Baltimore Gas and Elec. Co. v. Commercial Union Ins. Co.

• Decision Date: 01 September 1996
• Docket Number: No. 671,671
• Citation: 688 A.2d 496,113 Md.App. 540
• Parties: BALTIMORE GAS AND ELECTRIC COMPANY v. COMMERCIAL UNION INSURANCE COMPANY, et al. ,
• Court: Court of Special Appeals of Maryland

Page 540

113 Md.App. 540

688 A.2d 496

BALTIMORE GAS AND ELECTRIC COMPANY v. COMMERCIAL UNION INSURANCE COMPANY, et al.

No. 671, Sept. Term, 1996.

Court of Special Appeals of Maryland.

Feb. 4, 1997.

Ronald D. Byrd and Stephen J. Rosasco, Baltimore, for Appellant.

M. Bradley Hallwig (Robert H. Bouse, Jr., and Anderson, Coe & King, LLP, on the brief), Baltimore, for Appellees.

Argued before FISCHER and HOLLANDER, JJ., and JAMES S. GETTY, Judge (retired), Specially Assigned.

HOLLANDER, Judge.

In this case, we must decide whether an insurer's duty to defend its insured depends entirely upon the claims as originally asserted in the complaint, or whether the plaintiffs' revised allegations, during the course of litigation, may terminate the insurer's duty to defend. We also must determine if the insurer is obligated to indemnify its insured, and whether a subcontractor of the insured breached its contract to provide insurance for the insured.

In February 1991, Michael and Kathleen Corradetti filed suit against Jones Intercable, Inc. ("Jones") for personal injuries suffered after the couple's car fell into a utility pit ("the Corradetti suit"). They later amended their suit to include claims for negligence against Baltimore Gas and Electric Company ("BGE"), appellant, Ferguson Trenching Company ("Ferguson"), appellee, and others. Pursuant to a contract with BGE, Ferguson dug the pit into which Mr. Corradetti later drove his car. Ferguson was contractually obligated to obtain a general commercial liability insurance policy to protect both Ferguson and BGE, in connection with Ferguson's work for BGE. That policy, which is central to this dispute, was obtained from Commercial Union Insurance Company ("Commercial"), appellee, through Commercial's issuing company, American Employers Insurance Company ("American"), appellee.

Relying on the terms of the policy, Commercial declined to defend or indemnify BGE in the Corradetti suit. Thereafter, BGE instituted a declaratory action in the Circuit Court for Anne Arundel County, seeking a determination of its rights under the policy. After judgment was entered against BGE in the Corradetti suit, the circuit court granted appellees' motions for summary judgment in the declaratory action. It determined that Commercial did not have a duty to defend or indemnify BGE and that Ferguson did not breach its contractual obligation to provide BGE with insurance coverage. This appeal followed, in which BGE presents the following questions.

I. Did the circuit court err in granting Appellees' Motion for Summary Judgment on all issues relating to the indemnification and defense of BGE in the underlying Corradetti case?

II. Did the circuit court err in failing to grant Appellant's Motion for Partial Summary Judgment on all issues related to the indemnification and defense of BGE in the underlying Corradetti case?

For the reasons that follow, we shall affirm in part and reverse in part.

Factual Summary

In connection with BGE's installation of underground utilities in Anne Arundel County, BGE and Ferguson entered into a "blanket contract," which extended from June 1, 1989 to May 31, 1991. The agreement specifically required the insurance to cover "excavation" and "subsurface work," and provided that Ferguson assumed all risks of liability for injuries "arising out of or incident to the performance of the work." Further, the contract obligated Ferguson to maintain commercial general liability insurance for the benefit of BGE, listing BGE as an additional insured. Pursuant to the contract, in May 1990 Ferguson excavated the site in issue.

In accordance with the contract, Ferguson obtained insurance coverage from Commercial, through its issuing agent, American. ¹ Ferguson was the named insured on the policy and an endorsement to the policy named BGE as an additional insured. Under the policy, however, BGE's coverage was limited by several exclusions, which restricted coverage to claims based on negligence by Ferguson and claims that BGE negligently failed to supervise Ferguson.

Between May 21 and May 23, 1990, Ferguson dug a "splicing pit" adjacent to Seamore Street, in Anne Arundel County, based on a request from BGE under the parties' blanket contract. The pit was designed to give BGE access to a power line buried in the ground.

Some months later, in October 1990, the Corradettis visited the home of a friend residing on Seamore Street. As they were leaving, Mr. Corradetti backed his car down the driveway of the home and onto Seamore Street. Unfortunately, he stopped his car partially in the splicing pit. As he got out of his car, he fell into the pit, sustaining serious personal injuries. Although the Corradettis brought suit initially against Jones only, they amended their suit to add claims against BGE, Ferguson, C & P Telephone Company, and Spector Communications, Inc.

