Case Title: Nova v. Penske

Citation: 405 Md. 435

Docket Number: 68/07

State: maryland

Court: Maryland Supreme Court

Date: 2008-07-25T00:00:00Z

Document:
In the Circuit Court for Prince George’s County
Case No. CAL 02-28837
IN THE COURT OF APPEALS
OF MARYLAND
No. 68
September Term, 2007
Nova Research, Inc., et al.
v.
Penske Truck Leasing Co., L.P.
Bell, C.J.
        *Raker
Harrell
Battaglia
Greene
Wilner, Alan, M .
(Retired, specially assigned)
Cathell, Dale, R.
(Retired, specially assigned),
JJ.
Opinion by Raker, J. 
Bell, C.J., Battaglia, and Greene, JJ., dissent.
Filed:   July 25, 2008
*Raker, J., now retired, participated in the hearing
and conference of this case while an active
member of this Court; after being recalled
pursuant to the Constitution, Article IV, Section
3A, she also participated in the decision and
adoption of this opinion.
1 Unless otherwise noted, all subsequent statutory references herein shall be to the
Courts & Judicial Proceedings Article of M aryland Code (1974, 2006 Repl. Vol.).
2 Nova also maintained its own primary insurance policy with Fireman’s Insurance
Company of Washington, D.C., an additional petitioner in the case sub judice.
In this case requesting declaratory relief, we review the trial court’s construction of
a rental agreement between Penske Truck Leasing Co., L.P. (Penske) and Nova Research,
Inc. (Nova).  The question presented in this appeal is whether the contract provision for
indemnification includes first party attorney’s fees, where the contract language does not
provide expressly for the recovery of attorney’s fees.  We are asked also to decide whether,
subsequent to the declaratory judgment in favor of indemnification, Penske’s applications
filed for costs and expenses were submitted properly to the trial court pursuant to Maryland
Code (1974, 2006 Repl. Vol.), § 3-412 of the Courts & Judicial Proceedings Article.1  We
shall hold that Penske’s applications were submitted properly, but that attorney’s fees in the
present action establishing the right to indemnification are not recoverable.
I.
In 2001, petitioner Nova contracted to rent a tractor and trailer from respondent,
Penske, under two identical rental agreements.  The agreements obligated Penske to provide
liability protection in the form of supplemental liability insurance.2  The provision provides
as follows: 
“[Penske] shall, at its sole cost, provide liability protection for
Customer and any operator authorized by Penske, and no others
. . . in accordance with the standard provisions of a Basic
Automobile Liability Insurance Policy as required in the
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jurisdiction in which Vehicle is operated, against liability for
bodily injury, including death, and property damage arising out
of the ownership, maintenance, use and operation of Vehicle as
permitted by this agreement, with limits as follows:
. . . . [P]rimary coverage of $100,000 each person, $300,000
each accident for bodily injury, including death, and $25,000
each accident for property damage.”
The provision went on to state as follows:
“Customer shall indemnify, and hold harmless, Penske, its
partners, and their respective agents, servants and employees,
from and against all loss, liability and expense as a result of
bodily injury, death or property damage caused by or arising out
of the ownership, maintenance, use or operation of Vehicle, but,
if ‘Penske Provides L.P.’ is initialed or is otherwise applicable,
and Customer is in compliance with its obligations to Penske
under this Agreement, Customer’s indemnification and hold
harmless obligation hereunder shall be in excess of the liability
protection expressly required to be provided by Penske under
this Agreement.”
An additional clause, entitled “Customer’s Responsibilities; Refueling Service Charges;
Breakdown Expenses,” states further, in pertinent part, as follows:
“Customer shall: (A) indemnify, and hold harmless Penske, its
partners, and their respective agents, servants and employees,
from and against all loss, liability and expense caused or arising
out of Customer’s failure to comply with the terms of this
Agreement.”
The effect of these provisions is to provide insurance up to the provided for limits, but not
beyond that, where Nova was in compliance with its obligations under the contract, but for
Nova to indemnify and hold harmless Penske if Nova failed to comply with the agreement
terms.
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On May 24, 2002, the rental vehicle was involved in a fatal accident in Texas, where
both vehicles involved were destroyed and both drivers killed.  The State of Texas charged
Penske with the expenses incurred in investigating the accident, as well as environmental
cleanup and remediation costs.  In December 2002, Nova’s primary insurer, Fireman’s
Insurance Company, filed a declaratory judgment action in Texas, naming Nova and Penske
as defendants, seeking to determine that Penske was obligated to provide liability insurance
under the rental agreements.  Within a week, Penske filed a request for declaratory relief
against Nova and Fireman’s Insurance in the Circuit Court for Prince George’s County,
Maryland, asserting that Nova had breached the agreement by using a non-permissive driver
and asserting that Nova was obligated to indemnify Penske for any expenses incurred as a
result of the accident.  In June 2003, the Texas lawsuit was dismissed on the grounds of
forum non conveniens.  Penske was not a named party in a subsequent wrongful death suit
filed against Nova in Texas.
In the Maryland declaratory judgment action, both parties filed motions for summary
judgment.  After a hearing, the Circuit Court for Prince George’s County found that Nova
breached the terms of the rental agreements and issued an Order on October 16, 2003,
declaring, in part, as follows:
“[I]t is further ordered, adjudged and declared that Plaintiff
Penske Truck Leasing Co., L.P., is entitled to full
indemnification from the Defendant . . . for any claims arising
out of said loss . . . and that Penske, having established its right
to coverage and indemnity, is entitled to its costs and expenses
in the subject action.”
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Nova filed a motion to alter or amend the judgment and Penske filed a request for
Application for Costs and Expenses, seeking a total of $91,979.18, to cover the investigation
of the accident, environmental clean up and remediation, attorney’s fees in defense of the
Texas action, and attorney’s fees in the Maryland declaratory judgment action Penske
brought against Nova and Fireman’s.  Nova then filed a third party complaint against
Penske’s insurer, Old Republic Insurance Company, and Penske filed a motion to dismiss the
third party complaint.  On March 8, 2004, the Circuit Court denied Penske’s application for
costs, struck the third party complaint, and denied Nova’s motion to alter or amend the
finding of summary judgment for Penske.  Nova noted a timely appeal to the Court of Special
Appeals contesting the trial court’s grant of summary judgment.  Penske filed a cross-appeal
regarding the denial of its application for costs.  
The Court of Special Appeals, in an unreported opinion, affirmed the declaratory
judgment, but vacated the denial of the Application for Costs and Fee and remanded for
further proceedings.  On remand, Penske filed a Supplemental Application for Costs and
Expenses, seeking an additional $84,162.46, which included additional investigation costs
of the accident, the destruction of the tractor and trailer, and additional attorney’s fees for
both the Texas and Maryland litigation.
