Southwick v. City of Rutland
30 A.3d 1298
Vt.2011Background
- City of Rutland and Vermont Swim Association (VSA) entered a license/indemnity agreement allowing VSA to use a city park/pool for its annual meet.
- During the meet a child was injured; Southwicks sued the City for negligence, and City sought defense/indemnification from VSA.
- City filed third-party actions against VSA and against Nautilus Insurance and Paige & Campbell for failure to procure/defend insurance.
- Southwicks settled the negligence suit, preserving the City’s right to recover defense costs and attorney’s fees from VSA.
- Trial court awarded the City over $166,000 in attorney’s fees and costs, based on an indemnity clause the court deemed all-encompassing; VSA appealed.
- Court reversed and remanded, holding the indemnity clause covers only defense costs related to the City’s claims of bodily injury/property damage and does not cover third-party actions or indemnity disputes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Clause 6 obligates VSA to pay attorney's fees for third-party actions. | VSA: indemnity/Paragraph 6 covers defense costs, including third-party actions. | City: indemnity clause is all-encompassing and includes third-party actions. | No; clause does not cover third-party actions; only defense of the Southwick action. |
| Whether the City is entitled to attorney's fees for indemnity/third-party actions given the contract language. | VSA: no contractual basis for such fees. | City: indemnity clause supports some fee recovery. | Not allowed under the contract; indemnity limited to City’s defense costs in the Southwick action. |
| Whether the fee award was proper under the common-core-of-facts or should be apportioned. | VSA: not all claims share a common core; fees should be apportioned. | City: claims share common core with indemnity actions. | Fees not recoverable for third-party actions; proper apportionment required. |
| Whether equitable exceptions or bad-faith grounds justify fees. | OMIT/argue bad faith per Gadhue. | No bad-faith conduct here. | Equitable/Bad-faith basis not established to award fees; American Rule applies. |
Key Cases Cited
- L'Esperance v. Benware, 2003 VT 43 (Vt. 2003) (claims derived from a common core of facts can be searched for fee allocation)
- Elec. Man, Inc. v. Charos, 2006 VT 16 (Vt. 2006) (apportionment of fee awards can be improper where claims share a core of facts)
- Windsor Sch. Dist. v. State, 2008 VT 27 (Vt. 2008) (insurer not entitled to fees in certain declaratory actions; American Rule applies)
- Concord Gen. Mut. Ins. Co. v. Woods, 2003 VT 33 (Vt. 2003) (denying insured attorney's fees incurred in defense of insurer's declaratory action)
- In re Gadhue, 149 Vt. 322 (Vt. 1987) (equitable bad-faith exceptions to fee-shifting not applicable here)
- Perez v. Travelers Insurance, ex rel. Ames Department Stores, Inc., 2006 VT 123 (Vt. 2006) (time entries must be sufficiently detailed to relate work to the issue)
- Sprague v. Ticonic Nat'l Bank, 307 U.S. 161 (U.S. 1939) (equitable powers to award attorney's fees in exceptional cases)