Massachusetts Appeals Court holds that Supplementary Payments Provision does not include coverage for award of attorney's fees or most costs

When I started practicing law  I was puzzled by Massachusetts Rule of Civil Procedure 54(d), which provides that after judgment "costs shall be allowed as of course to the prevailing party."  It struck me as something that every prevailing party should pursue. Although costs don't include attorney's fees, litigation costs such as expert witness fees can be huge in a hard-fought case of significant damages.

Older and wiser attorneys explained to me that costs in the rule didn't actually mean costs in the ordinary sense of expert fees and so on.  They told me that asking for them after winning a case was considered "Mickey Mouse," and experienced attorneys didn't do that.

I never revisited the question, but in Styller v. Nat'l Fire & Marine Ins. Co., __ N.E.3d __, 2019 WL 2607504 (Mass. App. Ct.), the Massachusetts Appeals Court affirmed what I had been told.  

That case arose out of a dispute between a contractor and a homeowner.  FCMNH performed demolition and reconstruction work on Alex Styller's house.  Styller withheld payment, and FCMNH sued him.  Styller asserted counterclaims, alleging breach of contract, negligence, and statutory violations. National Fire, FCMNH's insurer, defended it on the counterclaims under a reservation of rights.

A jury awarded damages to Styller on the counterclaim for negligence.  The trial judge found that FCMNH was liable for breach of Mass. Gen. Laws ch. 93A., and awarded attorney's fees and expenses to Styller under that statute.  

National Fire denied a duty to indemnify FSMNH because all the damages found came within a policy exclusion for damages to FSMNH's own work.

FCMNH assigned its rights against National Fire to Styller.  Styller sued National Fire.  The trial judge in that case held that although the policy exclusion for FCMNH's own work applied, National Fire was nevertheless required, pursuant to the Supplementary Payments provision of the policy, to indemnify FCMNH (and thus, Styller) for the attorney's fee award.

The Supplementary Payments clause provided that with respect to any suit against the insured that the insurer defends, the insurer will pay "all costs taxed against the insured in the suit." 

In Styller v. Nat'l Fire & Marine Ins. Co., __ N.E.3d __, 2019 WL 2607504 (Mass. App. Ct.), the Massachusetts Appeals Court reversed.  It held that although the term costs usually means all the expenses incurred during the course of litigation, including attorney's fees, the policy does not use the word in that way.  Rather, it specifically limits costs to "costs taxed" in the technical sense, "namely, the meaning of that term in the context of a legal proceeding."  The court noted that the supplementary payments provision refers to the insurer's obligations to pay for "costs taxed against the insured in the suit."  The word suit is defined as "a civil proceeding in which damages because of property damage to which this insurance applies are alleged."

The court continued that in the context of civil proceedings, taxable costs ordinarily refer to costs that are recoverable under Mass. Gen. Laws ch. 261 §§1 et seq. (the statute parallel to Massachusetts Rule of Civil Procedure 54(d)).  Those costs do not include attorney's fees or most litigation expenses.

Addendum:  A reader inquired what costs actually are covered under Rule 54(d).  I believe the answer is filing fees, service of process fees, travel costs, and, sometimes, deposition costs.