Thursday, March 19, 2009

Who Pays?

A case decided today by the Massachusetts Supreme Judicial Court holds:

It is well settled that an insured is entitled to recover reasonable attorney's fees and expenses incurred in successfully establishing the insurer's duty to defend under the terms of the policy. See Preferred Mut. Ins. Co. v. Gamache, 426 Mass. 93, 98 (1997) (Gamache ). What happens when the party incurring attorney's fees and expenses to establish the insurer's obligation to defend is not the insured but a different insurer that has defended and provided coverage to the insured? That is the question raised in this case. We answer that the exception to the American Rule in Gamache and its progeny does not extend to allow the prevailing insurer recovery of its attorney's fees associated with an action brought to establish the defense and coverage responsibility of another insurer.

The court found that a contrary Maryland decision was not persuasive on public policy grounds.  The case is Callahan & sons, Inc. v. Worcester Insurance Company. (Mike Frisch)

Economics | Permalink

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