Attorney’s fees. Indemnity agreement did not require award of fees incurred to enforce the indemnity clause. Case analogous to denial of fees for suits that establish insurance coverage.

Southwick v. City of Rutland, (II), 2011 VT 105 (Skoglund, J. )


After we held an indemnity clause applies to claims based on the City’s own negligence, Southwick v. City of Rutland, 2011 VT 53, the City filed a motion for attorney’s fees covering all legal expenses associated not only with its defense in the underlying Southwick action, but also for all expenses incurred through the litigation of the indemnity and third-party actions. The trial court entered judgment in favor of the City, awarding the entirety of its requested attorney’s fees. Because the plain language of the contract does not require VSA to pay attorney’s fees incurred by the City in pursuing either indemnity from VSA or other third-party actions, we reverse and remand.


The Agreement’s indemnity clause reads:


"Indemnification and Hold Harmless: [VSA] hereby agrees to defend, indemnify and hold harmless Rutland, . . . its officers, trustees, agents and employees from all claims for bodily injury or property damage arising from or out of the presence of [VSA], including its employees, agents, representatives, guests and others present because of the event or [VSA’s] activities in or about Whites Park, including the entrances, lobbies and exits thereof, the sidewalks, streets and approaches adjoining the campus or any portion of the campus used by [VSA] or any of the above stated. [VSA] shall be responsible for all costs of defense, including reasonable attorney’s fees, and shall pay all fines or recoveries against Rutland."


The costs contemplated in the Agreement do not include the City’s claim to enforce the indemnity clause against VSA, or its claims against P&C and Nautilus. Contrary to the trial court’s conclusion, the indemnification clause is not all encompassing: it limits VSA’s obligation to those costs associated with the City’s defense against claims for bodily injury or property damage. Therefore, there is no contractual basis for departing from the American Rule and awarding attorney’s fees for time expended on work other than for defense in the Southwick action. See Windsor Sch. Dist. v. State, 2008 VT 27, ¶ 28, 183 Vt. 452, 956 A.2d 528 (“An insured is not entitled to recover attorney’s fees incurred in a declaratory-relief action to establish the insurer’s duty to defend or indemnify.”); see also Concord Gen. Mut. Ins. Co. v. Woods, 2003 VT 33, ¶ 18, 175 Vt. 212, 824 A.2d 572 (denying insured attorney’s fees incurred in defense of insurer’s declaratory action).


The Southwicks’ action and the City’s third-party claims might have been set in motion by the same event, they are not based on a “common core of facts” within the rule of L’Esperance v.Benware, where plaintiffs’ lawsuit was not one “which can be viewed as a series of discrete claims so that the hours expended can be divided on a claim by claim basis.” 2003 VT 43, ¶ 24, 175 Vt. 292, 830 A.2d 675. Nor is there an equitable basis for awarding the City attorney’s fees related to its third-party actions under the urle of In re Gadhue, where we upheld an award of attorney’s fees on the basis of bad faith. 149 Vt. 322, 328-29, 544 A.2d 1151, 1154-55 (1987).