Does Insurance Policy Duty to Defend Include Legal Fees for a Counterclaim ?
In Duke University v. St. Paul Mercury Insurance Co., 95 N.C. App. 663, 384 S.E.2d 36 (Ct. App. N.C., 1989), Duke University had been sued by doctors as a result of Duke's proposed sale of a psychiatric hospital and the disbursement of various funds and accounts from the sale.
Duke filed a counterclaim against the doctors for various intentional torts, including defamation, interference with contract, and unfair trade practices.
Duke also filed a declaratory judgment action against its insurer in an effort to obtain coverage for the underlying lawsuit.
The Duke court found that the insurer did have a duty to defend Duke in the underlying case, but it also found that the trial court had correctly refused to award Duke legal fees incurred in connection with prosecuting its counterclaim because the insurer's policy only obligated it to "defend suits 'against' Duke." Duke, 384 S.E.2d at 46.