Appeal from judgment of Court of Common Pleas of Chester County, June T., 1969, No. 152, in case of Boiler Engineering & Supply Co., Inc. v. General Controls, Inc.
John A. Featherman, with him Richard Reifsnyder, and MacElree, Platt & Harvey, for appellant.
William H. Lamb, with him Susan P. Windle, and Rogers, Gentry, Windle & Lamb, for appellee.
Bell, C. J., Jones, Eagen, O'Brien, Roberts, Pomeroy and Barbieri, JJ. Opinion by Mr. Justice Jones. Mr. Chief Justice Bell dissents.
In Burbage v. Boiler Eng. & Supply Co., Inc., 433 Pa. 319, 249 A.2d 563 (1969), we were presented with the factual genesis of this controversy. Briefly summarized, we affirmed the entry of judgment by the Chester County Court of Common Pleas in favor of Norina G. Burbage, administratrix of the estate of Edward Burbage, against the Boiler Engineering and Supply Company, Inc. (Boiler), and in favor of Boiler against General Controls, Inc. (General) for indemnification.*fn* In accordance with our opinion, indemnification payments were made on the judgment.
Thereafter, Boiler's insurance carrier paid $12,500 to Boiler's legal counsel for their services in representing Boiler both at the trial and appellate level. Subsequently, Boiler filed a complaint against General for indemnification of reasonable counsel fees and costs. In its answer and new matter, which was admitted, General averred that Boiler's insurance carrier was obliged by the terms of its policy of insurance to provide a defense and that counsel fees and costs had been paid by the insurance carrier. A motion for judgment on the pleadings was interposed by General and judgment was entered in General's favor after oral argument. This appeal followed.
As the operative facts are not in dispute, we are confronted with a pure question of law: whether an indemnitee (actually the indemnitee's insurance carrier) may recover counsel fees and costs incurred by the indemnitee in defense litigation and paid by its insurer under the terms of the policy from the indemnitor.
This specific question was resolved in the negative by the Superior Court over twenty years ago in Rohm & Haas Co. v. Lessner, 168 Pa. Superior Ct. 242, 77 A.2d 675 (1951). In Rohm & Haas, the defendant contracted to install a boiler for the plaintiff and agreed to "hold harmless" the plaintiff for any injuries negligently occasioned by the defendant. A third person was injured and brought suit against the plaintiff. After the defendant refused to undertake the defense of this third person's claim, plaintiff's insurance carrier, obliged to defend the plaintiff under the policy, undertook the defense and was successful. A subsequent assumpsit action to recover costs and fees was then instituted by the plaintiff to recover this amount. Recognizing that the insurance carrier was the real party in interest, as is the situation in the case at bar, and that the nominal plaintiff suffered no pecuniary loss, the Superior Court held that the plaintiff had "no cause of action either on its own account or on behalf of its insurer by equitable subrogation." 168 Pa. Superior Ct. at 246, 77 A.2d at 677. Just as that plaintiff was entitled to be "held harmless" under his contract, so is Boiler, under our prior decision, entitled to indemnification. 433 Pa. at 326-27, 249 A.2d at 567. Similarly, the insurance carriers for that plaintiff and Boiler defended and paid counsel fees and costs so that neither Boiler nor that plaintiff suffered any pecuniary loss. Accordingly, the court below, bound by the principle of stare decisis, concluded that Boiler could not recover.
Throughout this intervening period of twenty years, no court in this Commonwealth has relied on this particular aspect of Rohm & Haas. While two federal courts have examined Rohm & Haas and concluded it was factually inapposite, DiBiase v. Rederi Aì Walship, 32 F.R.D. 41, 44 (E.D. N.Y. 1963), and United Page 47} States Lines Co. v. E. J. Lavino & Co., 198 F. Supp. 483 (E.D. Pa. 1961), one federal court has flatly refused to follow this precedent. Fisher v. United States, 299 F. Supp. 1, 36 (E.D. Pa. 1969). So framed, our specific inquiry is whether Rohm & Haas should now be followed.
Although the principle was never discussed or even mentioned in Rohm & Haas, this Court as well as the vast majority of jurisdictions adhere to the rule that the nominal indemnitee may recover attorney's fees and costs along with the actual judgment from the indemnitor. Orth v. Consumers' Gas Co., 280 Pa. 118, 124 Atl. 296 (1924); 41 Am. Jur. 2d Indemnity § 36 (1968); 42 C.J.S. Indemnity § 13d (1944). See, also, Annot., 45 A.L.R. 2d 1183 (1956). While we have never addressed the issue, these other jurisdictions, however, hold that only those expenses engendered by the defense litigation and not that portion allocable to the indemnification litigation may be recovered by the indemnitee. 41 Am. Jur. 2d Indemnity § 36 (1968); 42 C.J.S. Indemnity ...