Appeals Court holds trial court cannot award attorney's fees to insurer where underlying action never developed into a claim

I have been writing about OneBeacon Am. Ins. Co. v. Narragansett Elec. Co., 2014 WL 9865738 (Mass. App. Ct. 2015). 


The last subject the court addressed was a voluntary dismissal by NEC of claims with respect to some of the sites.


In 2011, after prosecuting its case against the insurers for over five years, NEC moved to voluntarily dismiss its claims with respect to three of the locations.  Although NEC had anticipated legal action by the Rhode Island Department of Environmental Management with respect to those sites, no such action had come.  Thus there existed no claim under the policies and no justiciable controversy. 


The trial court judge who heard the motion for voluntarily dismissal conditioned its allowance without prejudice on NEC's payment of the insurers' reasonable costs and attorneys' fees in responding to those claims.  A month later the parties reported that they had not reached agreement on how to proceed and the insurers had therefore not yet submitted their fee requested.  In the interest of "moving this case on," the judge dismissed the claims with prejudice and omitted the award of attorney's fees.


On appeal NEC argued that the claims should have been dismissed without prejudice.  The court agreed.  Because the claims presented no justiciable controversy, the court lacked subject matter jurisdiction to enter an order of dismissal with prejudice. 


The court also held that NEC's actions did not warrant dismissal with prejudice.  The evidence suggested that NEC was not recalcitrant in paying the insurer's fees but was waiting information from them regarding the amount of their fees. 


The court also held that the trial court judge had no authority to order that NEC pay the insurer's attorney's fees as a condition of dismissal without prejudice when the court lacked subject matter jurisdiction.