The trial court issued a written decision denying the application for costs and
expenses.  The Circuit Court observed that “[t]here is no argument as to whether Penske is
entitled to indemnification arising out of the breach.  The only issue is whether
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indemnification encompasses attorney’s fees accumulated in anticipation of the wrongful
death litigation.”  Treating Penske’s application as a request for attorney’s fees in a first party
action, the Circuit Court determined that the American Rule applied and the contract
indemnification clause did not serve as a fee-shifting provision.  The court supported its
reasoning by examining Shan Industries, LLC v. Tyco International (US), Inc., No. Civ. 04-
1018, 2005 WL 3263866 (D.N.J. Nov. 30, 2005), an unreported federal district court order,
where the district court found that an indemnification clause did not encompass attorney’s
fees in first party actions, and  U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d
34, 77 (2d Cir. 2004).  The Circuit Court found also that the insured exception to the
American Rule in Bausch & Lomb v. Utica Mutual, 355 Md. 566, 735 A.2d 1081 (1999), did
not apply to insurers or in first party liability cases.
Penske noted a timely appeal.  The Court of Special Appeals reversed the decision of
the trial court.  First, the intermediate appellate court noted a distinction in Penske’s
application between the request for attorney’s fees and the request for other consequential
expenses arising out of the accident, “including property losses and the expenses of
environmental cleanup and accident investigation.”  The Court of Special Appeals held that
Penske was entitled to both.  The court reasoned that, as to attorney’s fees, the contract
exception to the American Rule applied.  As to the issue of other accident-related costs, the
Court of Special Appeals held that there was no bar to Penske’s recovery of these expenses.
We granted certiorari to address the following questions submitted by Nova:
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“Is it desirable, or in the public interest, for this Court to address
whether first party attorney’s fees should be awarded as a matter
of public policy in a suit for contractual indemnity when there
is no fee shifting provision in the subject contract and without
regard to the nature of whether the indemnity is first party
damages or as a result of third party litigation.
“Is it desirable, or in the public interest, for this Court to define
and determine the extent of continuing jurisdiction for
‘Applications’ under Maryland’s Declaratory Judgment Act,
C&J P Art., and section 3-412. Further relief, and 
a.  Assuming that such jurisdiction exists, what rules, standards
and procedural protections should a circuit court use with
respect to Applications for ‘necessary and proper’ further relief,
and,
b.  Whether the statute of limitations applies to Applications for
further relief.”
Nova v. Penske, 401 Md. 172, 931 A.2d 1095 (2007).
II.
Petitioner argues that the Court of Special Appeals erred in reading a fee shifting
provision into the indemnity clause in the contract.  Petitioner points out that the case law
relied upon for support of awarding attorney’s fees is limited to circumstances involving
indemnification after defending against a third party claim, and argues that the case sub
judice is procedurally distinguishable.  Further, petitioner argues that Atlantic v. Ulico, 380
Md. 285, 302, 844 A.2d 460, 469 (2003), which construed an indemnity contract as
encompassing first party attorney’s fees,  is not controlling because in that case the
indemnification provision in the agreement specifically defined the term “loss” to include any
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expenses as a result of the enforcement of the agreement.  On the second question, Nova
argues that Penske’s application and supplemental application should not have been granted
because no damages had been pled or proven prior to final judgment.  Petitioner argues also
that allowing the application would conflict with § 5-101 of the Courts & Judicial
Proceedings Article, which limits the filing of a civil action to within three years of date it
accrues, unless another provision of the Code provides a different time period.
Respondent argues that we should imply that respondent is entitled to recovery of
attorney’s fees unless the indemnity contract provides otherwise.  Rather than interpret the
terms of the contract to provide for fee-shifting to overcome the American rule, respondents
maintain that this case falls within an exception identified in Maryland law regarding cases
seeking indemnification.  Penske cites the proposition in Jones v. Calvin B. Taylor Banking
Co., 253 Md. 430, 441, 253 A.2d 742, 748 (1969), that “[a]s a general rule, and unless the
indemnity contract provides otherwise, an indemnitee is entitled to recover, as part of the
damages, reasonable attorneys’ fees.”  Further, respondent argues that the applications were
timely filed and that the statute of limitations runs on indemnity claims from the date
payment becomes due, not the date of the underlying breach.  Finally, respondents note that
the applications were allowed as further relief under § 3-412 of the Courts and Judicial
Proceedings Article.
III.
3 Another exception to the American Rule is recognized for “an insured who defends
against liability and is forced to challenge decisions of his or her insurer in respect to policy
coverage issues.”  Megonnell v. United Services, 368 Md. 633, 659, 796 A.2d 758, 774
(2002).  We have declined to extend this exception to cover third party attorney’s fees in a
suit to force an insurer to provide coverage.  See id. at 660-61, 796 A.2d at 774-75.  We do
not find the insured exception relevant to the circumstances of the case sub judice, where an
insurer, rather than an insured, seeks indemnification in a first party action, rather than for
defending against a third party action.
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As concerns the grant of attorney fees, Maryland follows the common law “American
Rule,” which states that, generally, a prevailing party is not awarded attorney’s fees “unless
(1) the parties to a contract have an agreement to that effect, (2) there is a statute that allows
the imposition of such fees, (3) the wrongful conduct of a defendant forces a plaintiff into
litigation with a third party, or (4) a plaintiff is forced to defend against a malicious
prosecution.”  Thomas v. Gladstone, 386 Md. 693, 699, 874 A.2d 434, 437 (2005).3  In St.
Luke Church v. Smith, 318 Md. 337, 358-59, 568 A.2d 35, 45 (1990), we said that counsel
fees generally are not awarded as damages, absent a contract providing to the contrary, or
special circumstances.  We included as examples of special circumstances “cases where the
defendant’s wrongful conduct has involved the plaintiff in litigation with others, certain
implied indemnity actions, and actions resulting in declaratory judgments that a liability
insurer must defend the insured in a particular action.”  Id. at 359 n.2, 568 A.2d at 46 n.2.
(citations omitted) (emphasis added).
Respondent’s first argument as to why it is entitled to first party attorney’s fees relies
upon the “implied indemnity action” special circumstance identified in Smith.  The implied
indemnity exception in Maryland originated in Jones v. Calvin B. Taylor Banking Co., 253
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Md. 430, 441-42, 253 A.2d 742, 748 (1969).  In Jones, a bank entered into a financing
agreement accepting assignment of a manufacturer’s accounts receivable and the
responsibility of making disbursements to the manufacturer’s suppliers.  In return, the
manufacturer’s officers personally executed a note to the bank, guaranteeing against any loss
in connection with the transaction.  Thereafter, the manufacturer was adjudged bankrupt and
the trustee in bankruptcy recovered from the bank certain transaction amounts.  The bank,
in turn, was awarded a judgment against the manufacturer’s officers to recover the losses
suffered as a result of the bank’s liability under the financing agreement.  Following a bench
trial, a judgment was entered in favor of the bank, including the bank’s attorney’s fees, in
connection with the trustee in bankruptcy action.  
