Acmat v. Greater New York Mut. Ins. Co.

• Decision Date: 29 May 2007
• Docket Number: No. 17740.,17740.
• Citation: 282 Conn. 576,923 A.2d 697
• Court: Connecticut Supreme Court
• Parties: ACMAT CORPORATION v. GREATER NEW YORK MUTUAL INSURANCE COMPANY.

923 A.2d 697

282 Conn. 576

ACMAT CORPORATION v. GREATER NEW YORK MUTUAL INSURANCE COMPANY.

No. 17740.

Supreme Court of Connecticut.

Argued February 16, 2007.

Decided May 29, 2007.

John P. Graceffa, pro hac vice, Boston, MA, with whom were Cristin E. Sheehan and, on the brief, Robert W. Cassot, Hartford, and Tracey Lane Russo, for the appellant (defendant).

John W. Lemega, with whom was John C. Pitblado, Hartford, for the appellee (plaintiff).

Laura A. Foggan, John C. Yang, Washington, DC, and Kathleen F. Munroe, Hartford, filed a brief for the Complex Insurance Claims Litigation Association as amicus curiae.

BORDEN, NORCOTT, PALMER, VERTEFEUILLE and ZARELLA, Js.

NORCOTT, J.

The sole issue in this appeal is whether we should adopt a common-law exception to the American rule that would allow an award of attorney's fees to a policyholder that has prevailed against its insurance company in a declaratory judgment action, despite the absence of bad faith by the insurer. The defendant, the Greater New York Mutual Insurance Company, appeals¹ from the judgment of the trial court ordering the defendant to pay attorney's fees incurred by the plaintiff, the ACMAT Corporation, in successfully prosecuting this declaratory judgment action to establish the existence of a certain insurance policy. We decline to adopt this new exception to the American rule, and we, therefore, conclude that the trial court improperly awarded the plaintiff attorney's fees in the absence of a statutory or contractual provision authorizing such an award, or a finding of bad faith conduct by the defendant. Accordingly, we reverse the judgment of the trial court.

The record reveals the following facts and procedural history, much of which is set forth in the Appellate Court opinion with respect to the merits of this case. "In 1950, Waldvogel Brothers, Inc., a New York corporation, loaned money to Henry Nozko, Sr., to form Acoustical Materials Corporation, a business engaged in the installation of acoustical ceilings in commercial buildings. Located in East Hartford, Acoustical Materials Corporation was a subsidiary corporation of Waldvogel Brothers, Inc., until 1969, when Waldvogel Brothers, Inc., was dissolved. Nozko purchased the stock of Acoustical Materials Corporation and, in 1972, changed its name to ACMAT Corporation. Since 1988, the plaintiff has been named as a defendant in numerous lawsuits by individuals alleging bodily injuries, dating back to the 1950s, that resulted from exposure to asbestos in the plaintiff's workplaces. Facing potentially serious liability, the plaintiff undertook an exhaustive search of its records to ascertain whether [the defendant] provided insurance coverage applicable to the injuries that formed the basis of the lawsuits. Although the plaintiff was unable to locate any insurance policies issued by [the defendant], it did discover, among other documents, a certificate of insurance, signed by an authorized representative of [the defendant], that listed Acoustical Materials Corporation as the named insured. The certificate indicated that Acoustical Materials Corporation had in effect with [the defendant], through January 1, 1966, a products liability and comprehensive general liability policy (number 17-C3-C00627) with bodily injury limits of $500,000 per person and $1 million per accident. Confronted with the certificate and a request that it participate in the plaintiff's defense in the asbestos lawsuits, [the defendant] conducted its own search for evidence of the policy, following which it denied that the policy ever existed and refused to tender a defense.

"In light of [the defendant's] refusal, the plaintiff filed this action seeking, inter alia, declarations that [the defendant] had issued to Acoustical Materials Corporation an insurance policy that provided comprehensive general liability and products liability coverage with liability limits of $500,000 per person and $1 million per accident, and that the policy was in full force and effect during the period from January 1, 1964, to January 1, 1968.² In its answer, [the defendant] denied the policy's existence.

"Following a two day trial to the court, at which the plaintiff called five witnesses and introduced several exhibits, the court issued a memorandum of decision, declaring in relevant part: `The court declares, by way of this judgment, that the defendant . . . issued to the plaintiff . . . an insurance policy numbered 17-C3-C00627 which provided comprehensive general liability and product liability coverage to [the plaintiff], with the policy in effect beginning January 1, 1965, to January 1, 1966, and it also provided limits to its liability of $500,000 per person and $1 million per accident. This policy and/or its similar predecessors and successors were validly issued by the defendant . . . to the plaintiff . . . and were in full force and effect from January 1, 1964, through January 1, 1968.'" ACMAT Corp. v. Greater New York Mutual Ins. Co., 88 Conn.App. 471, 473-75, 869 A.2d 1254, cert. denied, 274 Conn. 903, 876 A.2d 11 (2005). The defendant appealed, and the Appellate Court affirmed the judgment of the trial court. Id., at 483, 869 A.2d 1254.

