Chesapeake & P. Tel. Co. of Md. v. Allegheny Const. Co.

• Decision Date: 21 January 1972
• Docket Number: Civ. No. 19152.
• Citation: 340 F. Supp. 734
• Parties: The CHESAPEAKE & POTOMAC TELEPHONE COMPANY OF MARYLAND, a body corporate v. ALLEGHENY CONSTRUCTION COMPANY, a body corporate of the Commonwealth of Pennsylvania, and Pennsylvania National Mutual Casualty Insurance Company, a body corporate of the Commonwealth of Pennsylvania.
• Court: U.S. District Court — District of Maryland

340 F. Supp. 734

The CHESAPEAKE & POTOMAC TELEPHONE COMPANY OF MARYLAND, a body corporate v. ALLEGHENY CONSTRUCTION COMPANY, a body corporate of the Commonwealth of Pennsylvania, and Pennsylvania National Mutual Casualty Insurance Company, a body corporate of the Commonwealth of Pennsylvania.

Civ. No. 19152.

United States District Court, D. Maryland.

January 21, 1972.

COPYRIGHT MATERIAL OMITTED

Paul V. Niemeyer, Baltimore, Md., for plaintiff.

W. Hamilton Whiteford, Baltimore, Md., for defendant Allegheny Construction Co.

Alva P. Weaver, III, Baltimore, Md., for defendant Pennsylvania National Mutual Casualty Ins. Co.

FRANK A. KAUFMAN, District Judge.

The Chesapeake & Potomac Telephone Company of Maryland (C & P), a Maryland corporation with its principal place of business in Maryland, seeks, in this suit against Allegheny Construction Company (Allegheny) and Pennsylvania National Mutual Casualty Insurance Company (Pennsylvania National), both Pennsylvania corporations with their respective places of business in Pennsylvania, a declaratory judgment pursuant to 28 U.S.C. § 2201. Diversity jurisdiction exists under 28 U.S.C. § 1332(a).

On August 24, 1961, C & P and Allegheny entered into a contract pursuant to which Allegheny agreed, inter alia, to erect and replace telephone poles,¹ to hold harmless C & P from all liability "arising from said work, or from any act or negligence of" Allegheny, and to carry liability insurance to protect both C & P and Allegheny.²

Pursuant to the 1961 agreement and at C & P's request, Allegheny undertook, on October 25, 1962, to take the wires from certain telephone poles near Chestertown, Maryland, and to remove those poles from the ground. In the course of that operation, one of Allegheny's employees, Ralph W. Lods (Lods), was seriously injured when the telephone pole which he had climbed for the purpose of removing its wires, and to which he had attached himself, toppled over onto the bed of an adjacent roadway, pinning Lods underneath.

At the time of that accident there was in effect a policy of manufacturers' and contractors' liability insurance (MC), issued to C & P by Pennsylvania National's predecessor in interest³ for the policy period, July 1, 1960-July 1, 1963. Among other coverage, that policy afforded, under the heading, "Independent Contractors," insurance against bodily injury liability of up to $100,000 for each person injured. Also in effect at the time of Lods' accident was a policy of comprehensive general insurance (CGL), issued by Pennsylvania National to Allegheny for the policy period, July 1, 1962-July 1, 1963, which inter alia, afforded insurance against "contractual bodily injury liability" of up to $100,000 for injury to one person and of up to $300,000 for injuries arising from one accident.

After Lods suffered his accident, Pennsylvania National, as the workmen's compensation insurer of Allegheny, began to pay to Lods compensation insurance pursuant to the undertakings of the workmen's compensation policy. Lods also initiated, for his own use and for the use of Pennsylvania National as the compensation insurer, a $1,000,000 damage suit in the Superior Court of Baltimore City, against C & P, alleging, inter alia:

While the Plaintiff was upon the pole in the performance of his duties, the telephone pole because of its rotted and deteriorated condition at a point below the surface of the ground snapped and broke off throwing the Plaintiff to the ground where he was struck by the falling pole and where he sustained serious and permanent injuries hereinafter to be described. Plaintiff alleges that his fall and subsequent injuries were the direct result of the negligence of The Chesapeake and Potomac Telephone Company, its agents and servants, without any negligence on his part contributing thereto, because of the following reasons:

(a) The Chesapeake and Potomac Telephone Company approximately a year before this accident had transplanted the telephone pole which broke to the position it was on sic the date when Plaintiff fell and at the time of the transplant the pole was then in a deteriorated condition or about to be in a deteriorated condition in the very near future, all of which a proper inspection and the exercise of due care would have disclosed, but the Defendant, knowing or having the ability to know of the condition of said pole and the fact that utility men were to climb it, permitted and invited the Plaintiff, Ralph W. Lods, as an employee of Allegheny Construction Company, to climb upon the pole when it was an unsafe place in which to work;