The officers appealed, inter alia, the award of attorney’s fees accrued from defense
of the third party action.  This Court affirmed the grant of attorney’s fees, implying a fee-
shifting provision to allow an indemnitee to recover reasonable attorney’s fees incurred in
defending against a third party.   We stated in part that “[a]s a general rule, and unless the
indemnity contract provides otherwise, an indemnitee is entitled to recover, as part of the
damages, reasonable attorneys’ fees.”  Jones, 253 Md. at 441, 253 A.2d at 748 (quoting 41
Am. Jur.2d Indemnity, § 36 at 727 (1968)).  The relied upon quotation is taken out of context.
This proposition, when considered in context, does not accurately settle the matter where first
party indemnification claims are involved.  The source quoted in Jones goes on to say in the
following sentence that “[t]he allowance of attorneys’ fees is limited to the defense of the
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claim indemnified against and does not extend to services rendered in establishing the right
of indemnity.”  41 Am. Jur.2d Indemnity, § 36 at 727 (1968).  The Jones holding was limited
to circumstances where the indemnitee sought to recover “the amount of the counsel fee
incurred by the Commissioners in defending the suit” against a third party.  Jones, 253 Md.
at 442, 253 A.2d at 748.  See also C. & O.C. Co. v. County Comm’rs, 57 Md. 201, 226
(1881) (holding that “in conducting a defense made necessary by the default of another who
is answerable over, the services of an attorney are a natural and proper incident or
consequence to such a proceeding”).  Jones does not provide the support claimed by Penske,
and we decline to read Jones so expansively as to imply indemnity for first party attorney’s
fees.
Penske’s second argument in support of granting first party attorney’s fees is based
on the contract exception to the American rule.  As noted earlier, another recognized
exception to the American rule prohibiting the recovery of prevailing party attorney’s fees
is where the contract provides otherwise.  See Thomas v. Gladstone, 386 Md. at 699, 874
A.2d at 437.  See also Empire Realty Co. v. Fleisher, 269 Md. 278, 286, 305 A.2d 144, 148
(1973) (“[I]n the absence of special circumstances, as where the parties to a contract agree
on the payment of attorney’s fees, . . . counsel fees are not a proper element of damages”);
Webster v. People’s Loan Etc. Bank, 160 Md. 57, 61, 152 A. 815, 817 (1931) (“That the
parties to a contract have the right to agree for the payment of an  attorney’s fee in the event
of default in payment by the promisor has long been recognized in the decisions of this
4 The party requesting fees has the burden of providing the court with the necessary
information to determine the reasonableness of its request.  Myers v. Kayhoe, 391 Md. 188,
207, 892 A.2d 520, 532 (2006).  Reasonableness of fees is a factual determination within the
sound discretion of the court, and will not be overturned unless clearly erroneous.  Id.
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court”).
Contract clauses that provide for the award of attorney’s fees generally are valid and
enforceable in Maryland, subject to a trial court’s examination of the prevailing party’s fee
request for reasonableness.  Myers v. Kayhoe, 391 Md. 188, 207, 892 A.2d 520, 532 (2006).4
The interpretation of a written contract is a question of law for the court subject to de novo
review.  Diamond Point v. Wells Fargo, 400 Md. 718, 751, 929 A.2d 932, 951 (2007).
Maryland applies an objective interpretation of contracts.  Id.  If a contract is unambiguous,
the court must give effect to its plain meaning and not contemplate what the parties may have
subjectively intended by certain terms at the time of formation.  Id. at 751, 929 A.2d at 952.
A contract is ambiguous if, when read by a reasonably prudent person, it is susceptible of
more than one meaning.  Id.  In interpreting a contract provision, we look to the entire
language of the agreement, not merely a portion thereof.  Jones v. Hubbard, 356 Md. 513,
534-35, 740 A.2d 1004, 1016 (1999).  When interpreting a contract’s terms, we consider “the
customary, ordinary and accepted meaning of the language used.”  Atlantic v. Ulico, 380 Md.
285, 301, 844 A.2d 460, 469 (2003).
In Atlantic, this Court was faced with whether to award attorney’s fees in a first party
action to recover loss arising out of a surety bond with an indemnity agreement.  Id.  Under
the agreements, Ulico was to act as a surety for Atlantic, and issued a performance and
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payment surety bond on behalf of Atlantic to a third party.  The third party made a claim on
the bond, and Ulico brought suit against Atlantic in an effort to recover the loss it suffered
paying out on the bond.  Ulico also sought attorney’s fees incurred in the first party action
to obtain indemnification from Atlantic.  The trial court awarded reasonable attorney’s fees,
costs, and expenses.
Atlantic noted a timely appeal challenging, among other things, the award of
attorney’s fees.  Notably, this Court did not uphold the award under the rule articulated in
Jones, implied fee-shifting for attorney’s fees from third party defensive actions.  Rather, we
upheld the award of attorney’s fees after interpreting the indemnification contract.  The
indemnity agreement covered “from and against any and all Loss.”  The agreement then went
on to define “Loss” in relevant part as follows:
“Any and all damages, costs, charges, and expenses of any kind,
sustained or incurred by [the indemnified party] in connection
with or as a result of: (1) the furnishing of any Bonds; and (2)
the enforcement of this Agreement.”
Id. at 302, 844 A.2d at 469 (emphasis added).  We then reasoned as follows:
“[U]nder the terms of the indemnity agreement, Atlantic was
obligated by contract to pay Ulico the sums it incurred to
enforce the agreement, which included its attorney’s fees, costs,
and expenses.  Indemnity agreements of this kind are interpreted
generally to entitle the surety to recover fees, costs, and
expenses incurred in enforcing them.”
Id. at 316-17, 844 A.2d at 478 (emphasis added) (citation omitted).
Our holdings in Jones and Atlantic do not obviate the need to apply contract
5 The treatise corrects a common misperception, stating as follows:
“One rule often stated is that the plaintiff may recover for
litigation expenses in prior litigation with third parties, but not
for expenses incurred in litigation with the defendant.  As shown
below, the ‘third parties’ limitation is not accurate; in
appropriate cases the plaintiff may also recover for expenses in
litigation with the defendant himself.”  
DAN B. DOBBS, LAW OF REMEDIES § 3:10(3), at 401 (2d Ed. 1993).  Stated otherwise,
whether indemnification coverage extends to first party litigation expenses is a matter of
contract interpretation.
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interpretation to determine the scope of the indemnification provision and whether the clause
covers first party enforcement rights.  The scope of indemnification is a matter of contract
interpretation, and as such may or may not include attorneys’ fees in first party enforcement
actions, in addition to the standard allowance of attorney’s fees in defense of suits by third
parties.  This concept is expressed in DAN B. DOBBS, LAW OF REMEDIES § 3:10(3) n.5 (2d Ed.
