Two law firms went head-to-head over fees in a case involving Lloyd’s of London – and Vermont’s top court just shut the door on expanding who gets paid.
On July 19, the Vermont Supreme Court ruled in WWSAF Special Partners Group, LLC (Series D) v. Costello, Valente & Gentry, P.C. that a law firm couldn’t recover attorney fees from another firm’s insurance settlement, even if its work helped make that deal possible. It’s a decision that reins in how far the common-fund doctrine can stretch, particularly in multi-party insurance litigation.
Here’s what happened. A workplace injury set off two lawsuits: one brought by an employee against his employer, and another by the employer against its insurance services provider, Cornerstone Risk Management, LLC. The employer claimed Cornerstone failed to get proper workers’ comp coverage. Gravel & Shea PC represented the employer in that action, which was defended by Lloyd’s of London as Cornerstone’s liability insurer. Gravel & Shea prevailed on key motions, keeping the case alive.
Meanwhile, the injured employee sued the employer. That case was handled by a different firm – Costello, Valente & Gentry, P.C. – on a contingency basis. Gravel & Shea also represented the employer in that litigation.
Eventually, Lloyd’s settled directly with the employee, who then dropped claims against the employer. That settlement didn’t involve the employer, but Costello, Valente & Gentry earned a fee from it. Gravel & Shea, pointing to its work defeating motions in the employer’s case, claimed that those efforts paved the way for the employee’s deal and the resulting fees. They sued, arguing they deserved a cut.
At trial, Gravel & Shea won. A judge agreed they were owed a share under what’s called the common-fund doctrine – a legal principle that allows a firm to recover fees when its work creates a financial benefit for others. But the state’s high court didn’t buy it.
Writing for the court, Justice Karen Carroll said the doctrine didn’t fit these facts. There wasn’t a shared fund or joint recovery. The employer didn’t receive anything from the employee’s settlement, and the firms weren’t working toward a common outcome. Any benefit Gravel & Shea provided to the employee’s case, the court said, was incidental – not enough to demand fee-sharing.
The justices also made it clear this wasn’t the time to expand the doctrine beyond traditional insurance subrogation cases, where one party recovers money that another had a legal interest in. That wasn’t the situation here.
For insurers and claims professionals, the takeaway is simple: even when legal battles overlap, fee recovery isn’t guaranteed unless there’s a direct, shared financial interest. That can shape how defense teams and carriers think about joint settlements and legal coordination when multiple parties – and law firms – are involved.
No insurance policy terms were debated in this decision. The fight was squarely about who pays for what when cases cross paths. And for now, at least in Vermont, the answer is clear: you don’t get paid just for helping from the sidelines.
