Gao v. Progressive Max Ins. Co.

GRACE GAO v. PROGRESSIVE MAX INSURANCE COMPANY

No. 278

COURT OF SPECIAL APPEALS OF MARYLAND

September Term, 2018

April 16, 2019

Circuit Court for Montgomery County

Case No.: 430554V

UNREPORTED

Fader, C.J., Kehoe, Battaglia, Lynne, A. (Senior Judge, Specially Assigned), JJ.

Opinion by Battaglia, J.

*This is an unreported opinion, and it may not be cited in any paper, brief, motion, or other document filed in this Court or any other Maryland Court as either precedent within the rule of stare decisis or as persuasive authority. Md. Rule 1-104.

Appellant, Grace Gao, sustained injuries when she was involved in a motor vehicle accident with Shawn Ryan Haas, who was driving a rental car owned by Enterprise RAC Company of Maryland, LLC, on October 24, 2014, in Montgomery County. At the time of the accident, Mr. Haas was insured by Appellee, Progressive Max Insurance Company, under a policy issued to him in West Virginia, which provided liability coverage for bodily injury in the amount of $20,000. Following the accident, Ms. Gao filed a personal injury claim against Mr. Haas, and pursuant to the liability coverage limit contained in Mr. Haas's insurance policy, Progressive offered her $20,000 in settlement. Ms. Gao refused the settlement offer, contending that because the accident occurred in Maryland, Mr. Haas was entitled, pursuant to Maryland law,¹ to $30,000 in liability coverage.

Subsequently, Ms. Gao filed suit in the Circuit Court for Montgomery County against Mr. Haas, Progressive, Enterprise, and GEICO Casualty Company, Ms. Gao's automobile insurance provider.² The suit, in part, sought a declaratory judgment toestablish that $30,000 of liability coverage was available to her under the Progressive policy. In the alternative, Ms. Gao requested that the court order Enterprise to pay her the additional $10,000 in liability coverage, as a dispute between Enterprise and Progressive existed as to who was responsible for covering the difference between the $20,000 in Mr. Haas's policy and the $30,000 minimum liability coverage required by Maryland law. Progressive filed an answer, and during discovery, provided Ms. Gao with a copy of the policy issued to Mr. Haas. The Section entitled "Out-of-State Coverage" in the Haas policy provided:

If an accident to which this Part I applies occurs in any state, territory, or possession of the United States of America or any province or territory of Canada, other than the one in which a covered auto is principally garaged, and the state, province, territory, or possession has:

1. a financial responsibility or similar law requiring limits of liability for bodily injury or property damage higher than the limits shown on the declarations page,³ this policy will provide the higher limits; or

2. a compulsory insurance or similar law requiring a non-resident to maintain insurance whenever the non-resident uses an auto inthat state, province, or territory, or possession, this policy will provide the greater of:

a. the required minimum amounts and types of coverage; or

b. the limits of liability under this policy.

(Emboldened in original).

Ms. Gao's counsel, thereafter, demanded $30,000 from Progressive, to which Progressive demurred. Ms. Gao then filed a motion for partial summary judgment on her declaratory judgment action against Progressive. Progressive responded to the motion by stating that it would only provide higher limits than those stated in the policy where the accident occurred in a state that has a "financial responsibility or similar law" that requires higher limits or where "a compulsory insurance or similar law" requires non-residents to maintain insurance when a non-resident uses a motor vehicle in that state; Progressive argued that the requirements of the Maryland Transportation and Insurance Articles did not trigger either of these contractual provisions.

One day before the hearing on the motion for partial summary judgment, however, Progressive offered $30,000 in settlement to Ms. Gao, which she accepted, and, in turn, subsequently withdrew the motion. Ms. Gao then filed a motion for attorneys' fees and costs based upon the declaratory judgment action she had pursued against Progressive.

After a subsequent hearing on the motion for attorneys' fees and costs, to which Progressive responded, Judge Cynthia Callahan of the Circuit Court for Montgomery County denied Ms. Gao's request. Ms. Gao then filed a timely Notice of Appeal.

On appeal from the ruling of the Circuit Court, in positing multiple grounds for the recovery of attorneys' fees and costs, Ms. Gao presents two issues for our review:

1. Whether the trial court was legally incorrect in denying Gao's verified motion for payment of her attorney's fees and costs that she incurred in successfully litigating her declaratory judgment claim against Progressive, which claim resulted in Progressive extending liability insurance coverage of $30,000 for Gao's tort claim.

