James G. Davis Construction Corp. v. Erie Insurance Exchange

BERGER, J. This appeal arises out of an order of the Circuit Court for Montgomery County, entered on May 30, 2014, granting a motion for summary judgment filed by Erie Insurance Exchange (“Erie”). The circuit court further denied a motion for ²⁸ partial summary judgment filed by James G. Davis Construction Corporation (“Davis”). In granting Erie’s motion for summary judgment, the circuit court found that Erie did not have a duty to defend Davis in a tort suit filed in the Circuit Court for Prince George’s County, despite the fact that Davis was listed as an “additional insured” on an insurance policy issued by Erie to Erie’s subcontractor, Tricon Construction, Inc. (“Tricon”). On appeal, Davis presents one issue for our review, which we have rephrased as follows: Whether the circuit court erred in granting Erie’s motion for summary judgment and denying Davis’s motion for partial summary judgment.

For the reasons that follow, we reverse the judgment entered by the Circuit Court for Montgomery County and remand this case to the Circuit Court for Montgomery County for additional proceedings consistent with this opinion. FACTUAL AND PROCEDURAL BACKGROUND I. Subcontract Agreement and Indemnification In 2009, Davis served as the general contractor for a home construction project in Washington, D.C. (the “Project”). On January 6, 2009, Davis subcontracted Tricon to provide drywall, insulation, and fireplace services on the Project.

The terms of the subcontract agreement between Davis and Tricon (the “Subcontract Agreement”), as amended on January 22, 2009, provided that: To the fullest extent permitted by applicable state law [Tricon] shall indemnify, save harmless [Davis] ... from any and all claims, and liabilities for property and personal injury, including death, arising out of or resulting from or in connection with any negligent act or omission of [Tricon], its sub-subcontractors, vendors or anyone else for whom [Tricon] is responsible in the execution of the work, whether or not caused in part by the active or passive negligence or other fault of a party indemnified hereunder. ²⁹ The Subcontract Agreement further provided that this indemnity “shall be insured from an acceptable insurance carrier with minimum A.M. Best rating of A, naming [Davis] as an additional insured by ISO form CG 2010, 11/89 edition endorsement or equivalent....” Pursuant to the Subcontract Agreement, Tricon was to indemnify Davis for up to $1,000,000 per occurrence and up to $2,000,000 in the aggregate for all work performed on the Project. Upon execution of the Subcontract Agreement, Tricon presented Davis with a certificate of liability insurance as proof that it had procured insurance coverage for Davis as required by the Subcontract Agreement. Attached to the certificate of liability insurance was an additional insured endorsement (the “Certificate Additional Insured Endorsement”). Read together, these documents provided that Tricon was issued a commercial general liability policy by Erie (the “Policy”) and that Davis was named as an additional insured on the Policy.

The Certificate Additional Insured Endorsement provided the following: A. Section II — Who is an insured is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of [Tricon’s] ongoing operations performed for that insured. B. With respect to the insurance afforded to these additional insureds, the following exclusion is added: 2. Exclusions This insurance does not apply to “bodily injury” or “property damage” occurring after: (1) All work, including materials, parts or equipment furnished in connection with such work, on the project (other than service, maintenance or repairs) to be performed by or on behalf of the additional insured(s) at the site of the covered operations has been completed; or (2) That portion of “[Tricon’s] work” out of which the injury or damage arises has been put to its intended use by any person or organization other than another ³⁰ contractor or subcontractor engaged in performing operations for a principal as a part of the same project. The Certifícate Additional Insured Endorsement also included a schedule, listing Davis an additional insured under the Policy.

The Policy actually issued to Tricon, however, included an additional insured endorsement (the “Policy Additional Insured Endorsement”) with slightly different terms from those in the Certifícate Additional Insured Endorsement. The Policy Additional Insured Endorsement provided as follows: A. Section II — Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for “bodily injury, ” “property damage” or “personal and advertising injury” caused, in whole or in part, by: 1. [Tricon’s] acts or omissions; or 2. The acts or omissions of those acting on [Tricon’s] behalf; in the performance of [Tricon’s] ongoing operations for the additional insured(s) at the location(s) designated above. B. With respect to the insurance afforded to these additional insureds, the following additional exclusions apply: This insurance does not apply to “bodily injury” or “property damage” occurring after: 1.