BGE advised Commercial of the suit and requested a defense. In September 1992, Commercial refused to defend BGE, asserting that the Corradettis' claim was not covered by Commercial's policy, as it fell within one of the exclusions to BGE's coverage. Consequently, BGE instituted a declaratory action against Commercial, alleging that the insurer was obligated to defend and indemnify BGE in the Corradetti case, and that Ferguson breached its contractual obligation to acquire certain insurance for BGE. On March 22, 1993, the court denied BGE's motion for summary judgment, concluding: "I don't think I can resolve this issue without [the Corradetti case] being resolved first."

In the meantime, the parties in the Corradetti case proceeded with discovery and, on April 12, 1993, the trial court held a hearing on the Corradettis' Motion For Dismissal By Order of Court, which all defendants, except BGE, joined. The motion sought dismissal of 1) all claims by the plaintiffs against all defendants, except BGE; 2) all cross-claims by Jones against the other defendants; and 3) BGE's cross-claim against Ferguson.

The Corradettis advised the court that they had concluded, based on discovery, that BGE alone was negligent, as it was responsible for the failure to backfill the pit. The plaintiffs further argued that the continued presence of the other defendants would confuse the jury, since "the only person we're going after is BG & E." Although BGE objected, the court granted the motion and dismissed all claims, with prejudice, except the Corradettis' claim against BGE. Thereafter, the Corradettis proceeded to trial and the jury returned a verdict finding BGE liable for negligence. It awarded the Corradettis $500,800.00 in damages. ²

The jury in the Corradetti case found BGE liable for the Corradettis' injuries, based on BGE's own negligence, apparently because of BGE's failure to backfill the splicing pit. The Corradetti jury returned the following answer to the single question presented to it on the issue of BGE's conduct:

1. Was the Defendant, the Baltimore Gas & Electric Company, negligent, and did that negligence proximately cause injuries to the Plaintiff, Michael W. Corradetti and his wife, Kathleen Corradetti?

Check: Yes (X) No ( )

On September 15, 1993, the court held a hearing in the declaratory action with regard to Ferguson's motion for summary judgment. Ferguson argued that the court's dismissal of BGE's cross-claim against it acted as res judicata or collateral estoppel of the entire declaratory action. The court concurred and dismissed the declaratory action.

BGE appealed both cases. In the Corradetti case, BGE asserted, inter alia, that it was not solely responsible for the condition of the trench, and argued that it should have had an opportunity to establish that others were liable for the accident. We upheld the jury verdict in an unreported opinion, but reversed the dismissal, with prejudice, of BGE's cross-claim against Ferguson; we directed the trial court to enter an order of dismissal without prejudice. Baltimore Gas and Electric Co. v. Corradetti, No. 1493, September Term 1993, 100 Md.App. 788 (filed May 2, 1994). While we determined that BGE was entitled to an opportunity to present evidence on its cross-claim, we rejected BGE's claim that it was entitled to a reversal because it had been prevented from presenting evidence that Ferguson and others were responsible for the Corradettis' injuries. We noted that "the questions of liability and damages as between BG & E and the Coradettis were unaffected by the presence or absence of Ferguson in the suit...." Slip. op. at 9. We reasoned that BGE never proffered any evidence to support its proposed defense, and that BGE's claim as to Ferguson and others was not relevant to the issues in the Corradetti suit, because BGE was not attempting to shift liability onto Ferguson. Rather, BGE was attempting to share liability with Ferguson, and thus BGE was not shielded from liability.

In an unreported opinion in the declaratory action, we concluded that our reversal of the dismissal of BGE's claim against Ferguson "eviscerated" the trial court's dismissal of the declaratory action based on res judicata or collateral estoppel principles. Baltimore Gas and Electric Co. v. Commercial Union Ins. Co., No. 23, September Term, 1994, 101 Md.App. 714 (filed Sept. 19, 1994). Therefore, we remanded the declaratory action for further proceedings.

On remand in the declaratory action, BGE filed a motion for partial summary judgment on the issue of whether Commercial had a duty to defend BGE in the Corradetti suit. The court denied this motion, and issued a written opinion and order dated September 19, 1995, concluding that Commercial "had no duty to defend BG & E in the Corradetti litigation." The court stated that it had previously found that Ferguson had completed the excavation work on May 25, 1990, and "was off the job from that point forward." The court thus concluded: "The Plaintiff in Corradetti was not injured as a result of Ferguson's omission to fill in the...