CSX Transp., Inc. v. Mass Transit Admin.

• Court: Maryland Court of Appeals
• Writing for the Court: SALMON
• Citation: CSX Transp., Inc. v. Mass Transit Admin., 683 A.2d 1127, 111 Md.App. 634 (Md. App. 1995)
• Decision Date: 01 September 1995
• Docket Number: No. 1779,1779
• Parties: CSX TRANSPORTATION, INC. v. MASS TRANSIT ADMINISTRATION. ,

Page 634

111 Md.App. 634

683 A.2d 1127

CSX TRANSPORTATION, INC. v. MASS TRANSIT ADMINISTRATION.

No. 1779, Sept. Term, 1995.

Court of Special Appeals of Maryland.

Oct. 30, 1996.

M. Natalie McSherry (Stephen B. Caplis and Whiteford, Taylor & Preston, on the brief), Baltimore, for appellant.

William A. Kahn, Assistant Attorney General (J. Joseph Curran, Jr., Attorney General, on the brief), Baltimore, for appellee.

Argued before MOYLAN, HOLLANDER and SALMON, JJ.

SALMON, Judge.

Appellant, CSX Transportation, Inc. (CSXT), operates Maryland Rail Commuter (MARC) service for the Mass Transit Administration (MTA) under a State procurement contract. The contract requires the MTA (appellee) to indemnify CSXT for any and all claims arising out of "Contract Service," which includes, inter alia, train operation. This case arises out of a claim, submitted to the MTA on October 25, 1993 by CSXT, for indemnification of property damage losses resulting from a December 1992 collision between a MARC train and a backhoe owned by a third party. The claim was denied by the MTA on May 27, 1994. CSXT appealed the MTA's denial to the Maryland State Board of Contract Appeals (the "Board"). On January 3, 1995, after hearing argument on cross motions for summary disposition, the Board affirmed the MTA's denial of the claim. CSXT filed a Petition for Judicial Review with the Circuit Court for Howard County, and on September 11, 1995, the court affirmed the Board's decision.

CSXT filed a timely appeal presenting the following issues, which we have rephrased:

1. Whether the indemnification claim arose out of contract service because the collision involved a MARC train operating pursuant to the contract.

2. Whether MTA's promise to indemnify CSXT is rendered unenforceable by section 5-305 of the Maryland Courts and Judicial Proceedings article.

FACTS

In 1979, the Baltimore & Ohio Railroad Company, predecessor in interest to CSXT, and the State Railroad Administration, predecessor in interest to the MTA, entered into certain leasing and operating agreements which were later superseded by a Commuter Rail Passenger Service Agreement (the "contract"). Pursuant to the contract, CSXT operates weekday commuter passenger rail service known as MARC between Baltimore and Washington, D.C., and between Washington and Martinsburg, West Virginia, on tracks owned by CSXT and using station facilities owned by CSXT, CSXT and MTA rolling stock, CSXT maintenance facilities, and CSXT employees.

CSXT's primary obligations under the contract are summarized in Article I, section 1(a):

SECTION 1. SERVICE OBLIGATION

(a) CSXT will provide regularly scheduled daily commuter rail service on weekdays (Monday through Friday) on its Capitol Subdivision line between Baltimore, Maryland and Washington, DC, its Metropolitan and Cumberland Subdivision lines between Martinsburg, West Virginia, and Washington, DC, in accordance with Section 2 of this Agreement. This train operation, plus the maintenance of equipment access of and use of facilities, ticket sales, and other activities required to support the operation of the train service as provided in this Article I, shall be called the "Contract Service." CSXT will make available its rail facilities on the above stated lines to provide the Contract Service. CSXT will operate the Contract Service in a safe and efficient manner with use of appropriate facilities and staff for management, train operations, and maintenance....

(Emphasis added.)

Under section 9(b) of the contract, the MTA agreed to indemnify CSXT from loss arising out of the Contract Service:

SECTION 9. RISK OF LIABILITY, INDEMNIFICATION AND INSURANCE

(b) Indemnification by Administration

(1) The Administration agrees to indemnify, save harmless, and defend CSXT from any and all casualty losses, claims, suits, damages or liability of every kind arising out of the Contract Service under this agreement....

(Emphasis added.)

CSXT contracted with Melvin Benhoff Sons, Inc. (Benhoff) to remove and replace four public road crossings over CSXT's track. One of the crossings was at Hanover Street in Baltimore City. Benhoff's work was part of general track rehabilitation to benefit all traffic, both passenger and freight. The MTA was not notified of the work to be performed by Benhoff or asked to contribute to the cost of the work.

Benhoff commenced work with a backhoe at the Hanover Street crossing on December 18, 1992. Although a CSXT supervising foreman was present, the central train dispatcher was not informed--as required by CSXT's operating rules--of Benhoff's work plans on the track. Due to this oversight, no train engineer or dispatcher was notified of the obstruction on the track caused by Benhoff's work.

