W.M. Schlosser Co. v. Insurance Co. of North America

McAULIFFE, Judge. The United States Court of Appeals for the Fourth Circuit has certified to this Court, pursuant to Maryland Uniform Certification of Questions of Law Act, §§ 12-601 through 12-609 of the Courts and Judicial Proceedings Article, Maryland Code (1974, 1989 Repl.Vol.), the following question of law: Whether costs incurred by the certificate holder to avoid imminent catastrophic damage to the property of others are recoverable under the terms of a Comprehensive General Liability Policy where the certificate holder’s actions were necessitated by the insured’s negligent workmanship. I. The certifying court provided us with the following facts, which include footnotes 1 through 5: “In April, 1985, W.M. Schlosser Co., Inc. (Schlosser), entered into a contract with Fairfax County, Virginia, to ³⁰³ build a pumping station. The contract provided that Schlosser would indemnify, hold harmless and be strictly responsible to Fairfax County for any and all damage to existing and partially complete structures of Fairfax County arising out of Schlosser’s operations and activities attributable to it or any of its subcontractors at the site. “In May, 1985, Schlosser entered into a written subcontract with Geofreeze Corporation (Geofreeze).

Under the subcontract, Geofreeze agreed to perform all necessary labor and supply all necessary materials and equipment to complete the temporary ground support, ground water control, and rough excavation phases of the project. In addition, Geofreeze agreed to indemnify and hold harmless Schlosser and Fairfax County from any and all claims, liabilities, and expenses for property damage arising out of or resulting from and in connection with the execution of its work. “Pursuant to the requirements of the subcontract, Geo-freeze purchased a Comprehensive General Liability Policy from Insurance Company of North America (INA). 1 A Certificate of Insurance was delivered to Schlosser which named it as the Certificate Holder and certified that a $1 million Comprehensive General Liability Policy had been issued on the project. 2 ³⁰⁴ “In July, 1985, Geofreeze began freezing the earth around the intended area of excavation. On September 5, 1985, Geofreeze commenced excavation activity on the interior of the frozen earth cofferdam. By September 9, 1985, large quantities of earth were falling off of the wall of the excavation.

On September 12, 1985, the cofferdam was deteriorating to such an extent that excavation work was temporarily stopped because of unsafe job site conditions. “On September 16, 1985, significant deterioration on the face of the earthen wall posed a threat of lateral collapse to the earth surrounding the frozen wall, as well as to adjacent structures owned by Fairfax County. On September 18, 1985, Geofreeze halted its excavation operation completely until the structural problems with the earthen cofferdam could be repaired. . “On September 26, 1985, with the excavation approximately two-thirds complete, total collapse of the earthen cofferdam and surrounding wall appeared imminent with Hurricane Gloria forecast to pass over the site within 48 hours. 3 Upon the recommendation of Geofreeze, an ‘emergency backfilling’ operation was undertaken to fill in the excavation and avoid a total collapse. Schlosser notified INA of the emergency backfilling on the same day. ³⁰⁵ “Subsequently, Schlosser filed a claim with INA under Geofreeze’s policy seeking coverage for property damage incurred as a result of the frozen cofferdam’s failure and reimbursement of costs associated with the emergency backfilling and reexcavation. INA denied coverage on the claim, stating that emergency backfilling and reexcavation did not constitute an ‘occurrence’ under the policy. “On December 21, 1988, Schlosser sued Geofreeze 4 and its insurance company, INA, in federal court.

The laws of Maryland govern the legal issues raised in this appeal. 5 Schlosser and INA each filed Motions for Partial Summary Judgment and Summary Judgment, respectively. The district court granted INA’s motion for Summary Judgment on the basis that Schlosser’s losses were caused by negligent workmanship and were not caused by an ‘occurrence’ within the coverage of the policy. Schlosser appealed to the United States Court of Appeals for the Fourth Circuit and shall be treated as the appellant in this certification procedure.” II. In Cheney v. Bell National Life, 315 Md. 761, 766-67 , 556 A.2d 1135 (1989), we set forth certain principles governing the interpretation of insurance contracts: Maryland does not follow the rule, adopted in many jurisdictions, that an insurance policy is to be construed most strongly against the insurer.

Rather, following the rule applicable to the construction of contracts generally, we hold that the intention of the parties is to be ascertained if reasonably possible from the policy as a whole. In the event of an ambiguity, however, extrinsic and parol evidence may be considered. If no extrinsic or parol evidence is introduced, or if the ambiguity remains after ³⁰⁶ consideration of extrinsic or parol evidence that is introduced, it will be construed against the insurer as the drafter of the instrument. Applying these rules of construction to the provisions of the policy in question, we determine that the insurance contract does not provide for recovery of preventive costs, and therefore Schlosser is not entitled to relief on the basis of the contract between Geofreeze and INA.

The contract provides coverage only when “[the insured] has a legal responsibility to pay a claim someone made based on bodily injury, personal injury, or property damage, resulting from an occurrence.” (Emphasis omitted.) Addressing the question whether any third party has sustained bodily injury, personal injury, or property damage, resulting from an occurrence, or has made a claim therefor, Schlosser offers two arguments. First, it contends this is a non-issue, asserting that the certifying court has already concluded that there was an occurrence within the meaning of the policy, there was damage to the property of others, and a claim was filed. Schlosser argues that the certifying court assumed or found that these conditions had been met, and seeks our explication of Maryland law only as to the impact of Geofreeze’s negligent workmanship under those circumstances. We do not understand that to be the case.

Alternatively, Schlosser contends that the partial failure of the earthen wall constituted an occurrence within the meaning of the policy, and that the buildings of others had suffered property damage by reason of a diminution of, or imminent threat of loss of, lateral support. Again, we do not agree. The insurance contract involved in this case is a Contractor’s General Liability Policy. By its clear and unambiguous language, it is intended to protect the insured against claims made by others for damages the insured has a legal responsibility to pay.

It is not an all risks or builder’s risk policy. No claims were made by others as a result of any personal injury or property damage. Moreover, there was ³⁰⁷ no occurrence within the meaning of the policy that caused damage to the persons or property of others. The action taken by Schlosser was intended to prevent the type of harm the policy would have covered, and no such harm in fact resulted.

Schlosser argues that even if preventive costs are not within the literal language of the insurance contract, principles of equity, fairness, and public policy dictate that the contract be “interpreted” to afford such coverage. In support of that proposition, Schlosser cites Leebov v. United States Fidelity and Guaranty Co., 401 Pa. 477 , 165 A.2d 82 (1960). In Leebov , a contractor was engaged in excavating a hillside when a bank broke away and adjacent land began to slide, causing the porch of a nearby house to collapse. The contractor immediately ceased all excavation operations, drove his trucks against the bank, and enlisted the aid of a shoring expert.

The contractor ultimately sued the insurer who had issued a contractor’s liability policy to him, claiming reimbursement for, inter alia, the costs of shoring to prevent further damage. The liability policy issued to Leebov provided, in pertinent part: [The defendant insurance company agrees] to pay on behalf of the Insured all sums which the Insured shall become obligated to pay by reason of the liability imposed upon him by law for damages because of injury to or destruction of property, including the loss of use thereof, caused by accident and arising out of the hazards hereinafter defined. Id., 165 A.2d at 83 . The Supreme Court of Pennsylvania affirmed a judgment in favor of the contractor for all damages and costs.

The Court first distinguished the language of Leebov’s policy from the policy involved in the earlier New Hampshire case of Desrochers v. New York Casualty Co., 99 N.H. 129 , 106 A.2d 196, 198 (1954), in which liability had