METROPOLITAN PROPERTY AND CASUALTY INSURANCE COMPANY v. MCCARTHY et al

Filing 97

ORDER granting 84 McCarthy's Attorney Fee Application By JUDGE NANCY TORRESEN. (rmb)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
METROPOLITAN PROPERTY AND
CASUALTY INSURANCE CO.,
Plaintiff,
v.
SUSAN MCCARTHY and
GLYNIS DIXON MCCORMACK,
Defendants.

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) Docket No. 2:12-cv-151-NT
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ORDER ON MCCARTHY’S ATTORNEY FEE APPLICATION
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.
BACKGROUND
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

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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).
LEGAL STANDARD
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.

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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.
Id.
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
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§ 2436-B. See, e.g., Pro Con, Inc., 831 F. Supp. 2d at 372 n.4 (holding that a
corporation could recover fees under Maine common law as a prevailing insured,
despite § 2436-B’s limitation to “natural persons”).
DISCUSSION
In the present motion, McCarthy requests: (1) McCormack’s fees from this
federal declaratory judgment action; (2) McCarthy’s fees from this federal declaratory
judgment action; and (3) McCormack’s fees from the underlying state court action.
Att’y Fee Appl. 4-14; McCarthy’s Reply to Metropolitan’s Opp’n to McCarthy’s Appl.
for Att’y Fees 9-10 (“McCarthy’s Reply”) (ECF No. 92)
I.

McCormack’s Fees in the Declaratory Judgment Action
As the prevailing insured in the duty to defend declaratory judgment action,

McCormack is entitled to reasonable attorneys’ fees under 24-A M.R.S. § 2436-B(2).1
Metropolitan does not dispute the reasonableness of McCormack’s fees, or the fact
that they are owed under § 2436-B, but argues that they should be cut in half because
McCormack was a prevailing insured in her individual capacity, but not her guardian
capacity. Pl.’s Opp’n to Def.’s Appl. for Att’y Fees 5-6 (“Pl.’s Opp’n”) (ECF No. 89).
In its motion for summary judgment in this declaratory judgment action,
Metropolitan did not ask for any differentiation between McCormack’s individual and
guardian roles on the duty to defend issue. See Pl.’s Mot. for Summ. J. 13 (ECF No.
15) (requesting a declaration that “Plaintiff Metropolitan is under no duty to defend

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McCormack has assigned her right to these attorneys’ fees to McCarthy. See Assignment ¶ 1.

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Defendant Dixon McCormack with respect to the McCarthy Complaint.”).
Accordingly, my Order on the duty to defend did not distinguish between
McCormack’s individual versus guardian capacities. See Order on Cross-Mots. for
Summ. J. 11 (declaring “that the Plaintiff has a duty to defend McCormack in the
McCarthy suit.”). Metropolitan has not pointed to any authority supporting its post
hoc request for differentiation between McCormack’s roles in order to limit her
reimbursement of attorneys’ fees. Accordingly, McCormack is entitled to be made
whole for the full amount of attorneys’ fees incurred defending Metropolitan’s
declaratory judgment action.2
II.

McCarthy’s Fees in the Declaratory Judgment Action
McCarthy asserts that because McCormack assigned her rights and claims

under the Metropolitan policies to McCarthy, McCarthy may also recover the fees
McCarthy incurred in this declaratory judgment action pursuant to 24-A M.R.S.
§ 2436-B. Metropolitan resists, arguing that the assignment did not make McCarthy
“an insured” for purposes of § 2436-B, a statute which does not create rights for noninsured, third-party claimants. Pl.’s Opp’n 9-10. I decline to resolve whether
Metropolitan or McCarthy has the better argument with respect to § 2436-B, because
McCarthy is entitled to her fees in this declaratory judgment action under Maine’s
common law.

2
McCormack was represented in the declaratory judgment action by Monaghan Leahy, LLP
and incurred $19,561.44 in fees. Joint Statement of Facts ¶¶ 5-6 & Ex. B (ECF Nos. 85, 86-1).