1993), which states that “[w]hether the contract covers only fee costs incurred in third party
litigation or also covers fee costs incurred in litigation between the parties themselves is of
course a question to be answered by interpretation of the contract.”5 
The contract in the case sub judice was primarily a rental agreement with a liability
protection clause that provided insurance coverage.  Nova purchased the rental of the trailer
and insurance of up to $100,000 from Penske.  In addition, as part of the Agreement, Penske
was to be indemnified and held harmless for any loss liability or expense above and beyond
the $100,000 in liability protection that Penske was to provide.  The Agreement stated that
Nova was responsible to indemnify Penske for loss over this amount that occurred “as a
result of bodily injury, death or property damage caused by or arising out of the ownership,
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maintenance, use or operation of Vehicle.”  In addition, in the section entitled “Customer’s
Responsibilities; Refueling Service Charges; Breakdown Expenses,” a second
indemnification provision called for Nova to “indemnify, and hold harmless Penske . . . from
and against all loss, liability and expense caused or arising out of Customer’s failure to
comply with the terms of this Agreement.”  The provision goes on in parts (B) through (H)
to require Nova to pay for refueling, tolls and trip permits or licenses, unauthorized service,
towing expenses, etcetera.
We note that the second indemnification clause, read as part of the contract as a
whole, is not the same as an indemnification agreement in the context of creditor-debtor or
surety agreements, as it was in Jones and Atlantic.  In the latter cases, the sole purpose of the
arrangement was to secure credit or a guarantor.  The creditor or guarantor relied on
indemnification as assurance in undertaking the deal.  Here, the primary purpose of the
contract was to lease a truck and trailer.  In addition, the agreement called for Penske to
provide liability coverage to Nova.  The second indemnification provision, as was determined
by the Circuit Court, operated to negate Penske’s obligation to provide liability protection
if Nova breached the contract.  It also, by a plain reading of its inclusion in the subheading
that deals with refueling charges and breakdown expenses, served to exempt Penske from
any miscellaneous fees Nova might accrue in breach of contract by refusing to refuel the
vehicle, subjecting the vehicle to unauthorized service or maintenance, towing expenses, and
related matters.  It was not a provision to protect a creditor or surety, but was instead meant
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to protect a commercial lessor against tort and casualty loss.
The indemnification provision, which encompasses loss “caused or arising out of” the
failure to comply with the agreement, is distinctly different from the loss provision in
Atlantic.  The agreement in Atlantic stated explicitly that it covered loss “sustained or
incurred . . . in connection with or as a result of . . . the enforcement of this Agreement.”
Atlantic, 380 Md. at 302, 844 A.2d at 469.  The contract in the case sub judice does not so
provide.  Interpreting the indemnification provision in the context of the contract as a whole,
we do not find support that the parties intended the indemnification to cover first party
attorney’s fees.  In examining the scope of the indemnification provision, we find no express
fee shifting provision.  Under Jones v. Calvin B. Taylor Banking Co., 253 Md. 430, 441-42,
253 A.2d 742,  748 (1969), we implied a fee-shifting provision to allow an indemnitee to
recover reasonable attorney’s fees incurred in defending against a third party.  Where the
contract provides no express provision for recovering attorney’s fees in a first party action
establishing the right to indemnity, however, we decline to extend this exception to the
American rule, which generally does not allow for prevailing parties to recover attorney’s
fees.
In reaching this conclusion, we note first that our decision in Jones, allowing for
recovery of attorney’s fees incurred in defense of claims by third parties, is already a great
expansion of the exceptions to the American rule.  Several courts refuse to imply such
fee-shifting into contracts, and instead require the explicit use of the phrase “attorney’s fees.”
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See, e.g., Woodhaven Homes & Realty v. Hotz, 396 F.3d 822 (7th Cir. 2005) (“Wisconsin
courts will not construe an obligation to pay attorney fees unless contract language ‘clearly
and unambiguously so provides’”); Zissu v. Bear, Stearns & Co., 805 F.2d 75, 77 (2d Cir.
1986) (indemnity clause in a securities agreement that protected “against any and all loss,
damage or liability due to or arising out of a breach of any representation or warranty,” with
no mention of attorney’s fees, did not meet the requisite level of specificity necessary to hold
a party liable for attorney’s fees where the indemnified party defended against a third party
claim) (emphasis in original).  Our reasoning in Jones aligns us with those states that do not
strictly require the phrase “attorney’s fees” in a contract to override the American rule.  See,
e.g., Tubb v. Bartlett, 862 S.W.2d 740 (Tex. Ct. App. 1993).
To extend the exception urged upon us by Penske to permit parties initiating first party
actions to enforce indemnification rights to recover attorney’s fees would be overbroad.  If
we were to imply a fee-shifting provision for first party actions, even where the contract does
not permit one expressly, the exception would swallow the rule, and the presumption of the
American rule disallowing recovery of attorney’s fees would, in effect, be gutted.  This result
is in accord with the result we reached with respect to attorney’s fees in insurance actions.
In Bausch & Lomb, 355 Md. 566, 591-92, 735 A.2d 1081, 1095 (1999) (quoting Collier v.
MD-Individual Practice, 327 Md. 1, 16-17, 607 A.2d 537, 542-45 (1992)), we stated as
follows:
“From the standpoint of a strict application of the American
rule, there is no logical reason why the successful plaintiff's
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action on a liability insurance policy for breach of a promise to
defend, or to pay the cost of defense, should include counsel
fees in prosecuting the breach of contract action, when
successful plaintiffs’ actions for other breaches of insurance
contracts, or for breaches of other contracts, do not ordinarily
include those counsel fees.  The Maryland rule awarding to the
successful insured counsel fees in declaratory judgment or
assumpsit actions with liability insurers for breach of the
promise to defend or to pay the cost of defense is an exception
to the American rule. To extend that exception to health
insurers, who breach their contracts by failure to pay covered
benefits, will only compound the anomaly.  It would probably
mark the elimination of the American rule as to contract actions
against insurers generally and leave in doubt the efficacy of the
American rule as to other types of contracts.”
Our holding comports with the generally accepted rule, requiring that a contract
provision must call for fee recovery expressly for establishing the right to indemnity in order
to overcome the application of the American rule.  “Most courts distinguish between the
recovery of attorney’s fees incurred in defending against the third-party claim and those
expended in prosecuting a claim against the indemnitor.  Unless the indemnity provision
expressly permits the recovery of fees incurred in prosecuting claims against the indemnitor,
such fees are not recoverable.”  PHILIP L. BRUNER & PATRICK J. O'CONNOR, JR., 3
CONSTRUCTION LAW § 10:51 (2007).  See also Vallejos v. C.E. Glass Co., 583 F.2d 507, 510
(1978) (“It is true that in connection with indemnity claims recovery may generally be had
for attorneys’ fees and expenses incurred in defense against the principal claim, but not for
those incurred in establishing the right of indemnity”); Bagby v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 491 F.2d 192, 198 n. 9 (8th Cir.1974) (“[Attorneys’] fees are limited,
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however, to those incurred in the defense of the claim indemnified against, and there should
be no recovery for fees and expenses incurred in establishing the right to indemnity”).