Thereafter, the plaintiff filed a motion with the trial court seeking an award of attorney's fees pursuant to Practice Book § 11-21.³ The defendant objected to the motion, claiming, inter alia, that: (1) attorney's fees are not available under the declaratory judgment statute, General Statutes § 52-29;⁴ and (2) the request was untimely under Practice Book § 11-21. The trial court granted the plaintiff's motion, and awarded it $126,153.50 for attorney's fees expended in prosecuting the action in federal court; see footnote 2 of this opinion; as well as in the state trial and appellate courts. Subsequent rulings by the trial court indicated that it reasoned that the attorney's fees incurred by the plaintiff in prosecuting the declaratory judgment action amounted to damages caused by the defendant's breach of its duty under the policy to defend the plaintiff. This appeal followed. See footnote 1 of this opinion.

On appeal, the defendant, supported by the amicus curiae, the Complex Insurance Claims Litigation Association, claims that the trial court's award violates the well established American rule, namely, "that attorney's fees and ordinary expenses and burdens of litigation are not allowed to the successful party absent a contractual or statutory exception . . . [or] bad faith conduct of the other party or the other party's attorney." (Citation omitted; internal quotation marks omitted.) Broadnax v. New Haven, 270 Conn. 133, 178, 851 A.2d 1113 (2004). The defendant contends that the award is improper because § 52-29 does not authorize attorney's fees in declaratory judgment actions, and there was no finding of "bad faith" to justify the award. In response, the plaintiff emphasizes the "special relationship between insured and insurer arising from the uniquely unequal bargaining positions of the parties,"⁵ and contends that we should follow the lead of those states that have adopted an exception to the American rule, requiring an insurer that has refused to defend its insured to pay the insured's attorney's fees in a declaratory judgment action.⁶ The defendant responds by relying on our decisions in Bodner v. United Services Automobile Assn., 222 Conn. 480, 610 A.2d 1212 (1992) and Burr v. Lichtenheim, 190 Conn. 351, 460 A.2d 1290 (1983), in support of its argument that nothing in the present case justifies the creation of a new exception to the American rule.⁷ We agree with the defendant.

"It is well established that we review the trial court's decision to award attorney's fees for abuse of discretion. . . . This standard applies to the amount of fees awarded . . . and also to the trial court's determination of the factual predicate justifying the award. . . . Under the abuse of discretion standard of review, [w]e will make every reasonable presumption in favor of upholding the trial court's ruling, and only upset it for a manifest abuse of discretion. . . . [Thus, our] review of such rulings is limited to the questions of whether the trial court correctly applied the law and reasonably could have reached the conclusion that it did." (Citations omitted; internal quotation marks omitted.) Schoonmaker v. Lawrence Brunoli, Inc., 265 Conn. 210, 252-53, 828 A.2d 64 (2003).

"The general rule of law known as the American rule is that attorney's fees and ordinary expenses and burdens of litigation are not allowed to the successful party absent a contractual or statutory exception. . . . This rule is generally followed throughout the country. . . . Connecticut adheres to the American rule. . . . There are few exceptions. For example, a specific contractual term may provide for the recovery of attorney's fees and costs . . . or a statute may confer such rights. . . . This court also has recognized a bad faith exception to the American rule, which permits a court to award attorney's fees to the prevailing party on the basis of bad faith conduct of the other party or the other party's attorney." (Citations omitted; internal quotation marks omitted.) Broadnax v. New Haven, supra, 270 Conn. at 178, 851 A.2d 1113; id., at 178-79, 851 A.2d 1113 (trial court properly denied motion for attorney's fees in declaratory judgment action challenging practice of "underfilling" positions in city's fire department); see also Maris v. McGrath, 269 Conn. 834, 844, 850 A.2d 133 (2004) ("[i]t is generally accepted that the court has the inherent authority to assess attorney's fees when the losing party has acted in bad faith, vexatiously, wantonly or for oppressive reasons" [internal quotation marks omitted]); Peterson v. Norwalk, 152 Conn. 77, 80, 203 A.2d 294 (1964) (trial court properly denied plaintiff's request for attorney's fees in declaratory judgment action against city's public utility commission...