Litigants that have been forced to defend groundless litigation are entitled to recover their attorneys' fees even if those costs were paid by an insurance company, Maryland's highest court has ruled.

In Worsham v. Greenfield, the Maryland Court of Appeals affirmed an award of litigation expenses in favor of a defendant who had been sued, along with her husband, in a defamation case. The trial court invoked Maryland Rule 1-341, which authorizes trial courts to award litigation costs and attorneys' fees in cases where the court finds the opposing party pursued the litigation "in bad faith or without substantial justification."

The trial court found that the plaintiff had included the wife as a defendant in the lawsuit despite "no evidence" that she was involved in the alleged defamatory conduct and when there was no "colorable reason" to include her.

The plaintiff appealed the sanctions award, arguing that the defendant had not actually" incurred" any attorneys' fees or litigation expenses because those costs had been paid by her insurance company.

The Court of Appeals rejected the plaintiff's argument, holding that the purpose of Maryland Rule 1-341 was to deter abusive litigation. 

The court noted that many businesses and professionals maintain some form of liability insurance, which often provides coverage for litigation costs. Prohibiting the award of litigation expenses simply because the defendant has insurance would undermine the purpose of the rule and deprive the courts of an important mechanism for deterring frivolous lawsuits, the court concluded.

Ballard Spahr attorneys regularly defend companies and individuals in commercial litigation.

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