Minnick's, Inc. v. Reliance Insurance

³³⁰ Thompson, J., delivered the opinion of the Court. Minnick’s, Inc. (Minnick’s), the appellant, contracted with Presley Development Company East, Inc. (Presley), to install heating systems in certain houses built by Presley. Following the installation of the systems and the completion and sale of the houses, four of the purchasers instituted actions against Presley, alleging that the heating systems were defective. The damages claimed included the costs to repair and/or replace the defective systems and the costs of using alternative heating systems while, the defective systems were inoperable.

In addition, in the actions filed by Mr. and Mrs. Stephen Grace and by Mr. and Mrs. Yung-Shu Wu, damages were claimed for loss of consortium allegedly caused by Presley’s negligence and breach of warranty. In each of the actions instituted, Presley filed a third party claim against Minnick’s, alleging that the heating contractor was responsible for any negligence involved in the installation of the heating systems and that Minnick’s was liable to Presley for any judgments which might be recovered by the purchasers. Minnick’s in turn notified its liability insurance carrier, Reliance Insurance Company (Reliance), the appellee here, of the claims and requested that Reliance provide a defense. Reliance declined to do so, stating that the claims were not covered by its policy.

Minnick’s then filed a declaratory judgment action in the Circuit Court for Prince George’s County seeking a declaration that Reliance was obligated under the policy to provide a defense and to pay any judgments which might be obtained in the actions. This appeal is from the decision of the Circuit Court denying the declaration sought by Minnick’s. "It is settled law that insurance contracts must be interpreted, like other contracts, according to the sense and meaning of the terms.” United States Fidelity and Guaranty Co. v. National Paving Co., 228 Md. 40, 50 , 178 A.2d 872 (1962); American Home Insurance Co. v. Osbourn, 47 Md. App. 73 , 422 A.2d 8 (1980). "If the plaintiffs in the tort suits allege a claim covered by the policy, the insurer has a duty to ³³¹ defend.” Brohawn v. Transamerica Insurance Co., 276 Md. 396, 407 , 347 A.2d 842 (1975).

The policy between Reliance and Minnick’s in pertinent part provided: "The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of Coverage G. personal injury or Coverage H. property damage to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such personal injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company’s liability has been exhausted by payment of judgments or settlements.” (Emphasis added). Under the definitions applicable to this section of the policy quoted above, " 'occurrence’ means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured;” and " 'property damage” means (1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of ³³² use is caused by an occurrence during the