An Anomaly in Maryland Insurance Law

By: Kamil Ismail | 6.8.23 | Media

Insurance law practitioners in Maryland have long recognized — and some have decried — an anomalous rule that allows a policyholder to recover its attorneys' fees in a coverage action if the court eventually rules that the insurer had a duty to defend against a liability claim.[1] This rule is applied — but only against the insurer — despite good-faith questions whether the insuring agreement extends coverage in the first place[2] or a stated exclusion then retracts it.[3] It applies whether the action was brought by the policyholder[4] or the insurer.[5] It has even been applied where the insurer clearly did not breach a duty to defend.[6] And yet, despite this ubiquity, it is at its core a legal oddity.

Other than with this rule, insurance law is largely a matter of contract.[7] Ordinarily, a party breaching a contract may be liable for damages but, absent a specific provision, is not liable for the counterparty's attorneys' fees.[8] Indeed, Maryland originally followed the usual American rule, and an insurer's breach of a contractual duty to defend was treated as any other breach of a contractual duty: the insured could recover damages but not attorneys' fees. As the Court of Appeals put it in 1967, "[i]n Maryland, except in special circumstances, not here present, the practice has been to require successful parties to pay their own counsel fee."[9] So why the later exception with an insurer's contractual duty to defend?

The anomaly came into being in 1969, in Cohen v. American Home Assurance. Co.,[10] which involved coverage for a motor vehicle accident that resulted in liability claims against the estate of the driver, who was killed in the accident, and his mother, the owner of the vehicle and the insurance policy. The policy application had listed only the mother as a permissive driver, as the son's license had been suspended. On the day of the accident, the mother gave the car keys to her son, at his request and with the express understanding that only a friend was to drive. At the time of the accident, however, the son was at the wheel. The insurer declined to defend the mother or the son's estate.

The administrator of the estate sued. The trial court, later affirmed by what is now the Supreme Court of Maryland, held that the insurer was bound to defend the mother but not the estate. It recognized that the grounds for denying coverage to the estate were "substantial" and the law "largely as yet unsettled."[11] However, it expressed "sympathy" for the mother's plight and indignation at the insurer's denial of her coverage.[12] In addition to the mother's defense costs, it allowed her claim — previously unrecognized — for attorneys' fees in the coverage action.[13] On appeal, the Cohen court recognized "a decided split of authority on the subject,"[14] and discussed potential rationales for allowing recovery of the coverage action fees.[15] Eventually, it upheld the trial court without picking a specific rationale.[16] As with the trial court, its sense of pique at the insurer's denial spilled into its opinion.[17]

 The Cohen decision was authored by the late Judge Marvin H. Smith. According to his obituary, Judge Smith was "[k]nown for his deep, booming voice that belied his small stature[.]"[18] Judge Smith was apparently a well-respected jurist; a former law clerk who later served on what is now the Appellate Court of Maryland commented that "the overriding key to [Judge Smith's] jurisprudence was common sense."[19] Without any disrespect, however, one might also wonder whether his jurisprudence was equally driven — at least in this case — by a booming advocacy for the perceived underdog.

It is unclear whether, or with what contours, the resulting anomaly might endure. It is at least unlikely to expand. In a 1985 opinion, the late Judge Lawrence Rodowsky of Maryland's highest court remarked that, while the exception was "now firmly established," the legal theory underpinning it "remains unrefined."[20] Seven years later, he delved deeper into this strange doctrine, recognized its oddity, and rebuffed an effort to expand its scope.

From the standpoint of a strict application of the American rule, there is no logical reason why the successful plaintiff's action on a liability insurance policy for breach of a promise to defend, or to pay the cost of defense, should include counsel fees in prosecuting the breach of contract action, when successful plaintiffs' actions for other breaches of insurance contracts, or for breaches of other contracts, do not ordinarily include those counsel fees. The Maryland rule awarding to the successful insured counsel fees in declaratory judgment or assumpsit actions with liability insurers for breach of the promise to defend or to pay the cost of defense is an exception to the American rule. To extend that exception . . . will only compound the anomaly. It would probably mark the elimination of the American rule as to contract actions against insurers generally and leave in doubt the efficacy of the American rule as to other types of contracts.
With the exception of cases involving liability insurers and cost of defense, Maryland law has never recognized fee shifting in breach of contract actions, absent contractual provision, statute or rule. We leave that law as we find it.[21]

Reading that last, terse, sentence, one can almost envision Judge Rodowsky throwing up his hands in vexation at Cohen's analytical incoherence and flatly refusing to extend it — while recognizing that the narrow question presented did not require a full reckoning of its core validity. Anyone still decrying this lingering anomaly in Maryland law today — over fifty years after Cohen and thirty after Judge Rodowsky's dissection of it – may well wonder whether that reckoning will ever come.


[1] E.g., Brohawn v. Transamerica Ins. Co., 276 Md. 396, 415 (1975).

[2] E.g., Bankers and Shippers Ins. Co. v. Electro Enters., Inc., 287 Md. 641 (1980).

[3] E.g., Brohawn, 276 Md. 396.

[4] E.g., Gov't Empl. Ins. Co. v. Taylor, 270 Md. 11 (1973).

[5] E.g., Electro Enters., 287 Md. 641.

[6] See Zurich Am. Ins. Co. v. Fieldstone Mortg. Co., CCB-06-2055, 2007 U.S. Dist. LEXIS 81570, 2007 WL 3268460 (D. Md. Oct. 26, 2007) (applying rule despite insurer's defense under reservation of rights while seeking declaratory relief). Disclosure: the author represented Zurich.

[7] E.g., Collier v. MD-Individual Practice Ass'n, Inc., 327 Md. 1, 5 (1992) ("In Maryland insurance policies ordinarily are construed in the same manner as contracts generally.").

[8] "The general rule is that costs and expenses of litigation, other than the usual and ordinary Court costs, are not recoverable in an action for damages." McGaw v. Acker, Merrall & Condit Co., 111 Md. 153, 160 (1909).

[9] Erie Ins. Exch. v. Lane, 246 Md. 55, 64-65 (1967).

[10] 255 Md. 334, 363 (1969) (overruling Lane).

[11] Id. at 351 (quoting trial court).

[12] Id. (quoting trial court: "The court is in sympathy with the argument that the purpose of buying insurance would largely be defeated if the insurance company were to refuse to honor its commitment until forced to do so through suit. This is especially so when the grounds of denying liability are as tenuous as those advanced in the case of [the mother].").

[13] Id.

[14] Id. at 354.

[15] These included: (1) a promise to reimburse the insured for expenses incurred at the insurer's request, and an implied "authorization" of litigation over the scope of the duty to defend; and (2) the goal of providing the insured with the full benefit of its bargain in purchasing insurance, which supposedly required the insurer to bear the cost of the coverage action as well. Id. at 363.

[16] Id.

[17] See id. ("American Home produced the current situation when it refused to defend its assured. . . . [T]he attorney's fees for the declaratory judgment action [might be deemed] a part of the damages sustained by the insured by American Home's wrongful breach of the contract[.]").

[18] Colleagues Remember Eastern Shore Judge, The Daily Record, (Sept. 29, 2010) (last retrieved June 5, 2023).

[19] Id. (reporting comments of Judge Timothy E. Meredith).

[20] Continental Cas. Co. v. Bd. of Educ., 302 Md. 516, 537-38 (1985).

[21] Collier, 327 Md. at 16-17 (emphasis added).


Kamil Ismail 2020Kamil Ismail is a partner with Goodell DeVries, where he represents clients in insurance coverage, commercial and business tort litigation, and product liability matters. He can be reached at