Opinion ID: 2088460
Heading Depth: 1
Heading Rank: 3

Heading: Apportionment of Legal Fees

Text: Universal further contends that the Superior Court erred in apportioning legal fees between State Farm and Universal. It argues that neither Section 831 nor Universal's policy gave rise to a duty to defend. Universal argues alternatively, that if such a duty does exist, State Farm has no right to contribution because State Farm had a distinct duty to defend Victor. The Superior Court found that even though Section 831 does not refer to a duty to defend, Universal has a duty to defend provided for in its policy. In determining that a duty to defend existed in these circumstances, the lower court relied upon Concord General Mutual Ins. Co. v. McLain, 270 A.2d 362, 366 (Me.1970). In McLain we found that the relevant insurance policy, in purporting to limit coverage to non-owned vehicles, did not meet the requirements of the mandatory financial responsibility law, 29 M.R.S.A. § 781 et seq. (1969), and was, therefore, invalid. We held that the statute required not only the extension of coverage by operation of law but also the duty to defend. McLain, 270 A.2d at 366. The same reasoning applies in the instant case. Written into Universal's policy is a requirement that it defend insureds to whom it offers primary coverage. Under the provisions of Section 831, Universal was required to extend primary coverage. Thus, once coverage under Universal's policy was triggered by the application of Section 831, so too was the duty to defend. The duty to defend exists if there is any legal or factual basis which could be developed at trial that would obligate an insurer under the policy. American Policyholders' Ins. Co. v. Kyes, 483 A.2d 337, 339 (Me.1984). The application of Section 831 provides a legal basis that obligated Universal under its policy to defend Victor. The lower court correctly determined that the escape clause contained in Universal's policy was ineffective in view of Section 831's requirement of primary coverage. It further correctly determined that State Farm's escape clause was void and unenforceable. The court thus found that coverage under both policies was primary and accordingly it prorated the liability loss and legal fees. In so doing it compared the pro rata clauses of both State Farm's and Universal's policies and determined that both clauses required the same apportionment. For personal injury, State Farm's limit was $25,000 and Universal's was $20,000 pursuant to Section 831. The lower court prorated the loss equally up to the limits of the lower policy and found that State Farm should bear five-ninths of the cost of settlement and legal fees and that Universal should bear four-ninths of the cost of settlement and legal fees. In Carriers Ins. Co. v. Am. Policyholders' Ins. Co., 404 A.2d 216, 221 (Me. 1979), we found that once two insurance policies are considered primary by virtue of ineffective escape clauses, then it is appropriate to prorate loss equally up to the limits of the lower policy. The apportionment of loss is grounded in the premise that on equitable principles the loss should be shared among the insurers ... Id. Although the reasoning in Carriers does not specifically address the question of contribution of costs of defending the suit, the same equitable principles apply. If prorating the loss equally up to the limits of the lower policy is an equitable basis for prorating damage liability, it provides like justification for a similar proration of suit expenses. General Acc. F. & L. Assur. Corp. v. Continental Cas. Co., 287 F.2d 464, 467 (9th Cir.1961). Where two insurers cover the same risk, it is appropriate that legal fees also be shared between them pro rata in proportion to the respective coverage afforded by them to the insured. Continental v. Morgan, Olmstead, Kennedy & Gardner, Inc., 83 Cal.App.3d 593, 608, 148 Cal.Rptr. 57 (1978); American Home Assurance Company v. Hartford Insurance Company, 74 A.D.2d 224, 427 N.Y.S.2d 26, 29 (N.Y.1980). The entry is: Judgment affirmed. All concurring.