The reasoning behind the distinction between attorney’s fees in third party claims and
first party actions for indemnity was articulated clearly in Peter Fabrics, Inc. v. S.S. Hermes,
765 F.2d 306 (2d Cir. 1985).  The United States Court of Appeals for the Second Circuit
explained as follows:
“Indemnity obligations, whether imposed by contract or by law,
require the indemnitor to hold the indemnitee harmless from
costs in connection with a particular class of claims.  Legal fees
and expenses incurred in defending an indemnified claim are
one such cost and thus fall squarely within the obligation to
indemnify.  Consequently, attorney’s fees incurred in defending
against liability claims are included as part of an indemnity
obligation implied by law, and reimbursement of such fees is
presumed to have been the intent of the draftsman unless the
agreement explicitly says otherwise . . . .  Such reasoning does
not apply to fees and expenses incurred in establishing the
existence of an obligation to indemnify, since such expenses are
not by their nature a part of the claim indemnified against.
Rather, they are costs incurred in suing for a breach of contract,
to wit, the failure to indemnify.  As such, fees and expenses
incurred in establishing the indemnity obligation fall within the
ordinary rule requiring a party to bear his own expenses of
litigation, see Berger, Court Awarded Attorneys’ Fees: What is
“Reasonable”?, 126 U.Pa.L.Rev. 281, 281 (1977). Cf. 5 Corbin,
Contracts § 1037 (1964) (attorneys’ fees and expenses may be
recovered if they constitute damages from the breach of a
contract but not if they are incurred in proving the breach).”
Id. at 316 (some citations omitted).
One instructive example is Oscar Grus & Son, Inc. v. Hollander, 337 F.3d 186 (2d
Cir. 2003).  In Oscar Grus, the United States Court of Appeals for the Second Circuit had
-19-
to determine whether an indemnification provision applied only to claims brought by third
parties or whether it applied also to claims brought between the parties to the agreement.  The
indemnification provision provided for reimbursement of any legal expenses incurred
“in connection with investigating, preparing to defend or
defending, or providing evidence in or preparing to serve or
serving as a witness with respect to, any lawsuits, investigations,
claims or other proceedings arising in any manner out of or in
connection with the rendering of services by the Advisor
hereunder (including, without limitation, in connection with the
enforcement of this Agreement and the indemnification
obligations set forth herein).”
Id. at 199 (emphasis in original).  The court determined nonetheless that, construing the
language in context with the surrounding contractual provisions, the right to attorney’s fees
applied only to claims brought by third parties, and not to an action commenced by the
indemnitee against the indemnitor.  Id. at 200.  The court reasoned as follows:
“Promises by one party to indemnify the other for attorneys’ fees
run against the grain of the accepted policy that parties are
responsible for their own attorneys’ fees.  Under New York law,
‘the court should not infer a party’s intention’ to provide counsel
fees as damages for a breach of contract ‘unless the intention to
do so is unmistakably clear’ from the language of the contract.”
Id. at 199 (citations omitted).  As explained by one commentator in a recognized treatise on
attorney’s fees:
“In a breach of contract action between the parties to an
agreement that included an indemnification clause which
encompassed legal expenses, the court concluded that the
indemnification provision applied only to claims brought by
third parties and not to claims such as the present one between
the parties to the agreement . . . .  In so ruling, the court relied in
-20-
part on principles that contractual attorney’s fees provisions
must be strictly construed to avoid inferring duties that the
parties did not intend to create and that promises by one party to
indemnify the other for attorney’s fees run against the grain of
the accepted policy that parties are responsible for their own
fees.”
ROBERT L. ROSSI, ATTORNEYS’ FEES § 9:18 (3d Ed. 2002, Cum. Supp. 2007).  
Many other courts have reached a similar conclusion.  See also Smoak v. Carpenter
Enterprises, Inc., 460 S.E.2d 381, 383 (1995) (refusing to grant first party attorney’s fees
under a contractual indemnification provision not “specifically dealing with the recovery of
attorney’s fees . . . in an action between the parties” as opposed to those incurred in third
party actions); Hooper Assocs. v. AGS Computers, 548 N.E.2d 903, 905 (N.Y. 1989) (holding
that the indemnification clause did not “contain language clearly permitting plaintiff to
recover from defendant the attorney’s fees incurred in a suit against defendant. On the
contrary, it is typical of those which contemplate reimbursement when the indemnitee is
required to pay damages on a third-party claim”); Otis Elevator Co. v. Toda Constr., 32 Cal.
Rptr. 2d 404, 406 (Cal. Ct. App. 1994) (declining to adopt a broad reading of an indemnity
provision that called for attorney’s fees where “[t]he provision does not specifically state .
. . that [the plaintiff] would be entitled to such fees in an action to enforce the indemnity
provision of the subcontract”); Merrimack School Dist. v. National School Bus Service, Inc.,
661 A.2d 1197, 1200-01 (N.H. 1995) (holding that “[t]he language relied on by the plaintiff
suggests that the defendant would be responsible for any damages suffered by the plaintiff
as a result of the defendant’s breach of the contract, but does not support the plaintiff’s
6  The dissent relies solely on Manson-Osberg Co. v. State, 552 P.2d 654 (Ala. 1976),
which held that a broad indemnification clause allows for recovery of attorney’s fees in a first
party indemnification action.  The Manson-Osberg view is a distinct minority view; it was
(continued...)
-21-
contention that the language was intended to include attorney’s fees incurred to enforce the
agreement”); U.S. v. Hardy, 916 F. Supp. 1385 (W.D. Ky. 1996) (same); Republic Ins. Co.
v. Pat DiNardo Auto Sales, Inc., 678 A.2d 516 (Conn. Super. Ct. 1995) (same); Seifert v.
Regents, 505 N.W.2d 83 (Minn. Ct. App. 1993) (same); Gen. Elec. Co. v. Mason & Dixon
Lines, Inc., 186 F.Supp. 761, 766 (W.D. Va. 1960) (“The allowance of attorneys’ fees should
be limited to the defense of the claim indemnified against and does not extend to services
rendered in establishing the right of indemnity.  It is fundamental that there should be no
recovery for attorneys’ services and expenses incurred in establishing the right of
indemnity”); Swiss Credit Bank v. Int’l Bank Ltd., 23 Misc.2d 572 (N.Y. Sup. 1960)
(unreported) (a contract clause to indemnify acted as “a general agreement for the payment
of counsel fees,” but was held not to include counsel fees in the suit to collect those fees,
with the court noting that “[o]f course, it is possible to contract for such an allowance but,
as it is an agreement contrary to what is usual, specific language would be needed to show
such an agreement”).
Although some courts have interpreted a contract provision to include first party
attorney’s fees incurred in enforcement actions, the vast majority of the contracts involved
in those cases explicitly allowed for the recovery of attorney’s fees by express inclusion of
the phrase “attorney’s fees” in the respective indemnity provisions.6  See, e.g., Dalton v.