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In Bucci v. Essex Ins. Co., 323 F. Supp. 2d 84, 94 (D. Me. 2004), aff’d, 393 F.3d
285, 292 (1st Cir. 2005), the court held that under Maine’s common law, an
underlying action plaintiff/assignee was entitled to the attorneys’ fees he incurred
pursuing a duty to defend action against an underlying action defendant/assignor’s
insurance company. The court in Bucci reasoned that Maine’s common law on feeshifting for duty to defend cases
[I]s broad enough to permit the inclusion of third-party victim’s attorney
fees within the insurer’s obligation to pay the insured’s attorney fees
necessary to enforce the insured’s rights under its policy where the third
party has incurred fees to enforce the insured’s rights while standing in
the position of the insured under an assignment of rights.
Bucci, 323 F. Supp. 2d at 94. The case at bar is indistinguishable from Bucci on the
issue of attorneys’ fees. Here, as in Bucci, the underlying action plaintiff (McCarthy)
seeks attorneys’ fees as an assignee of the underlying action defendant (McCormack)
from the insurance company in breach of its duty to defend (Metropolitan).
Under the reasoning in Bucci, attorneys’ fees are available to McCarthy; the
next question is whether they are owed. As described above, under Maine common
law, “attorney 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 . . . .”
Gibson, 673 A.2d at 1355. As my previous order described, in order to determine
whether an insurer has a duty to defend, the court compares the insurance contract
to the allegations in the complaint, and evaluates whether “there is any legal or
factual basis that could be developed at trial, which would obligate the insurer to pay
under the policy . . . .” Order on Cross-Mots. for Summ. J. 3. And as the First Circuit
explained, any ambiguities in the policy are resolved in favor of finding a duty to
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defend the insured. Metropolitan Prop. & Cas. Ins. Co., 754 F.3d at 50. In light of this
standard, which places a firm thumb on the scale in favor of insureds, and for the
reasons described in my previous Order and the First Circuit’s affirmance of the
same, I find that Metropolitan’s duty to defend McCormack in the underlying action
was clear. Thus, Metropolitan owes McCarthy—as McCormack’s assignee—the fees
McCarthy incurred in this declaratory judgment action after McCormack and
McCarthy settled the underlying action.3
III.

McCormack’s Fees in the Underlying State Court Action
McCarthy next requests the fees McCormack incurred defending herself in the

underlying state court action. In support, McCarthy points out that courts may award
“necessary or proper relief” under the Declaratory Judgment Act, even if that relief
was not requested by counterclaim or came after judgment was entered. McCarthy’s
Reply 3 (citing 28 U.S.C. § 2202). While it is true that 28 U.S.C. § 2202 is not a feeshifting statute, it may operate as such in the duty-to-defend context. See Sec. Ins.
Co. of New Haven v. White, 236 F.2d 215, 220 (10th Cir. 1956) (awarding attorneys’
fees under § 2202 for fees incurred in both the declaratory judgment action and the
underlying action); Nat. Indem. Co. v. Harper, 295 F. Supp. 749, 757-58 (W.D. Mo.
1969) (same); see also Mercantile Nat. Bank at Dallas v. Bradford Tr. Co., 850 F.2d
215, 218 n.9 (5th Cir. 1988) (noting an exception to the rule that § 2202 does not
provide statutory authority to award otherwise-unavailable attorneys’ fees for

3
McCarthy was represented in the declaratory judgment action by Verrill Dana, LLP and
incurred $23,526.49 in fees on the merits and $18,709.00 in fees in the pursuit of fees. Joint Statement
of Facts ¶¶ 5-6 & Ex. B; Apr. 27, 2015 Aff. of Michael J. Donlan & Ex. A (ECF Nos. 92-1, 92-2).

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coverage suits where “if not for the insurer’s improper failure to defend, the insured
would not have had to incur attorney’s fees in either the principal litigation or in the
declaratory judgment action.”).
Metropolitan resists the award of attorneys’ fees in the underlying action by
pointing out that McCormack/McCarthy never counterclaimed against Metropolitan
in this declaratory judgment action. In fact, McCarthy was specifically denied the
opportunity to bring a breach of contract claim against Metropolitan. See Rec. Entry
of Final J. 1-5, 8; Order Affirming Rec. Entry of Final J. 1. Thus, Metropolitan
reasons, an award of attorneys’ fees in the underlying action would compensate
McCarthy for an unasserted claim.4
The lack of a breach of contract claim is not fatal to McCarthy’s request for
attorneys’ fees in the underlying action. A declaration that an insurer has breached
its duty to defend inherently constitutes a finding that the insurer breached the
insurance contract. See Gibson, 673 A.2d at 1354-55 (“When it is an insurer’s clear
duty to defend and the insurer wrongfully refuses to do so on the ground that the
claim upon which the action against the insured is based is not within the coverage
of the policy, the insurer is guilty of a breach of contract . . . .”); Auto Europe, LLC v.
Conn. Indem. Co., 321 F.3d 60, 63 n. 1 (1st Cir. 2003) (quoting Auto Europe, LLC v.