All work, including materials, parts or equipment furnished in connection with such work on the project (other than service, maintenance or repairs) to be performed by or on behalf of the additional insured(s) at the location of the covered operations has been completed; or 2. That portion of “[Tricon’s] work” out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing operations for a principal as a part of the same project. (emphasis added). The Policy Additional Insured Endorsement further referred to a set of declarations within the ³¹ Policy.

One such declaration, effective January 22, 2009, indicated that Davis was added onto the Policy as an additional insured. 1 II. Tort Litigation As part of its work on the Project, Tricon erected a scaffold, which it owned, at the site of the Project’s construction. Another of Davis’s subcontractors, American Mechanical Services, subcontracted Frost Fire Insulation (“Frost Fire”) to perform air conditioning and insulation work on the Project. On September 24, 2009, two employees of Frost Fire were using Tricon’s scaffold to complete their work on the Project when the scaffold collapsed, injuring the two Frost Fire employees.

The injured Frost Fire employees alleged that they were authorized to use Tricon’s scaffold and were assured by Davis that the scaffolding was safe and secure. The two injured Frost Fire employees filed suit against Tricon and Davis in the Circuit Court for Prince George’s County (the “Tort Litigation”). The Frost Fire employees alleged one count of negligence against Tricon and one count of negligence against Davis. After being served with the Frost Fire employees’ complaint, Daws notified Erie of the Tort Litigation and tendered its defense to Erie.

Erie, however, declined to assume Davis’s defense. Erie claimed that the Policy did not cover Davis, as an additional insured, for Davis’s own negligent acts.

III

Breach of Contract Litigation On June 5, 2013, Davis filed a complaint in the Circuit Court for Montgomery County alleging that Erie breached its con ³² tract with Davis by failing to honor its duty to defend and indemnify Davis in the Tort Litigation. Davis claimed that the terms of the Policy required Erie to defend Davis in the underlying litigation. Furthermore, Davis requested a declaratory judgment from the circuit court that would declare that Davis is entitled to a defense from Erie in the Tort Litigation; that Davis is entitled to indemnity from Erie with respect to all costs, fees, expenses, settlements and/or judgments paid for or incurred by Davis in the Tort Litigation; that Davis is entitled to reimbursement from Erie for all attorneys’ fees Davis incurred defending against the Tort Litigation; and that Davis is entitled to reimbursement from Erie for all attorneys’ fees Davis incurred in its lawsuit against Erie. On February 10, 2014, Davis filed a motion for partial summary judgment in which it alleged that Erie had a duty to defend Davis in the Tort Litigation.

Davis asserted that it was added to the Policy as an additional insured and that the claims asserted against it in the Tort Litigation were covered by the Policy. Davis, therefore, claimed that Erie’s duty to defend Davis was triggered by the complaint in the Tort Litigation. On February 25, 2014, Erie filed an opposition to Davis’s motion for partial summary judgment that also functioned as a cross-motion for summary judgment. The circuit court heard the parties’ cross-motions for summary judgment on April 23, 2014 and issued an oral opinion and order on the motions on May 27, 2014.

The court denied Davis’s motion for partial summary judgment and granted summary judgment in favor of Erie. In its oral opinion and order, the court, finding no genuine dispute of material fact, concluded that Davis was covered by the Policy as an additional insured. The court further found that Erie did not have a duty to defend Davis in the Tort Litigation because the Policy did not cover Davis for Davis’s own negligence, and the complaint in the Tort Litigation “contained] a separate allegation of negligence against Davis for Davis’[s] own acts or omissions.” Ultimately, the circuit court concluded that the ³³ Policy only covered Davis for claims of vicarious liability “arising out of Tricon’s performance.” 2 Additionally, the court found that Davis did not qualify for coverage under the Policy as an “indemnitee.” 3 This timely appeal followed. DISCUSSION I. Standard of Review The entry of summary judgment is governed by Maryland Rule 2-501, which provides: ³⁴ The court shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law.

