Heat & Power Corp. v. Air Products & Chemicals, Inc.

Decision Date12 September 1990
Docket NumberNo. 91,91
PartiesHEAT & POWER CORPORATION, et al. v. AIR PRODUCTS & CHEMICALS, INC. Sept. Term 1989.
CourtMaryland Court of Appeals

Robert L. Ferguson, Jr. (Michael N. Russo, Jr., Thieblot, Ryan, Martin & Ferguson, on brief) John L. Wood (Niles, Barton & Wilmer, on brief) (Benjamin R. Goertemiller, Susan M. Marzetta, Semmes, Bowen & Semmes, on brief), Baltimore, for petitioners.

Louis G. Close, Jr. (James R. Chason, Tricia D. O'Neill, Whiteford, Taylor & Preston, all on brief) Towson, for respondent.

Argued before ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS, * HOWARD S. CHASANOW ** (specially assigned) and CHARLES E. ORTH, Jr., (retired, specially assigned), JJ.

CHASANOW, Judge.

Respondent, Air Products & Chemicals, Inc. (Owner), produces gas for industrial use. In April, 1977, Owner entered into a contract with Petitioner, Heat & Power Corp. (Contractor), to construct a silencer building 1 at Owner's Sparrows Point plant. Owner designed and prepared all specifications for the building.

In July, 1987, an employee of Contractor, Ivor LaBarrie, was removing scaffolding from the silencer building roof when the building exploded. LaBarrie was seriously injured. The dispute in this case is not about who caused the accident. No challenge was made to the circuit court's entry of summary judgment in favor of LaBarrie against Owner. That decision was based on a finding that LaBarrie's injuries were caused by Owner's sole negligence in the design of the building which rendered the building incapable of withstanding the pressures to which it was subjected. Owner makes no allegation in this Court that any negligence of Contractor, or anyone other than Owner, contributed to LaBarrie's injuries. Rather, the dispute concerns the interpretation of the extent of insurance coverage Contractor obtained for Owner, as well as the interpretation of the construction contract.

The relevant portion of Article 13 of the construction contract between Owner and Contractor states:

The Contractor shall indemnify [Owner] ... and save and hold each of them harmless from any and all loss, liability, fine, penalty or other charge, cost or expense by reason of any claim, fine or penalty, or any action or suit for injury to, or death of any persons, including agents and employees, or for damage to property, including the property of [Owner] and/or the Owner and their respective representatives, assigns, and successors, resulting from or arising out of or in connection with the performance of this Contract by Contractor and Subcontractor selected by Contractor if any. Contractor shall obtain appropriate insurance coverage with respect to such liability. (Emphasis added.)

In addition, the bidding instructions for the construction contract, expressly incorporated into the contract, required Contractor to name Owner as an "additional insured" on the comprehensive general liability policy Contractor maintained with its insurance carrier, Petitioner General Accident Fire and Life Assurance Corp., Ltd. (Insurer). Following Contractor's request, Insurer added Owner to Contractor's general liability policy in an endorsement which provides In consideration of a flat charge of $25.00, it is agreed that the 'Persons Insured' provision is amended to include as insureds [Owner]. The provisions of this endorsement apply only in connection with work performed by the named insured for [Owner]. (Emphasis added.)

Owner maintains that Article 13 of the contract is unambiguous and clearly requires Contractor to indemnify and to secure insurance coverage for all claims made against Owner at this construction site, including claims made against Owner as a result of its own negligence. Contractor agrees with the Owner's contention that the language is unambiguous, but contends that clearly Article 13 only requires indemnification and insurance for Owner's vicarious liability, i.e., indemnification for any claims made against Owner as a result of Contractor's negligence for which Owner may be held vicariously liable.

In its dispute with Insurer, Owner contends that Insurer is obligated to defend and indemnify Owner for Owner's own negligence by virtue of the endorsement in Contractor's general liability policy with Insurer. Insurer, however, argues that the insurance contract endorsement is limited to protecting Owner against liability for work performed by Contractor for Owner. They maintain this language unambiguously limits any coverage to Owner's vicarious liability as the result of Contractor's work. Various judges of the Circuit Court for Baltimore City faced with the issue of ambiguity in the instant case "resolved" the issue four separate times, issuing four separate motions rulings.