4
Metropolitan also challenges this Court’s Article III jurisdiction over what it labels “an
unasserted claim for attorneys’ fees” in the underlying action. Pl.’s Opp’n 4. This argument is a nonstarter. This Court has diversity jurisdiction over this dispute pursuant to 28 U.S.C. § 1332(a)(i), the
power to declare the rights and responsibilities of the parties arising under the insurance policies
pursuant to 28 U.S.C. § 2201(a), and the authority to grant “[f]urther necessary or proper relief based
on a declaratory judgment . . . against any adverse party whose rights have been determined by such
judgment” pursuant to 28 U.S.C. § 2202.

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Conn. Indem. Co., No. 01-271-P-H, 2002 WL 475123, at *8 (D. Me. Mar. 28, 2002))
(approving lower court’s observation that “ ‘it necessarily follows that, if a duty to
defend exists and the insurer has refused to provide a defense, the contract has been
breached.’ ”). And while McCarthy may have styled the portion of her motion
requesting fees in the underlying action as one for further relief under § 2202,5 rather
than as an application for attorneys’ fees, that potential mislabeling is not fatal to the
motion.
Moreover, in this declaratory judgment action, Metropolitan asked this Court
to determine “its obligation to defend . . . McCormack.” Compl. 1. I determined
Metropolitan did have a duty under the policy to defend McCormack. The attorneys’
fees McCormack incurred in the underlying action as a result of Metropolitan’s failure
to defend thus constitute “necessary or proper relief based on [the] declaratory
judgment.” 28 U.S.C. § 2202.6 Such relief is consistent with Maine common law in
duty to defend cases, where the purpose of damages 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, 673 A.2d at
1355; see also Union Mut. Fire Ins. Co. v. Inhabitants of the Town of Topsham, 441
A.2d 1012, 1017, 1019 (Me. 1982) (leaving trial court’s award of attorneys’ fees from
underlying action intact); Jackson v. N.E. Ins. Co., No. cv-07-178, 2009 WL 6898164

See United Teacher Assocs. Ins. Co. v. Union Labor Life Ins. Co., 414 F.3d 558, 571-74 (5th Cir.
2005); Fred Ahlert Music Corp. v. Warner/Chappell Music, Inc., 155 F.3d 17, 25-26 (2d Cir. 1998).
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No § 2202 hearing is necessary because: (1) McCarthy has waived it; (2) Metropolitan concedes
that McCormack incurred fees defending herself in the underlying action; and (3) the parties have
stipulated that the fees requested are fair and reasonable.

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(Me. Super. Ct. Sept. 8, 2010) (ordering payment of fees incurred in underlying
action); Centennial Ins. Co., 2009 WL 2175763, at **1, 3-4 (same). Thus, Metropolitan
owes McCarthy—as McCormack’s assignee—the fees McCormack incurred in the
underlying state court action.7
CONCLUSION
For the reasons stated above, the motion is GRANTED. Metropolitan is
ORDERED to pay McCarthy: (1) the $19,561.44 McCormack incurred defending this
declaratory judgment action; (2) the $42,235.498 McCarthy incurred defending this
declaratory judgment action and (3) the $27,596.20 McCormack incurred defending
the underlying action.

SO ORDERED.
/s/ Nancy Torresen
United States Chief District Judge
Dated this 15th day of September, 2015.

McCormack was represented in the underlying action by Childs, Rundlett, Fifield & Alshuler,
LLC and Thompson, Bull, Furey, Bass & MacColl, LLC and incurred $27,596.20 in fees. Joint
Statement of Facts ¶¶ 2, 5 & Ex. B.
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8
This figure includes the $23,526.49 McCarthy incurred on the merits and the $18,709.00
McCarthy incurred seeking fees.

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