Maine District Court Awards Attorneys’ Fees to Insured in Declaratory Judgment Action
The United States District Court for the District of Maine awarded attorneys’ fees to the insured seed supplier where the insurer’s duty to defend was clear from the outset. OneBeacon America Ins. Co., et al. v. Johnny’s Selected Seeds Inc., C.A. No. 1:12-CV-00375, 2014 WL 1569517 (D. M.E. April 17, 2014).
Plaintiffs, OneBeacon America Insurance Company and Massachusetts Bay Insurance Company (“Insurers”), issued successive comprehensive general liability policies to Johnny’s Selected Seeds Inc. (“Johnny’s”). The Insurers initiated a declaratory judgment action seeking to establish that they did not have a duty to defend against a lawsuit alleging that Johnny’s seeds were contaminated with molds and fungi that resulted in damaged crops. The Insurers contended that there was no possible coverage under either of the respective policies for a variety of reasons, among them, that the claimed damage to the crops was excluded by the policies’ exclusions for fungi or bacteria, and damage to “your product.”
The parties filed cross-motions for summary judgment on a stipulated factual record. Applying Maine’s “pleading comparison test,” the District Court found that the exclusions did not apply to bar coverage. After finding that the Insurers had a duty to defend, the District Court addressed Johnny’s claim for attorneys’ fees incurred to defend the declaratory judgment action.
Maine generally follows the American Rule that the losing party in litigation is not charged with the opposing party’s attorneys’ fees. Maine deviates from that Rule, however, where the duty to defend is clear such that the insurer’s initiation of a declaratory judgment action is attributed to a bad faith refusal to honor its obligations. The District Court found that under this test Johnny was entitled to attorneys’ fees because the Insurers’ had a clear duty to defend based on a comparison of the allegations of the complaint and the policies.