layer
of Tyvec, a synthetic wrapping material. Using one layer of gypsum
          PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’               13
and one layer of Tyvec was evidently cheaper than the cost of two
layers of gypsum sheathing. The district court awarded Park Center
the estimated cost of replacing the two damaged layers of gypsum
with two new layers of gypsum rather than the cost Park Center had
actually incurred replacing the two damaged layers with one layer of
gypsum and one layer of Tyvec. On appeal PMA argues that Park
Center’s recovery should be limited to the amount it actually spent
replacing the sheathing, not estimated replacement costs that were not
actually incurred. We agree with PMA that Park Center’s replacement
cost recovery must be limited to the money actually spent by Park
Center to replace the damaged property, so we vacate the district
court’s award as to the gypsum panels and remand for calculation of
Park Center’s actual replacement costs.

   The policy provides for two methods of valuation of covered prop-
erty, replacement cost basis and actual cash value basis. For new con-
struction, the policy uses replacement cost basis as the default method
of valuation but allows the insured to elect actual cash value instead.
Policy § E.2.a(2). Actual cash value is defined elsewhere in the policy
as the cost to replace the property minus depreciation. Policy
§ E.2.b(1). Here, Park Center has not elected actual cash value, so it
may only recover on a replacement cost basis.

   The "replacement cost" provision of the policy limits recovery to
the lesser of the limit of the insurance policy or "[t]he cost of materi-
als and labor to repair, replace or rebuild Covered Property with mate-
rials of similar kind and quality." Policy § E.2.a(1)(b). This
constitutes the only definition in the policy of the meaning of "re-
placement cost." Two subsections later, the policy provides the fur-
ther limitation that the insurer "will not pay on a replacement cost
basis for any ‘loss’ or damage . . . [u]ntil the lost or damaged property
has actually been repaired, replaced or rebuilt; and . . . [u]nless the
repairs or replacement are made as soon as reasonably possible." Pol-
icy §§ E.2.a(3)(a), (b) (emphasis added).

   Park Center points out that the policy does not expressly provide
that "replacement cost" is limited to the amount actually spent replac-
ing the covered property, but simply defines replacement cost as
"[t]he cost of materials and labor to . . . replace . . . Covered Property
with materials of similar kind and quality." Park Center argues that
14        PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’
the policy language is, at worst, ambiguous as to whether replacement
cost is limited to the amount actually spent and that this ambiguity
must be resolved in favor of the insured.

   While it is true that ambiguous provisions in insurance policies are
generally interpreted in favor of the insured, we determine whether a
specific provision is ambiguous by considering the policy as a whole.
See Virginia Farm Bureau Mut. Ins. Co. v. Gile, 524 S.E.2d 642, 645
(Va. 2000) (noting that ambiguous terms in insurance contracts are
construed in favor of the insured, but determining that the term "foster
child" was unambiguous when read in context). Standing alone,
§ E.1.a(1)(b) does not impose any requirement that the insured is lim-
ited to money actually spent rebuilding or replacing the damaged
property. However, § E.1.a(3)(a) precludes replacement cost recovery
"[u]ntil the lost or damaged property has actually been repaired."
Thus Park Center concedes, as it must, that it would not have been
entitled to replacement costs had it abandoned the project and not
made any repairs whatsoever.

   Park Center claims that § E.1.a(3)(a) merely requires some repair
or replacement as a precondition to payment and neither states nor
implies that recovery is then limited to the amount actually spent.
Under Park Center’s reasoning, the availability of full replacement
costs simply turns on the occurrence of some type of replacement or
rebuilding, regardless of how much that replacement differs from the
previous form of the damaged property. This would suggest, for
example, that if Floyd had destroyed the entire apartment building
complex, Park Center could have elected full replacement costs as
opposed to actual cash value so long as it erected so much as a small
shed on the same property. We decline to interpret these provisions
in a manner that would lead to such an odd result.

   We can imagine that the parties could have intended for the
replacement cost provision to provide full replacement costs irrespec-
tive of whether Park Center chose to rebuild or repair the damaged
property. This would amount to a decision to insure the previously
incurred construction costs. But if that was the case, there would be
no reason whatsoever to condition recovery of those past costs on
Park Center actually replacing the damaged property in some fashion.
The only purpose of a provision such as § E.1.a(3)(a) is to prevent
          PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’              15
what has occurred here, that is, to prevent an insured from collecting
the costs to fully replace its property, spending only part of that
money on a cheaper form of replacement, and then pocketing the net.

   In sum, we hold that the clear import of § E.1.a(3)(a) of the policy,
which conditions payment on completion of actual repair or rebuild-
ing, when read in conjunction with § E.1.a(1)(b), is that under the
replacement cost method in this policy the insured is limited to the
money actually spent in replacing the damaged property.