6(...continued)
so in 1976, and remains so today.  See id. at 660 n.11 (“In so deciding we are not unmindful
that the general rule holds the other way”); Chetopa State Bancshares, Inc. v Fox, 628 P.2d
249 (Kan. App. 1981) (“Except for an Alaska decision in 1976 (see Manson-Osberg
Company v. State, 552 P.2d 654) predicated upon a statute and public policy determination
that costs of enforcing an indemnity contract are recoverable, the holdings in other states
appear to be reasonably uniform.  As in Kansas, most states have a postulate that attorney
fees are recoverable only if provided by statute or contract.  Absent a statute, there must be
express contractual language”).  Manson-Osberg has had little impact nationally.  Cf. Pike
Creek Chiropractic Center, P.A. v. Robinson, 637 A.2d 418, 422 (Del. 1994) (quoting
Manson-Osberg with approval when holding first party attorney’s fees were recoverable, but
in a case where the indemnification clause expressly included the phrase “attorney’s fees”);
Transamerica Premier Ins. Co. v. Nelson, 878 P.2d 314 (Nev. 1994) (citing Manson-Osberg
when holding that, specific only to surety actions, a surety may recover the cost of first party
attorney’s fees in enforcement actions). 
-22-
Childress Service Corp., 432 S.E.2d 98, 102 (W. Va. 1993) (allowing for the recovery of
attorney’s fees in an enforcement action, but notably where the contract indemnification
clause provided for “any and all cost[s] and expenses including attorneys’ fees . . .”)
(emphasis in original); RJF Int’l Corp. v. B.F. Goodrich Co., 880 S.W.2d 366, 371-72 (Mo.
Ct. App. 1994) (finding that an agreement “to indemnify and hold harmless Seller (BFG)
from and against any and all claims, liabilities, damages, losses, costs and expenses,
including without limitation, reasonable counsel fees and disbursements” included first party
attorney’s fees) (emphasis added); Tack’s Steel Corp. v. ARC Constr. Co., 821 N.E.2d 883,
890 (Ind. Ct. App. 2005) (finding that, where an agreement to indemnify expressly included
attorney’s fees, “such broad clauses specifically including attorney fees encompass fees for
prosecuting the claim for indemnification” as well as in defense against third party suit).
Because of our holdings in Jones, that the indemnity agreement need not contain the express
-23-
phrase “attorney’s fees,” and Atlantic, where indemnifying against loss “including in the
enforcement of the agreement” encompassed first party attorney’s fees, we adopt the
approach followed by the majority of states, and require that the contract provide expressly
for recovery in first party enforcement actions.  The contract in the case before us does not
explicitly cover expenses in the enforcement of the contract; therefore, we shall not imply
the recovery of attorney’s fees accrued in a first party action establishing the right to
indemnity.
IV.
The second question we address is whether Penske’s submission of Applications for
Costs and Expenses was proper under the provision for further relief in Maryland’s
Declaratory Judgment Act, Md. Code (1974, 2006 Repl. Vol.), § 3-412 of the Courts and
Judicial Proceedings Article.  Section 3-412 states in relevant part as follows:
“(a) Further relief. - Further relief based on a declaratory
judgment or decree may be granted if necessary or proper.
“(b) Application. - An application for further relief shall be by
petition to a court having jurisdiction to grant the relief.  
“(c) Show cause order. - If the application is sufficient, the
court, on reasonable notice, shall require any adverse party
whose rights have been adjudicated by the declaratory judgment
or decree, to show cause why further relief should not be
granted.”
The statutory scheme expressly permits further relief based on a declaratory judgment if
-24-
necessary or proper, either in a separate action or by application by a court who retains
jurisdiction.  We have said that, based on this framework, “[c]onsequently, the traditional
principles of res judicata are inapplicable in this context, as they would prevent bringing the
action for further relief that is expressly permitted by s 3-412(a).”  Bankers & Ship. Ins. v.
Electro Enter., 287 Md. 641, 653, 415 A.2d 278, 285 (1980) (allowing the prevailing party
in a declaratory judgment action to bring a separate action for further relief).  The effect of
a declaratory judgment action “is not to merge a claim in the judgment or to bar it.”
Restatement of the Law (Second), Judgments § 76, Comment c (Tent. Draft No. 3, 1976).
That the effect of a declaratory judgment should not bar a further claim applies as well to
cases where further relief is requested by way of application, rather than through filing a
separate action.
The type of further relief by application granted in this case is the type the statute
recognizes.  We have indicated as much in Electro-Nucleonics v. WSSC, 315 Md. 361, 375
n.4, 554 A.2d 804, 811 n.4 (1989), where we stated that “[w]e do not imply that the
timeliness of the counterclaims for compensation filed by the defendants in [the] declaratory
judgment action . . . is to be measured from the date of taking of Site 2.”  Citing § 3-412 as
our authority, we went on to say that “[t]hus, in lieu of counterclaiming, the counterclaimants
in Frankel could have awaited the final declaratory decree and, if it were adverse to WSSC,
could have then sought just compensation in the declaratory judgment action or commenced
separate actions for relief based on that judgment.”  Id. (emphasis added).
7 28 U.S.C. § 2202 specifically provides as follows:
“Further necessary or proper relief based on a declaratory
judgment or decree may be granted, after reasonable notice and
hearing, against any adverse party whose rights have been
determined by such judgment.”
-25-
The express language of § 3-412 allowing a court to grant further relief requested
through application if necessary or proper directly contradicts Nova’s contention that the
claim must be filed in a separate action.  The Maryland Declaratory Judgments Act, in § 3-
414, provides that the Act is to be construed in harmony with federal law:
“This subtitle shall be interpreted and construed to make
uniform the law of those states which enact it, and to harmonize,
as far as possible, with federal laws and regulations on the
subject of declaratory judgments and decrees.”
See Hamilton v. McAuliffe, 277 Md. 336, 340 n.2, 353 A.2d 634, 637 n.2 (1976).  The
language in § 3-412 is nearly identical to the federal statute granting further relief.  See 28
U.S.C. 2202 (2006).7   The United States Court of Appeals for the Second Circuit interpreted
the further relief provision of the federal statute in Edward B. Marks Music Corp. v. Charles
K. Harris Music Pub. Co., 255 F.2d 518 (2d Cir. 1958).  The plaintiff, after receiving a
declaratory judgment in its favor, appealed the denial of its motion for an accounting.  The
Second Circuit, citing the statute, said that:
“If plaintiff is not barred by laches this relief is proper . . . . We
take [28 U.S.C. 2202] to mean that the further relief sought –
here monetary recompense – need not have been demanded, or
even proved, in the original action for declaratory relief.  The
section authorizes further or new relief based on the declaratory
judgment, and any additional facts which might be necessary to
support such relief can be proved on the hearing provided in the
-26-
section or in an ancillary proceeding if that is necessary.  Here
the further demand for relief is based on the declaration of
plaintiff’s ownership of the songs at issue and, unless otherwise
barred, is proper under the statute.”