On December 18, 1992, a MARC train en route to Baltimore rounded a bend and collided with one of Benhoff's backhoes, which blocked the tracks. It is undisputed that the collision was not caused by negligence on the part of personnel on the MARC train. Benhoff made a claim for $40,420.25 against CSXT for the damage to the backhoe. Without conceding liability, CSXT settled the claim for $23,350. Relying on the indemnity agreement in the contract, CSXT made an indemnification claim against the MTA for $23,350 plus attorney's fees.

After the MTA denied CSXT's claim, CSXT appealed to the Board. The Board held that CSXT was not entitled to indemnity because the claim did not arise "out of 'Contract Service.' " The Board opined that "the mere fact that a MARC train was innocently and fortuitously involved in the incident does not bring the incident within the ambit of the definition of 'contract service' under the Contract." Moreover, the Board ruled that Benhoff's work--repairing the grade crossing--did not constitute Contract Service within the meaning of the contract. The circuit court, affirming the Board, held that 1) the work being performed by Benhoff was not within the scope of the contract service and 2) the "fortuitous" involvement of the MARC train in the accident did not require indemnification by the MTA.

DISCUSSION

I. Standard of Review

The Board is an "agency" within the ambit of the Maryland Administrative Procedure Act, which is codified in the Maryland Code, State Government article, § 10-101 et seq. (1995). Department of General Services v. Harmans Associates Ltd. Partnership, 98 Md.App. 535, 542, 633 A.2d 939 (1993). Where an agency's decision is predicated solely upon an error of law, no deference is appropriate and the reviewing court may substitute its judgment for that of the administrative agency. Washington Nat'l Arena Ltd. Partnership v. Comptroller of Treasury, 308 Md. 370, 378-79, 519 A.2d 1277 (1987); Kohli v. LOOC, Inc., 103 Md.App. 694, 710-11, 654 A.2d 922 (1995); Gray v. Anne Arundel County, 73 Md.App. 301, 307-09, 533 A.2d 1325 (1987).

In the case sub judice, the facts are undisputed. The Board's decision was a purely legal determination of the meaning of the contractual term "arising out of." Thus, we must determine only whether the Board applied the correct principles of law to the undisputed facts. In making that determination, we accord no deference to the Board's findings. Kohli, supra, 103 Md.App. at 711, 654 A.2d 922.

II.

CSXT asserts that the December 18, 1992, collision arose out of "Contract Service" because the collision involved a MARC train and "Contract Service" specifically includes "train operations." CSXT argues that, contrary to the Board's determination and the MTA's assertions, questions of legal liability or fault play no role in the determination of whether the claim "arises out of" contract service.

The MTA argues that the term "arising out of" requires a causal connection "between the damage or injury and the activity covered by the provision." The MTA asserts that although it was "the impact between the MARC train and the backhoe that eventually led to the payment CSXT made to Benhoff" the required causal connection is nevertheless lacking. The MTA argues that no causal connection exists because the MARC train did not causally contribute "to the dangerous situation that caused the collision," i.e., it was not negligent. According to the MTA, "[a]ll that one can say ... is that the MARC train was 'there.' But being there is not sufficient" to require indemnification of CSXT.

Whether someone or something else other than the MARC train may be legally liable for the damage is immaterial. The issue of negligence is separate from that of causation and it has no role in determining whether the collision "arose out of" Contract Service.

In construing the phrase "arising out of the Contract Service," we apply the definition set forth in Northern Assurance Co. v. EDP Floors, 311 Md. 217, 230, 533 A.2d 682 (1987). In that case, the Court determined that the "words 'arising out of' must be afforded their common understanding, namely to mean originating from, growing out of, flowing from, or the like." Id. at 230, 533 A.2d 682; see also 12 Couch on Insurance 2d § 45:61 (rev. ed. 1981) ("arising out of" generally means originating from, growing out of, or flowing from); 6B Appleman, Insurance Law and Practice § 4317, at 360-63 (Buckeley ed. 1979) (in automobile insurance context, words arising out of have "broader significance than words 'caused by' and are ordinarily understood to mean originating from, incident to, or in connection with the use of the vehicle"). ¹ In addition, in Maryland, it is well established that the words "arising out of" require a showing of a causal relationship, although "recovery is not limited to the strict rules developed in relation to direct and proximate cause." National Indemnity Co. v. Ewing, 235 Md. 145, 149-50, 200 A.2d 680 (1964); see Frazier v. Unsatisfied Claim & Judgment Fund Bd., 262 Md. 115, 277 A.2d 57 (1971); McNeill v. Maryland Ins. Guar. Ass'n, 48 Md.App. 411, 427 A.2d 1056 (1981); see also 1 Rowland H. Long, The Law of Liability Insurance...