   Park Center is not entitled to the money it previously incurred in
constructing these two gypsum layers, but rather it is entitled to be
reimbursed for placing itself in the same position it was in prior to
Floyd. To the extent Park Center has not placed itself in that same
position, this is solely of its own choosing. Had Park Center elected
to replace the two layers of gypsum sheathing, it would have been
reimbursed for those costs. Under the policy, Park Center is entitled
to only what it actually spent on the one layer of gypsum and the one
layer of Tyvec.

                                  III.

   Park Center cross-appeals the district court’s refusal to award attor-
neys’ fees. Park Center included a claim for attorneys’ fees in its first
amended complaint. The district court dismissed this claim, explain-
ing that absent statutory authority to the contrary, each party must
bear its own attorneys’ fees. Park Center then filed a motion to recon-
sider, bringing to the court’s attention Va. Code § 38.2-209, which
provides for attorneys’ fees to the insured in an insurance coverage
dispute if the court determines that the insurer denied the disputed
claim in bad faith. The court granted the motion and amended its prior
order "to provide that if, following trial, the plaintiffs bring them-
selves within the statutory provisions of Va. Code § 38.2-209, the
court will then consider any request for attorney fees."

   In the order of the court following the bench trial on the merits, the
court disposed not only of the merits issues but also denied Park Cen-
ter’s standing request for attorneys’ fees. Park Center cross-appeals
this ruling, arguing that the court’s previous order had established that
the issue of attorneys’ fees would not be considered again until the
16        PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’
trial was over, and that it was caught off guard by the court’s resolu-
tion of the issue in its decision on the merits. We understand why
Park Center might have expected the court to solicit additional sub-
missions on the attorneys’ fee issue after it decided the merits. Never-
theless, we conclude that sufficient information was presented to the
district court during trial to justify its decision to deny Park Center’s
request for attorneys’ fees when it did.

  The Virginia Supreme Court has stated that a bad faith analysis
under Va. Code § 38.2-209

     generally would require consideration of such questions as
     whether reasonable minds could differ in the interpretation
     of policy provisions defining coverage and exclusions;
     whether the insurer had made a reasonable investigation of
     the facts and circumstances underlying the insured’s claim;
     whether the evidence discovered reasonably supports a
     denial of liability; whether it appears that the insurer’s
     refusal to pay was used merely as a tool in settlement nego-
     tiations; and whether the defense the insurer asserts at trial
     raises an issue of first impression or a reasonably debatable
     question of law or fact.

CUNA Mutual Ins. Soc’y v. Norman, 375 S.E.2d 724, 727 (Va. 1989)
(emphasis added). Here, the evidence and arguments presented on the
merits of the case — the legal and factual correctness of PMA’s
denial of coverage — bear directly on a number of the considerations
for determining bad faith claims denial. For example, the district
court’s determination of the merits of the claims denial necessarily
placed it in an informed position to determine "whether reasonable
minds could differ in the interpretation of policy provisions" and
"whether the defense the insurer asserts at trial raises . . . a reasonably
debatable question of law or fact." Id. Indeed, the district court deter-
mined that while there was "some evidence of inconsistencies in the
position of PMA with regard to coverage and some delay in commu-
nicating its position to the plaintiffs," on the whole "PMA had a legit-
imate, arguably supportable, basis for its refusal to pay the claim."
Accordingly, the district court concluded that PMA had acted in good
faith.
          PARK CENTER III v. PENNSYLVANIA MANUFACTURERS’            17
   The district court’s reconsideration order promised only that it
would consider attorneys’ fees if, following trial, the plaintiffs had
brought themselves within the provisions of Va. Code § 38.2-209.
Throughout the course of the trial, both parties presented, and the
court considered, extensive evidence indicative of the reasonableness
of PMA’s denial of the claim. In light of this evidence of objective
reasonableness, the district court evidently concluded that additional
evidence of alleged acts by PMA showing subjective bad faith would
not aid its decision or bring PMA’s conduct within the scope of Va.
Code § 38.2-209. We conclude that the court’s determination to make
the decision without further evidence or argument, while certainly not
required, was permissible. Accordingly, we affirm the district court’s
denial of Park Center’s request for attorneys’ fees.

                                 IV.

   In conclusion, we affirm the bulk of the district court’s judgment.
We vacate the district court’s award of replacement costs to Park
Center and remand for recalculation in light of our determination that
Park Center may recover only the costs it actually incurred replacing
the sheathing, not the costs it would have incurred had it replaced the
sheathing as it previously existed.

                                   AFFIRMED IN PART, VACATED
                                      IN PART, AND REMANDED
