Court Opinion

ID: 9647571
Source: CourtListenerOpinion
Date Created: 2023-08-23 13:41:08.907359+00
Date Added: 2024-06-11T15:23:54.684037
License: Public Domain

Dissenting Opinion by BATTAGLIA, J., which BELL, C.J. and GREENE, J. join.
I respectfully dissent.
*462In 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 [253 A.2d 742] (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).
In determining whether the defendant has agreed to accept the financial burden of the plaintiffs 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 *463Ins. Corp., 32 Md.App. 177, 187 [359 A.2d 260] (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 [51 L.Ed.2d 573] (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[441]-42 [253 A.2d 742], 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[380] Md. 285, 302[, 844 A.2d 460] (2003[2004]), 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 (“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 with*464out 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 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 *465it might have had to Nova, and that Nova and Fireman’s3 are 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, 844 A.2d 460 (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 *466obtained 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 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 *467provides otherwise, an indemnitee is entitled to recover, as part of the damages, reasonable attorneys’ fees,’ ” but from sound policy reasons and practical 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.

. 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).

. 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, 253 A.2d 742 (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, 844 A.2d 460 (2004), the Court affirmed an award of attorney’s fees to 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.

. 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 coverage for any award made to Penske as reimbursement for expenses it incurred as a result of Nova’s use of the tractor-trailer.