Md. Rule 2—501(f). The Court of Appeals has explained the standard of review of a trial court’s grant of a motion for summary judgment as follows: On review of an order granting summary judgment, our analysis “begins with the determination [of] whether a genuine dispute of material fact exists; only in the absence of such a dispute will we review questions of law.” D’Aoust v. Diamond, 424 Md. 549, 574 , 36 A.3d 941, 955 (2012) (quoting Appiah v. Hall, 416 Md. 533, 546 , 7 A.3d 536, 544 (2010)); O’Connor v. Balt. Cnty., 382 Md. 102, 110 , 854 A.2d 1191, 1196 (2004). If no genuine dispute of material fact exists, this Court determines “whether the Circuit Court correctly entered summary judgment as a matter of law.” Anderson v. Council of Unit Owners of the Gables on Tuckerman Condo., 404 Md. 560, 571 , 948 A.2d 11, 18 (2008) (citations omitted).

Thus, “[t]he standard of review of a trial court’s grant of a motion for summary judgment on the law is de novo, that is, whether the trial court’s legal conclusions were legally correct.” D’Aoust, 424 Md. at 574 , 36 A.3d at 955 . Koste v. Town of Oxford, 431 Md. 14, 24-25 , 63 A.3d 582, 589 (2013). We are “obliged to conduct an independent review of the record to determine if there is a dispute of material fact.” Injured Workers’ Ins. Fund v. Orient Express Delivery Serv., Inc., 190 Md.App. 438, 450-51 , 988 A.2d 1120, 1127 (2010) (citing Wells Fargo Home Mortgage, Inc. v. Neal, 398 Md. 705, 714 , 922 A.2d 538 (2007)). “A material fact is one that will alter the outcome of the case, depending upon how the fact-finder resolves the dispute.” Id. at 451, 988 A.2d 1120 (citing Berringer v. Steele, 133 Md.App. 442, 470-71 , 758 A.2d ³⁵ 574 (2000) (citations omitted)). “Mere general allegations of conclusory assertions will not suffice.” Id.

(citing Beatty v. Trailmaster Prods., Inc., 330 Md. 726, 738 , 625 A.2d 1005 (1993)).

II

Erie’s Duty to Defend Davis as an “Additional Insured” The issues presented in the instant case hinge, in some part, on this Court’s interpretation of the terms of the Policy issued by Erie to Tricon, to which Davis was added as an additional insured. When it comes to the interpretation of the terms of an insurance contract, “Maryland does not follow the rule, adopted in many jurisdictions, that an insurance policy is to be construed most strongly against the insurer.” Bausch & Lomb Inc. v. Utica Mut. Ins. Co., 330 Md. 758, 779 , 625 A.2d 1021 (1993) (citing Cheney v. Bell National Life, 315 Md. 761, 766 , 556 A.2d 1135 (1989)).

Rather, “the terms of an insurance contract are to be interpreted utilizing well-established principles that guide the interpretation of contracts generally.” Kendall v. Nationwide Ins. Co., 348 Md. 157, 166 , 702 A.2d 767 (1997) (citing Pac. Indem. Co. v. Interstate Fire & Cas.

Co., 302 Md. 383, 388 , 488 A.2d 486 (1985)). “Where terms are ambiguous, extrinsic and parol evidence may be considered to ascertain the intentions of the parties.” Sullins v. Allstate Ins. Co., 340 Md. 503, 508 , 667 A.2d 617 (1995) (citing Cheney, supra, 315 Md. at 766-67 , 556 A.2d 1135 ). “If no extrinsic or parol evidence is introduced, or if the ambiguity remains after consideration of extrinsic or parol evidence that is introduced, it will be construed against the insurer as the drafter of the instrument.” Cheney, supra, 315 Md. at 767 , 556 A.2d 1135 (citing Pac. Indem., supra, 302 Md. at 388-89 , 488 A.2d 486 ). Under Maryland law, when determining whether an insurer is under a duty to defend its insured, a court must answer two questions: “(1) what is the coverage and what are the defenses under the terms and requirements of the insurance policy? [and] (2) do the allegations in the tort action potentially bring the tort claim within the policy’s coverage?” ³⁶ Aetna Cas. & Sur.

