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Metropolitan Property and Casualty Insurance Co. v. McCarthy

United States District Court, D. Maine

September 15, 2015




Before the Court is Defendant Susan McCarthy’s application for attorneys’ fees (“Att’y Fee Appl.”) (ECF No. 84). For the reasons that follow, the motion is GRANTED.


In February of 2012, Defendant Susan McCarthy filed suit against Defendant Glynis Dixon McCormack in York County Superior Court, alleging that McCormack’s ward sexually and physically abused McCarthy’s son. Compl. and Demand for Jury Trial (ECF No. 1-5). In May of 2012, Plaintiff Metropolitan Property and Casualty Insurance Company (“Metropolitan”) filed suit against McCormack and McCarthy in this Court, seeking a declaratory judgment that it had no duty to defend McCormack in the state court action. Compl. for Declaratory Relief (“Compl.”) (ECF No. 1). In June of 2013, I ruled that Metropolitan did have a duty to defend McCormack in the underlying state court action. Order on Cross-Mots. for Summ. J. (ECF No. 44). Metropolitan appealed that decision to the First Circuit. Notice of Appeal (ECF No. 48).

While this federal duty to defend suit was pending on appeal, McCormack and McCarthy settled the underlying state court action. Settlement Agreement (ECF No. 84-2). As part of the settlement, McCormack assigned certain rights and claims to McCarthy. Assignment of Rights, Claims, and Causes of Action (the “Assignment”) (ECF No. 84-3). In December of 2013, the Superior Court entered an order approving the settlement. Order Approving Settlement on Behalf of Minor (ECF No. 84-4). Shortly thereafter, the Superior Court entered a consent judgment against McCormack. Consent J. (ECF No. 84-5). Following the settlement of the underlying action, McCarthy took the laboring oar from McCormack in defending this declaratory judgment action. Mar. 23, 2015 Decl. of Susan McCarthy ¶¶ 9-11 (ECF No. 84-1).

In June of 2014, the First Circuit affirmed my order that Metropolitan had a duty to defend McCormack in the underlying state court action. See Metropolitan Prop. & Cas. Ins. Co. v. McCarthy, 754 F.3d 47 (1st Cir. 2014). In August of 2014, McCarthy moved in this Court to: (1) substitute herself as a party for McCormack; (2) amend her answer to add counterclaims against Metropolitan; and (3) enlarge time to file simultaneous applications for attorneys’ fees in both this federal declaratory judgment action and the underlying state court action. Mot. to Substitute a Party (ECF No. 62); Mot. to Amend Answer to Add Countercl. (ECF No. 66); Mot. for Enlargement of Time (ECF No. 65). With respect to the contemplated counterclaims, McCarthy sought to bring three claims against Metropolitan: (1) breach of the Metropolitan insurance contract in failing to defend and refusing to indemnify McCormack in the underlying state court action; (2) “reach and apply” under 24-A M.R.S. § 2904 such that McCarthy could reach the proceeds of McCormack’s Metropolitan insurance policies to satisfy the state court judgment; and (3) unfair claims settlement practices under 24-A M.R.S. § 2436-A(1)(E) for Metropolitan’s alleged failure to effectuate a prompt, fair, and equitable settlement of claims submitted, upon which liability had become reasonably clear. Proposed Am. Answer & Countercls. 7-9 (ECF No. 66-1).

In February of 2015, I adopted Judge Rich’s recommended decision (1) denying McCarthy’s motion to substitute herself as a party; (2) denying McCarthy’s motion to add counterclaims; and (3) granting McCarthy’s motion to enlarge the timeframe for filing applications for attorneys’ fees. Recommended Entry of Final J. & Denial of Mot. to Amend Answer & Order on Mots. to Substitute Party and Enlarge Time (“Rec. Entry of Final J.”) (ECF No. 73); Order Affirming Recommended Decision (“Order Affirming Rec. Entry of Final J.”) (ECF No. 75).


Under the so-called “American Rule, ” ordinarily each party to litigation pays its own attorneys’ fees. OneBeacon Am. Ins. Co. v. Johnny’s Selected Seeds, Inc., No. 1:12-cv-375-JAW, 2014 WL 1569517, at *12 (D. Me. Apr. 17, 2014). This default rule may be altered by statute, contract, or common law authorization. Id.

Under Maine law, there is a fee-shifting statute for certain declaratory judgment actions involving insurance policies. Title 24-A M.R.S. § 2436-B(2) instructs that “[i]n an action pursuant to Title 14, chapter 707 to determine an insurer’s contractual duty to defend an insured under an insurance policy, if the insured prevails in such action, the insurer shall pay court costs and reasonable attorney’s fees.” This right to fees is personal to the insured. 24-A M.R.S. § 2436-B(4) (“This section may not be construed to permit any assignment of rights by an insured to any other person or to create or extend any right or cause of action for a 3rd-party claimant under an insurance policy.”).

Maine common law also establishes a fee-shifting regime in duty-to-defend cases. Its purpose is to “place the insured in a position equally as good as the insured would have occupied had the insurance contract been fully and properly performed from the beginning.” Gibson v. Farm Family Mut. Ins. Co., 673 A.2d 1350, 1355 (Me. 1996). Under Maine common law,

[A]ttorney fees are available to the insured only when the insurer resists a duty to defend that is clear from the policy and the pleadings filed against the insured . . . . In determining whether a duty to defend is clear, the insurer will be held to recognize Maine law prevailing at the time of the insured’s request for defense.


Section 2436-B does not preempt Maine’s common law on fee shifting in insurance coverage suits. Pro Con, Inc. v. Interstate Fire & Cas. Co., 831 F.Supp.2d 367, 372 n.4 (D. Me. 2011); Centennial Ins. Co. v. Patterson, No. 07-cv-63-DBH, 2009 WL 2175763, at *3 (D. Me. July 21, 2009). And in fact, fee-shifting rights under Maine’s common law are in some respects broader than the fee-shifting rights under § 2436-B. See, e.g., Pro Con, Inc., 831 F.Supp.2d at 372 n.4 (holding that a corporation could ...

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