2. Whether the trial court was clearly erroneous in not considering Gao's claim against Progressive for attorney's fees under Maryland Rule 1-341, which was based on Progressive's unreasonable delay in extending Gao $30,000 in liability coverage for her tort claim against Haas and Progressive's further unreasonable delay in offering the policy limits of $30,000 to Gao to settle her tort claim against Haas.

For the reasons set forth below, we shall affirm the judgment of the Circuit Court and hold that Ms. Gao was not entitled to the award of attorneys' fees and costs.

STANDARD OF REVIEW

When a trial court determines that a party is not entitled to attorneys' fees as a matter of law, our review of that decision is de novo. See Giant of Maryland, LLC v. Taylor, 221 Md. App. 355, 368-69, cert. denied, 442 Md. 745 (2015); Maryland Green Party v. State Bd. of Elections, 165 Md. App. 113, 128 (2005), cert. denied, 390 Md. 501 (2006) (stating that the determination of "prevailing party" status, for purposes of entitlement to attorneys' fees and costs, is a question of law reviewed de novo (citing Smyth ex rel. Smyth v. Rivero, 282 F.3d 268 (4th Cir. 2002)). In the instant case, because Ms. Gao asks us to award her attorneys' fees pursuant to the insurance policy entered into between Progressive and Mr. Haas, a contract, we embark upon an independent review of the law.

DISCUSSION

Maryland generally adheres to the "American Rule," in which each party to litigation is responsible for their own legal fees, regardless of who prevails in the litigation. Henriquez v. Henriquez, 413 Md. 287, 294 (2010). As such, where there is no statute, rule or contract explicitly permitting the recovery of attorneys' fees, a prevailing party generally may not recover them. Bausch & Lomb Inc. v. Utica Mut. Ins. Co., 355 Md. 566, 590 (1999) (citation omitted); see also Collier v. MD-Individual Practice Assoc., Inc., 327 Md. 1, 17 (1992) ("Maryland law has never recognized fee shifting in breach of contract actions, absent contractual provision, statute or rule."); Nova Research, Inc. v. Penske Truck Leasing Co., 405 Md. 435, 445 & n. 3 (2008). Fee shifting, an exception to the American Rule whereby a court orders the losing side to pay the prevailing party's attorneys' fees, generally occurs pursuant to an express agreement providing the same or by statute. Henriquez, 413 Md. at 294 (citing Friolo v. Frankel, 403 Md. 443, 456 (2008)).

With respect to one such exception, it is firmly established in Maryland that if an insured "must resort to litigation to enforce its liability insurer's contractual duty to provide coverage for its potential liability to injured third persons, the insured is entitled to a recovery of the attorneys' fees and expenses incurred in that litigation." Nolt v. U.S. Fid. & Guar. Co., 329 Md. 52, 66 (1993) (internal citations omitted). Essentially, then, if the insured is not afforded what they are due under the policy with respect to a defense to a suit, they may be awarded attorneys' fees, as the Court of Appeals, in Bankers and Shippers Insurance Company of New York v. Electro Enterprises, Inc., noted:

[A]n insurer is liable for the damages, including attorneys' fees incurred by an insured as a result of the insurer's breach of its contractual obligation to defend the insured against a claim potentially within the policy's coverage, and this is so whether the attorneys' fees are incurred in defending against the underlying damage claim or in a declaratory judgment action to determine coverage and a duty to defend.

287 Md. 641, 648 (1980) (citing Brohawn v. Transamerica Ins. Co., 276 Md. 396, 347 (1975); Gov't Employees Ins. v. Taylor, 270 Md. 11, 22 (1973); Cohen v. Am. Home Assurance Co., 255 Md. 334, 363 (1969); Anderson v. Md. Casualty Co., 123 Md. 67, 71-72 (1914)); see also Megonnell v. United Services Auto. Ass'n, 368 Md. 633, 659 (2002) (stating that the exception does not extend to a third-party tort victim who is not an "insured" as defined by an insurance policy); Mesmer v. M.A.I.F., 353 Md. 241, 264 (1999).

The promise to defend and indemnify the insured serves as the consideration received by the insured for their payment of the policy premiums to the insurer. Brohawn, 276 Md. at 409. While a policy may be referred to as "liability insurance, it is 'litigation insurance' as well," protecting the insured from the expense of defending suits for the acts covered by the policy brought against them. Id. at 409-10 (citation omitted). In turn, the insurer "has assumed the obligation of relieving its insured of the expense of defending an action alleging and seeking damages within the policy coverage." Id. at 410. Further, the right of an insured to recover attorneys' fees in such a situation not only applies to the individual named in the insurance policy, but also to any individual who falls within the policy's definition of an insured and against whom a claim "alleging a loss within the policy coverage has been filed." Bankers and Shippers, 287 Md. at 649.

In the...