COURT DECISIONS

Rough Notes, Oct 2007

On appeal, the Supreme Judicial Court of Maine stated that the general rule (the so-called American Rule) is that parties in a breach of contract action are responsible for their own attorney fees absent a statutory or contractual provision to the contrary. However, the court noted that there is a special relationship between insurer and insured, and that there is a "heavy burden that can fall on an insured when the insurer unsuccessfully forces the insured to defend a declaratory judgment action."

According to the court, there were several factors that put Levesque at an unfair disadvantage. First, had Levesque not hired an attorney to defend him in the declaratory judgment action, Foremost would have prevailed through a default judgment. second, the declaratory judgment action was brought before judgment in the personal injury lawsuit and had the effect of essentially stopping the personal injury lawsuit until the declaratory judgment action was resolved. Third, Levesque lost the "benefit of his bargain" when he had to pay an attorney to defend him against his insurer. For these reasons, the court decided to join the minority of jurisdictions that allow attorney fees when an insured defends a declaratory judgment action brought on by the insurer.

Because Levesque hired his own attorney to defend him against Foremost in the declaratory judgment action, the lower court properly awarded him attorney fees. The decision of the lower court was affirmed.

Foremost Insurance Company vs. Levesque-Docket No. CUM-06-396-Supreme Judicial Court of Maine-July 26, 2007-926 Atlantic Reporter 2d 1185.