Opinion ID: 4249099
Heading Depth: 3
Heading Rank: 1

Heading: Mr. Oltmanns’s Claim for Attorney Fees for the

Text: Declaratory Judgment Action ¶67 One remedy that Mr. Oltmanns seeks here is a right to recover attorney fees in the declaratory judgment action under contract law, claiming that Fire Insurance should not have requested a declaratory judgment action. Utah courts do not allow recovery for attorney fees “in the ordinary lawsuit unless it is provided for by statute or by contract,” Am. States Ins. Co. v. Walker, 486 P.2d 1042, 1044 (Utah 1971), or “where they are a legitimate item of damages caused by the other party’s wrongful act,” W. Cas. & Sur. Co. v. Marchant, 615 P.2d 423, 427 (Utah 1980). This court has applied that standard in the case of insurance contracts where attorney fees have been awarded “in [a] declaratory judgment action” if “the insurance company acted in bad faith or fraudulently or was stubbornly litigious.” Walker, 486 P.2d at 1044; see also Doctors’ Co. v. Drezga, 2009 UT 60, ¶ 38, 218 P.3d 598 (“The rule that attorney fees will not be available to a prevailing insured following an action for declaratory relief unless an insurer is found to 34 Cite as: 2017 UT 81 DURHAM, J., concurring in part and in the result have acted fraudulently, stubbornly or in bad faith remains undisturbed. Nor do we intend to abandon the caution that Utah courts have long shown regarding the awarding of attorney fees.”). ¶68 We affirm the court of appeals’ affirmance of the district court’s grant of summary judgment to Fire Insurance on this claim and deny Mr. Oltmanns’s request for attorney fees for the declaratory judgment action. Because of the potential liability that is at stake for insurers in third-party cases, insureds face a very high bar in proving that an insurer filed a declaratory judgment in bad faith or to be stubbornly litigious. In this case Fire Insurance relied on the advice of outside counsel. Even though outside counsel believed that Fire Insurance would prevail, he advised Fire Insurance to file a declaratory judgment action to determine coverage. Fire Insurance was “entitled to seek a declaratory judgment as to its obligations and rights,” Farmers Ins. Exch. v. Call, 712 P.2d 231, 237 (Utah 1985) (citation omitted). Attorney fees for a declaratory judgment action brought in compliance with Utah Code section 78B-6-401 and Utah Rule of Civil Procedure 11, and not provided for in Mr. Oltmanns’s insurance contract, are unavailable. See also UTAH CODE § 78B-5-825(1) (not awarding “reasonable attorney fees” unless “the court determines that the action or defense to the action was without merit and not brought or asserted in good faith”). ¶69 Additionally, Mr. Oltmanns waived the right to argue that Fire Insurance acted in “bad faith or fraudulently or was stubbornly litigious” when it brought a declaratory judgment action for whether the “jet ski” exception applied in his situation. He did so by stipulating in its brief to the court of appeals and to this court that “Fire Insurance was within its rights to file for declaratory relief. For this, it had the advice of counsel,” noting that “no one contended” in the district court that “Fire Insurance [did not have] the right to seek declaratory relief.” In fact, in Mr. Oltmanns’s briefing, his main contention is that Fire Insurance breached its duty because “[a] reasonable response would have been to assume defense of the Blackner action.” Failure to assume the defense does not mean that Fire Insurance breached its duty by filing a declaratory judgment. “What Fire Insurance got [from counsel] was a recommendation to file for declaratory judgment. Fire Insurance argued over-and-over in the trial court that it had the right to seek declaratory relief. No one contended otherwise. However, it never occurred to Fire Insurance that it could argue the coverage question while at the same time defending its insured.” (Emphasis added.) Mr. 35 FIRE INSURANCE EXCHANGE v. OLTMANNS DURHAM, J., concurring in part and in the result Oltmanns’s briefing shows that he seeks a remedy for breach of duty to defend through an award of attorney fees for the declaratory judgment action. This is not how the law works. Mr. Oltmanns therefore waived the argument that Fire Insurance brought the declaratory judgment action in bad faith and seeks damages pertaining to the attorney fees for defending the declaratory judgment action only under contract law; this request is without merit. There are no disputed material facts that indicate that Fire Insurance acted in bad faith in filing the declaratory judgment. Thus, summary judgment was appropriate for this claim.