(b) That in transplanting the pole aforesaid well-knowing that in the ordinary course of business pursuits that sic linesmen would climb the pole, the Defendant failed to transplant it in a proper and customary manner, failed to treat the wooden pole with chemical or other type of substance which would insure its safety and preservation and thus failed to provide the Plaintiff, Ralph W. Lods, with a safe place in which to work when it invited him as an employee of Allegheny Construction Company upon its property for the purpose of work; and

(c) In failing to inspect the aforesaid telephone pole prior to inviting and allowing Plaintiff, Ralph W. Lods, as an employee of Allegheny Construction Company, to climb upon said pole for the purpose of performing his work when a proper inspection coupled with knowledge or access to knowledge of The Chesapeake and Potomac Telephone Company of the age and condition of the pole would have revealed it as an unsafe working place; and

(d) In general in negligently failing to provide the Plaintiff with a safe place in which to work when he, as an employee of Allegheny Construction Company, was upon the property of the Defendant, The Chesapeake and Potomac Telephone Company, as a business invitee.

The declaration goes on to describe serious, painful and permanent injuries to Lods, including "severance or damage" to Lods' spinal nerve cord and resulting "paralysis of arms, legs and body."

C & P, alleging in the within proceeding that Allegheny and Pennsylvania National have refused to assume the defense of Lods' state court action against C & P and to acknowledge their respective obligations to C & P, asks this Court for a declaratory judgment with regard to (1) the coverage of Pennsylvania National's MC policy, (2) Allegheny's indemnification and hold-harmless obligations, (3) the coverage of Pennsylvania National's CGL policy, and (4) Allegheny's obligations if the CGL policy does not afford the contractor's liability coverage required by Allegheny's contract with C & P. Allegheny and Pennsylvania National also seek declaratory judgments with regard to their respective obligations. Because there are no factual disputes among the parties, all three of them appropriately seek summary judgment herein.

I. CHOICE OF LAW

A. General.

In the exercise of diversity jurisdiction a district court looks to the law of the state in which the court sits to determine what conflict of laws rule is applicable. Klaxon Co. v. Stentor Electric Mfg Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The issues involved herein all arise ex contractu. In Mackubin v. Curtiss-Wright Corp., 190 Md. 52, 57, 57 A.2d 318 (1948), the Court of Appeals of Maryland held that "it is a general rule of comity that the law of the place of contracting determines the validity and effect of a promise with respect to the nature and extent of the duty for the performance of which a party becomes bound." "A contract is made at the time when the last act necessary for its formation is done and at the place where that final act is done." Restatement of Contracts § 74 (1st ed. 1932). The Supreme Court of Pennsylvania has enunciated that same rule. Craig v. W. J. Thiele & Sons, Inc., 395 Pa. 129, 149 A.2d 35 (1959). So has the Court of Appeals of Maryland. Grain Dealers Mut. Ins. Co. v. Van Buskirk, 241 Md. 58, 65-66, 215 A.2d 467 (1965); Sun Ins. Office v. Mallick, 160 Md. 71, 81, 153 A. 35 (1931).

B. The August 24, 1961 Contract.

In this case, the August 24, 1961 contract was first signed by C & P in triplicate. Then, the three copies were forwarded by C & P to Allegheny on August 23, 1961, and, after execution by Allegheny, the latter returned one of the originals to C & P in Baltimore where the latter retained it. As Allegheny's signature was the last act needed for its creation, the contract was apparently formed in Pennsylvania. Accordingly, under Maryland's choice-of-law rule, Pennsylvania law would seem to govern the construction of the contract.⁴

C. The Policies.

The CGL policy, under which Allegheny was the insured, was issued in Pennsylvania by Wasson Insurance Agency of Pennsylvania (Wasson) on behalf of the insurer and was delivered in Pennsylvania to Allegheny by Wasson. Thus, Pennsylvania law, the lex loci contractus controls the construction of the CGL policy. The MC policy, effective July 1, 1960, was issued on behalf of the insurer by Wasson after it had been countersigned in Maryland by an agent of Pennsylvania National, resident in Maryland, and returned to Pennsylvania National in Pennsylvania. Although C & P was the insured under this policy, it was transmitted in Pennsylvania by Wasson to Allegheny, which, in accordance with its obligation under a predecessor to Allegheny's August 24, 1961 agreement with C & P, procured the MC policy and paid its premium. Allegheny subsequently delivered the policy to C & P, The parties do not know where that delivery took place though it was almost surely either in Pennsylvania or in Maryland. It would appear that Allegheny acted as C & P's agent in accepting the MC policy and that therefore that policy became effective in Pennsylvania. However, it is noted in that connection that C & P, under the August 24, 1961 agreement and presumably under the predecessor agreement in effect when the MC policy was issued, had the right to approve...