Co. v. Cochran, 337 Md. 98, 103-04 , 651 A.2d 859 (1995) (quoting St. Paul Fire & Marine Ins. Co. v. Pryseski, 292 Md. 187, 193 , 438 A.2d 282 (1981)). “The first question focuses upon the language and requirements of the policy, and the second question focuses on the allegations of the tort suit.” Capital City Real Estate, LLC v. Certain Underwriters at Lloyd’s London, Subscribing to Policy Number: ARTE018240, 788 F.3d 375, 379 (4th Cir.2015) (quoting St. Paul Fire & Marine Ins. Co. v. Pryseski, supra, 292 Md. at 193 , 438 A.2d 282 ). Critically, “[e]ven if a tort plaintiff does not allege facts which clearly bring the claim within or without the policy coverage, the insurer still must defend if there is a potentiality that the claim could be covered by the policy.” Brohawn v. Transamerica Ins.

Co., 276 Md. 396, 408 , 347 A.2d 842 (1975) (citing U.S. Fid. & Guar. Co. v. Nat’l Paving & Contracting Co., 228 Md. 40, 54 , 178 A.2d 872 (1962)). Furthermore, “[i]f there is any doubt as to whether there is a duty to defend, it is resolved in favor of the insured.” Walk v. Hartford Cas. Ins.

Co., 382 Md. 1, 16 , 852 A.2d 98 (2004) (citing Aetna Cas., supra, 337 Md. at 107 , 651 A.2d 859 ). On appeal, and in its motion for partial summary judgment, Davis contends that the terms of the Policy required Erie to assume Davis’s defense in the Tort Litigation. In analyzing this claim, we turn our attention to the terms of the Policy and the scope of coverage it affords. First, we must resolve the discrepancy between the Certificate Additional Insured Endorsement and the Policy Additional Insured Endorsement to determine what the Policy actually provides regarding “additional insureds.” A. Effect of Certificate of Insurance The United States District Court for the District of Maryland examined a similar issue in the case of G.E. Tignall & Co. v. Reliance Nat.

Ins. Co., 102 F.Supp.2d 300 (D.Md.2000). In Tignall, a general contractor agreed to have a subcontractor perform lead paint abatement work on a school ³⁷ renovation project. Id. at 301 .

The general contractor required the subcontractor to maintain liability insurance related to lead paint abatement at the school, so the subcontractor presented the general contractor with a certificate of insurance. Id. The certificate of insurance described a number of insurance policies procured for the subcontractor by an independent insurance broker. Id.

The certificate identified the general contractor as “an additional insured for liability incurred because of the lead abatement work at the school.” Id. When a student at the school sued the general contractor for alleged lead poisoning during the renovation period, the subcontractor’s insurer refused to defend and indemnify the general contractor, claiming that its policy only required it to defend the general contractor “where [the subcontractor’s] own operations were alleged as the basis of liability.” Id. at 302 . The general contractor in Tignall alleged that its subcontractor’s insurer had a duty to defend the general contractor against the lead poisoning suit based on the certificate of insurance the subcontractor had presented to the general contractor. Id. at 302-03 .

The court in Tignall, however, found that the terms of the certificate of insurance were not binding on the subcontractor’s insurer because “[o]rdinarily, the presentation of a certificate alone does not create coverage or legal duties.” Id. at 304 . The Tignall court highlighted the fact that the certificate was not prepared by the subcontractor’s insurer, but rather by an independent insurance broker, so its terms could not bind the insurer. Id. at 303 . Similarly, in the instant case, the certificate of liability insurance that Tricon presented to Davis upon execution of the Subcontract Agreement was not produced by Erie, but rather was produced by V W Brown Insurance Service, an independent insurance broker.

The text of the certificate of liability insurance in the instant case further provides that “THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND ... DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.” In light of these facts, we hold ³⁸ that the terms of the Certificate Additional Insured Endorsement are not a part of the Policy and, therefore, are not binding on Erie. Nevertheless, for the reasons that follow, we hold that Erie is bound to the terms of the Policy Additional Insured Endorsement, which constitute part of the Policy. Accordingly, the circuit court erred by exclusively analyzing the scope of coverage afforded by the Policy under the terms of the Certificate Additional Insured Endorsement.

B. Scope of Coverage Afforded to Davis by the Policy Having determined which terms comprise the Policy, we now turn our attention to analyzing the scope of insurance coverage provided by those terms. The circuit court found that the Policy did not cover Davis for Davis’s own negligence, but rather for “the acts or omissions of the named insured— that is Tricon — or the acts or omissions of those acting on the named insured’s behalf during ongoing operations for the additional insured.” The circuit court, therefore, concluded that the terms of the Policy only covered Davis