Circuit Court for Montgomery County

Case No.: 430554V

UNREPORTED

IN THE COURT OF SPECIAL APPEALS

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GRACE GAO

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Filed: April 16, 2019

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*This is an unreported

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

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

accident, Section 17-103(b)(1) of the Transportation Article, Maryland Code (1988, 2012

Repl. Vol.) required that every owner of a registered motor vehicle maintain liability

coverage for: “The payment of claims for bodily injury or death arising from an accident

of up to $30,000 for any one person and up to $60,000 for any two or more persons, in

addition to interest and costs[.]”

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I of the amended complaint alleged that Mr. Haas’s negligence caused her injuries. Count

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establish 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

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:

[

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]

(continued . . .)

GEICO, Gao’s uninsured motorist liability coverage provider, breached its policy with her

by failing to pay the difference between her uninsured motorist liability coverage and Mr.

Haas’s liability coverage.

The suit against GEICO was dismissed without prejudice, and after the court’s

denial of attorneys’ fees, the entire suit was dismissed with prejudice as to the remaining

defendants, Mr. Haas, Enterprise and Progressive.

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(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

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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

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

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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

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,

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

Shippers Insurance Company of New York v. Electro Enterprises, Inc., noted:

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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

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.

‘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

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In the instant case, Ms. Gao contends that as an “injured party” who successfully

pursued her declaratory judgment claim for an increase in Mr. Haas’s liability coverage

against Progressive, she is entitled to the payment of attorneys’ fees and costs, because

she comes within the definition of an insured. Progressive, conversely, posits that the

to the collection of attorneys’ fees and costs.

As we wade into the instant dispute, we recognize that when interpreting the

meaning of an insurance policy, we evaluate the instrument as a whole to determine the

As a point of departure, we turn to the language of the Progressive-Haas policy to

determine the breadth of its coverage. In pertinent part, Mr. Haas’s policy with

Progressive entitled “PART I – LIABILITY TO OTHERS,” provides:

injury and property damage for which an insured person becomes legally

responsible because of an accident.

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Damages include prejudgment interest awarded against an insured person.

We will settle or defend, at our option, any claim for damages covered by

this Part I.

(Emboldened in original). Part I of the Haas-Progressive policy defines “insured person”

maintenance, or use of an auto or trailer;

b. any person, other than a bailee for hire, with respect to an accident

arising out of that person’s use of a covered auto with the permission of

you or a relative;

c. any person or organization with respect only to vicarious liability for the

acts or omission of a person described in a or b above; and

d. any Additional Interest shown on the declarations page with respect

Ms. Gao, not an insured under the Progressive policy, is not entitled to attorneys’ fees

under the indemnity exception to the American Rule.

To argue otherwise, Ms. Gao offers Cohen v. American Home Assurance

contractually promised, to argue that the contractual exception to the American Rule

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(1991) (citation omitted). Substantial justification does not exist, however, when there is

no basis in law or in fact to support a claim or defense. Id.

Our analysis of the record reflects that Progressive did not maintain or defend the

action “in bad faith or without substantial justification.” Progressive filed an opposition

coverage exceeded $20,000. Its eventual agreement to provide coverage in the amount of

$30,000 cannot be considered an admission that its position was without justification, as

Ms. Gao would have us heed.