Id. at 522 (citations omitted).  Thus under a statute granting further relief, a court generally
has jurisdiction to grant all further and necessary or proper relief to effectuate the declaratory
judgment entered by the court.  See, e.g., City of Paducah v. Electric Plant Bd. of City of
Paducah, 449 S.W.2d 907, 910 (Ky. Ct. App. 1970) (finding that plaintiff’s argument that
the parties did not and therefore could not litigate the collection of payments in the
declaratory judgment action overlooked the existence of the statutory provision granting
further relief); Pan Am. Petroleum Corp. v. El Paso Natural Gas Co., 424 P.2d 397, 401
(N.M. 1966) (interpreting a statutory provision granting further relief as typically allowing
for a coercive decree to carry into effect the requested declaratory judgment).  Under a statute
authorizing further relief, the court is permitted to make further orders necessary to effectuate
the judgment without the need to initiate a separate proceeding.  See Gardner v. Berkman,
312 N.E.2d 563, 565 (Mass. 1974) (holding that “[a] separate petition for consequential relief
is not required by G.L. c. 231A, § 5, ‘where the court which hears the bill for declaratory
relief has jurisdiction to grant the further relief’”); Torbett v. Wheeling Dollar Savs. & Trust
Co., 314 S.E.2d 166, 170-71 (W. Va. 1983) (holding that, in declaratory judgment actions,
it was unnecessary for parties to file a separate complaint as a prerequisite to obtaining
further relief in the form of damages).  We find no merit in Nova’s challenge to the
procedure employed by Penske and authorized under § 3-412.
-27-
In conclusion, we hold that Penske is not entitled to first party attorney’s fees in the
declaratory judgment action establishing its right to indemnity.  The Court of Special Appeals
was correct, however, in distinguishing between attorney’s fees and the request for other
consequential expenses arising from the accident and included in the Application for Costs
and Expenses.  Although Penske may not recover first party attorney’s fees in the present
action, Penske is entitled to reasonable attorney’s fees in defense of the third party suit in
Texas prior to its dismissal, as well as the other accident-related costs, as the applications for
costs and expenses were proper.  
JUDGMENT OF THE COURT OF
SPECIAL 
APPEALS 
AFFIRMED.
CASE 
REMANDED 
TO 
THAT
COURT WITH INSTRUCTIONS TO
REMAND THIS CASE TO THE
CIRCUIT COURT FOR PRINCE
G E O R G E ’ S  
C O U N T Y  
F O R
F U R T H E R  
P R O C E E D I N G S
CONSISTENT WITH THIS OPINION.
COSTS TO BE EQUALLY DIVIDED
BY THE PARTIES.
IN THE COURT OF APPEALS OF
MARYLAND
No. 68
September Term, 2007
NOVA RESEARCH, INC., et. al.
v.
PENSKE TRUCK LEASING CO., L.P.
Bell, C.J.
         *Raker
Harrell
Battaglia
Greene
Wilner (Retired, Specially 
             Assigned)
Cathell (Retired, Specially        
       Assigned),
JJ.
Dissenting Opinion by Battaglia, J., 
which Bell, C.J. and Greene, J. join.
Filed:   July 25, 2008
*Raker, J., now retired, participated in the
hearing and conference of this case while an
active member of this Court; after being
recalled pursuant to the Constitution, Article
IV, Section 3A, she also participated in the
decision and adoption of this opinion.
1
The common law “American Rule” prohibits the recovery of attorney’s fees
by the prevailing party in a lawsuit absent certain exceptions.  Thomas v. Gladstone, 386 Md.
693, 699, 874 A.2d 434, 437 (2005).  
I respectfully dissent.
In the present case, the Circuit Court for Prince George’s County found that, although
Nova Research, Inc., (“Nova”) breached the terms of a rental agreement and must indemnify
Penske Truck Leasing, LLP, (“Penske”) for “any claims arising out of said loss,” that Nova
is not responsible for attorney’s fees that Penske incurred while establishing the right to
indemnity, under the American Rule.1  Penske appealed to the Court of Special Appeals,
arguing, in part, that cases involving attorneys fees under contracts of indemnity are one of
the exceptions to the American Rule and that court, in an unreported opinion, agreed with
Penske that it was entitled to reasonable attorney’s fees.  Although the majority agrees with
the Circuit Court’s rationale, I agree with that portion of the unreported opinion of the Court
of Special Appeals authored by Judge Sally E. Adkins, then writing for that court, which,
relative to the question at bar, stated:
The principle underlying the “contract exception” to the
American Rule regarding attorney’s fees is that, “when the
defendant has breached a specific [contractual] duty to protect
the plaintiff from litigation expenses, the defendant is
necessarily liable for those expenses, including attorney’s fees.”
1 Dan B. Dobbs, Dobbs Law of Remedies § 3.10(3), at 401 (2d
ed. 1993).  In appropriate cases, the plaintiff may recover for
expenses incurred in litigating with third parties or the
indemnitor.  See id.; Jones v. Calvin B. Taylor Banking Co., 253
Md. 430, 441-42 (1969) (bank could recover fees incurred to
litigate claim against bankrupt debtor, from officers of debtor
who indemnified bank against loss arising from dealings with
debtor).
-2-
In determining whether the defendant has agreed to accept the
financial burden of the plaintiff’s litigation expenses, explicit
language stating that the duty to indemnify encompasses
attorney’s fees is helpful, but not essential.  See Dobbs, supra,
at 402; cf., e.g., Overmyer v. Lawyers Title Ins. Corp., 32 Md.
App. 177, 187 (1976) (agreement stated that the “‘hold
harmless’ proviso embraced . . . attorney’s fees”), cert. denied,
278 Md. 730 (1976), cert. denied, 429 U.S. 1123, 97 S. Ct. 1159
(1977).  Due to the inherent nature of such agreements,
indemnity and hold harmless clauses are typically construed as
an undertaking to pay attorney’s fees.  
In Jones v. Calvin B. Taylor Banking Co., 253 Md. at 411-42,
the Court of Appeals recognized that, “‘[a]s a general rule, and
unless the indemnity contract provides otherwise, an
indemnitee is entitled to recover, as part of the damages,
reasonable attorneys’ fees[.]’” (Emphasis added and citation
omitted.)  Similarly, in Atlantic Contracting & Material Co. v.
Ulico Cas. Co., 389 Md. 285, 302 (2003), an indemnity contract
providing that the covered “Loss” included “all damages, costs,
charges, and expenses of any kind, sustained . . . as a result of
. . . the enforcement of this agreement” was construed to cover
attorney’s fees.2  See generally 42 C.J.S. Indemnity 20
____________________
2 
We reject Nova and Fireman’s argument that
these cases can be distinguished on their facts.  In
Jones v. Calvin B. Taylor Banking Co., 253 Md.
430, 439 (1969), the Court of Appeals affirmed a
judgment requiring two individual corporate
officers who guaranteed a loan made by the bank
to reimburse the bank for losses it suffered
“directly from its dealings” with their company,
including attorney’s fees incurred in representing
the bank in bankruptcy matters involving the
company.  In Atlantic Contracting & Material Co.
v. Ulico Cas. Co., 380 Md. 285, 317-18 (2004),
the Court affirmed an award of attorney’s fees to
-3-
the surety on a payment bond, who sued the
principal for indemnity in order to recover
attorney’s fees, costs, and expenses.  The factual
differences between those cases and the one at bar
do not alter the principle of law that governs all
three, i.e., that indemnification contemplates
reimbursement for attorney’s fees and expenses.