Owner sought a defense and indemnity from Insurer based on the endorsement in Contractor's insurance policy. When Insurer refused, Owner filed a third-party complaint both against Insurer based on the endorsement, and against Contractor based on the indemnification provision in the construction contract. Owner's motion for summary judgment against Insurer was granted. Insurer then filed a motion for reconsideration of the summary judgment entered in favor of Owner. This motion for reconsideration was granted, and the order granting summary judgment in favor of Owner was vacated. Next, a series of summary judgment motions and cross motions between Owner and Contractor were filed, which ultimately ended with a partial summary judgment in favor of Contractor. In response to Owner's motion for reconsideration from this ruling, the court reversed itself, finding that material issues of fact were presented which should be resolved by a jury. Despite this ruling, Contractor and Insurer each filed yet another motion for summary judgment on essentially the same grounds as their previous motions. Owner opposed them as before. This time the court entered summary judgment in favor of Contractor and Insurer. Owner appealed to the Court of Special Appeals.

In an unreported opinion the Court of Special Appeals reversed the Circuit Court for Baltimore City holding that the matters were inappropriate for summary judgment. Contractor and Insurer petitioned this Court, and we granted certiorari.

I. STANDARD FOR APPELLATE REVIEW OF SUMMARY JUDGMENTS GRANTED ON THE BASIS OF A CONTRACT INTERPRETATION

The parties differ as to the proper standard for appellate review of a judgment entered on a motion for summary judgment. Petitioners, Contractor and Insurer, contend that the proper standard of review of summary judgment is "clearly erroneous." They rely on subsection (c) of Maryland Rule 8-131, Scope of Review, which states:

(c) Action Tried Without a Jury.--When an action has been tried without a jury, the appellate court will review the case on both the law and the evidence. It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses.

The clearly erroneous standard for appellate review in section (c) of this rule does not apply to a trial court's determinations of legal questions or conclusions of law based on findings of fact. Davis v. Davis, 280 Md. 119, 124, 372 A.2d 231, 233, cert. denied, 434 U.S. 939, 98 S.Ct. 430, 54 L.Ed.2d 299 (1977). A trial court determines issues of law when granting summary judgment.

Petitioners also rely on the child custody determination in Sewell v. Sewell, 218 Md. 63, 145 A.2d 422 (1958). In Sewell, this Court employed the clearly erroneous standard on review notwithstanding the fact that the trial court decided the case primarily on depositions, as well as the recorded testimony of a witness taken before an Examiner. Our review of the trial court's decision in Sewell, however, was very different from a review of a summary judgment motion.

In granting a motion for summary judgment, the trial court makes rulings as a matter of law, resolving no disputed issues of fact from the record. In Sewell, the trial court used the depositions and the record before the Examiner to resolve factual disputes and make factual determinations based on recorded testimony. Sewell involves a judgment following a court trial utilizing testimony from depositions and testimony taken before the Examiner. "Clearly erroneous" was the proper standard for review of a judgment following a court trial.

Respondent Owner contends, and we agree, that the standard for appellate review of a trial court's grant or denial of a motion for summary judgment is whether the trial court was legally correct. A trial court decides issues of law, not fact, when granting summary judgment. Maryland Rule 2-501; King v. Bankerd, 303 Md. 98, 111, 492 A.2d 608, 614 (1985). Even where the underlying facts are undisputed, if the undisputed facts are susceptible of more than one permissible factual inference, the choice between those inferences should not be made as a matter of law, and summary judgment should not be granted. Id. In reviewing a summary judgment, an appellate court has the same information from the record and decides the same issues of law as the trial court. It follows then that the proper standard for reviewing the granting of a summary judgment motion should be whether the trial court was legally correct. Honaker v. W.C. & A.N. Miller Dev. Co., 278 Md. 453, 458 n. 3, 365 A.2d 287, 290 n. 3 (1976); Lynx, Inc. v. Ordnance Products, Inc., 273 Md. 1, 8, 327 A.2d 502, 509 (1974); Brewer v. Mele, 267 Md. 437, 441, 298 A.2d 156, 159 (1972).

II. INDEMNITY PROVISION IN THE CONTRACT

Article 13 of the contract required Contractor to indemnify Owner for any liability "resulting from or arising out of or in connection with the performance of this contract by Contractor...." This provision cannot be construed as indemnifying the Owner against its own sole negligence. Any such construction would render the...

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