____________________
(“As a general rule, an indemnitee is entitled to recover, as a
part of the damages, reasonable attorney fees, and reasonable
and proper legal costs and expenses, even though not expressly
mentioned[.]”).
There are sound policy and practice reasons for interpreting an
indemnity agreement to cover attorney’s fees, even without
explicit mention of such fees.  At its essence, an agreement to
indemnify means
that one of the parties will protect the other from
litigation costs or claims brought by third persons
as well as from claims between themselves.  That
is, A contracts to indemnify B and to hold B
harmless in the event of claims arising out of their
contract.  If B permits A to use B’s premises, B
wants protection against liability arising out of
that use, so B gives permission only if A agrees to
indemnify B for any expenses incurred.  The same
indemnity right might be implied in fact or
imposed by law, but when it is established by
contract, the contract controls, so that attorney
fees are awarded under such contracts with no
difficulty.
Dobbs, supra, at 403 (footnote omitted).
Here, we have a similar scenario.  Penske agreed to let Nova use
its tractor-trailer in exchange for Nova’s promise to indemnify
and hold Penske harmless against any and all “loss, liability, and
expense” occurring “as a result of bodily injury, death or
-4-
property damage caused by or arising out of the ownership,
maintenance, use or operation of Vehicle.”  In addition, Nova
promised to restrict its use of the tractor-trailer to “regular
employees” and intrastate travel, and to indemnify Penske for
expense[s] caused or arising out of [Nova’s] failure to comply
with the[se] terms[.]”
In the first appeal, we recognized that, as a result of the fatal
accident, Nova, Fireman’s, and Penske litigated in Texas over
who would be responsible for tort claims made by the Haley
family.  Specifically, Penske was hauled into a Texas court to
defend itself against Fireman’s suit for declaratory judgment
that Penske was obligated, under the supplemental insurance
terms in the rental agreements, to provide $500,000 of primary
insurance coverage to Nova and Fireman’s, and that neither
Nova nor Fireman’s had “any duty to indemnify Penske for a
judgment, if any, or defend in any lawsuit, related to this
claim[.]”
Penske’s defenses to that claim were that Nova’s material
breach of the rental agreements negated any coverage duty it
might have had to Nova, and that Nova and Fireman’s 3 are
____________________
3  
Just as an indemnitee’s insurer may recover fees
directly from the indemnitor, so too may an
indemnitee recover fees directly from the
indemnitor’s insurer.  When the terms of the
insurance policy permit the indemnitor to look to
its insurer for payment of the judgment, the risk
covered by the policy includes the indemnitor’s
liability for attorney’s fees and costs incurred to
obtain that judgment.
Here, Nova agreed to hold Penske harmless for all
claims, damages, and losses resulting from its use
of the tractor-trailer.  In turn, Fireman’s agreed to
insure Nova against all claims, damages, and
losses incurred as a result of its use of
automobiles.  That agreement necessarily includes
-5-
coverage for any award made to Penske as
reimbursement for expenses it incurred as a result
of Nova’s use of the tractor-trailer.
____________________
obligated to indemnify Penske against the costs of having to
mount such a defense.  Instead of pursuing these defenses in
Texas, however, Penske secured a forum non conveniens
dismissal of the Texas coverage suit, then filed this declaratory
judgment action seeking to adjudicate the same breach and
indemnification issues raised in the dismissed Texas action.  In
this respect, Penske’s attorney’s fees in both the Texas litigation
and this declaratory judgment action may be treated as
“expenses caused or arising out of” Nova’s “failure to comply
with the terms of” the rental agreements, as well as Nova’s “use
or operation of the Vehicle.”
Because the parties agreed to allocate such litigation expenses
to Nova, the court is obligated to enforce the indemnification
agreement by awarding reasonable attorney’s fees.  In this
context, the court does not have the same broad discretion that
it enjoys in non-contract cases to deny all such expenses.  See,
e.g., Atl. Contracting, 380 Md. at 316 (trial court was obligated
to include attorney’s fees in judgment enforcing indemnity
agreement).
The record before us shows that Penske incurred litigation fees
and costs in the Texas lawsuit in obtaining a forum non
conveniens dismissal.  In addition, Penske incurred fees and
costs in this declaratory judgment action, where it obtained a
judgment resolving the breach, coverage, and indemnity issues
first raised in the Texas action.
(emphasis in original).
One of our sister state courts, that of Alaska, has already held that indemnity clauses
include attorney’s fees incurred in establishing the right to indemnity, even when the
indemnity contract does not contain express language explicitly providing for attorney’s fees
-6-
or fees expended in establishing the right to indemnity.  Manson-Osberg Co. v. State, 552
P.2d 654, 660 (Alaska 1976).  In Manson-Osberg Co., the Alaska Supreme Court held “that
the ‘hold harmless’ indemnity clause should include the cost of recovery on the clause itself,
as a matter of policy.”  Id.  The Court noted that the holding departs from “the general rule,”
and articulated the reasons for the departure:
The hold harmless clause required that the [indemnitor] shall
save harmless the [indemnitee] from all suits, actions, or claims
of any character brought on any account of injuries or damages
sustained by any person.  The [indemnitee] is not held harmless
if it must incur costs and attorney’s fees in bringing suit to
recover on the indemnity clause.  The [indemnitor] on the other
hand can avoid such costs and attorney’s fees by paying the
amount due without the necessity of suit.
Id. & n.11.  In a subsequent case, the Alaska Supreme Court, in Heritage v. Pioneer
Brokerage & Sales, Inc., 604 P.2d 1059 (Alaska, 1979), further noted, with respect to
attorney’s fees expended in defending against the principle claim and those incurred in
establishing the right to indemnity, that, “[w]e see no reason for distinguishing the two types
of attorney’s fees, however, and indeed, we recognize that in many cases it would be difficult
to separate the expenses involved in each claim, since they are frequently tried
simultaneously and may involve proof of overlapping issues of fact.”  Id. at 1066 n.22. 
Therefore, the majority not only departs from our language in Jones v. Calvin B.
Taylor Banking Co., 253 Md. 430, 441, 253 A.2d 742, 748 (1969), that “‘unless the
indemnity contract provides otherwise, an indemnitee is entitled to recover, as part of the
damages, reasonable attorneys’ fees,’” but from sound policy reasons and practical
-7-
considerations, as articulated by the Alaska Supreme Court, to require that an indemnity
contract contain an explicit provision providing either for recovery of attorney’s fees or for
expenses in the enforcement of the action.  The nature of indemnity, however, is inherently
to make the indemnitee whole, see Black’s Law Dictionary 784 (8th ed. 2004) (defining
indemnity as “[a] duty to make good any loss, damage, or liability incurred by another”)
(emphasis added), rather than partially compensated.  The notion of recovery for only
portions of the loss just does not accord at all with the notion of indemnity.
As a result, I dissent.
Chief Judge Bell and Judge Greene authorize me to state that they join in this
dissenting opinion.