Gables Constr., Inc. v. Red Coats, Inc.

• Decision Date: 26 May 2020
• Docket Number: No. 23, Sept. Term, 2019,23, Sept. Term, 2019
• Citation: 468 Md. 632,228 A.3d 736
• Parties: GABLES CONSTRUCTION, INC. v. RED COATS, INC., et al.
• Court: Court of Special Appeals of Maryland

468 Md. 632

228 A.3d 736

GABLES CONSTRUCTION, INC.

v.RED COATS, INC., et al.

No. 23, Sept. Term, 2019

Court of Appeals of Maryland.

May 26, 2020

Argued by Robert L. Ferguson, Jr. and Timothy J. Dygert, Jr. (Ferguson, Schetelich & Ballew, P.A., Baltimore, MD), on brief, for Petitioner.

Argued by Alex J. Brown (David B. Applefeld, Shapiro, Sher, Guinot & Sandler, P.A.; Joseph T. Mallon, Jr., Mallon, LLC, Baltimore, MD), on brief, for Respondents

Howard G. Goldberg, Esquire, Goldberg & Banks, P.C., 1829 Reisterstown Road, Suite 120, Baltimore, MD 21208, for amicus curiae Architects, Associated General Contractors of America and Maryland AGC in Support of Petitioner

Argued before: Barbera, C.J.; McDonald, Watts, Hotten, Getty, Booth and Clayton Greene, Jr. (Senior Judge, Specially Assigned), JJ.

Booth, J.

Under our American civil justice system, there are situations in which a wrongdoer may be culpable for causing an injury, but not legally responsible to the injured party for damages. These scenarios can arise through the application of a variety of legal defenses which preclude recovery by the injured person, such as a statutory defense arising from an immunity, or a common law bar such as contributory negligence or assumption of the risk. There are also situations where the joint actions of two or more wrongdoers make these individuals jointly and severally liable for causing injuries to an injured party. In certain instances, where one wrongdoer has paid damages and has discharged the injured party's claim, the wrongdoer may have the right to recover a pro rata share of damages from another legally responsible party. Such a claim is known as a right to contribution, which arises under the Maryland Uniform Contribution Among Joint Tort-Feasors Act, Md. Code (1974, 2013 Repl. Vol., 2019 Cum. Supp.), Courts & Judicial Proceedings Art. ("CJ") § 3-1401, et. seq. ("UCATA"). The UCATA provides for the right of contribution among "joint tort-feasors," which is defined as "two or more persons jointly or severally liable in tort for the same injury to person or property, whether or not judgment has been recovered against all or some of them." CJ §§ 3-1401(c) ; 3-1402. In this case, we must determine whether a claim for contribution may arise under the UCATA when two wrongdoers are culpable for the wrong inflicted on the injured party, but only one wrongdoer is legally responsible to the injured party because of a defense arising from a contractual waiver of subrogation.

During the evening of March 31, 2014, and early morning of April 1, 2014, a fire damaged a near-completed 139-unit apartment building. The fire caused approximately $22,150,000 in damage. The project's owner, Upper Rock II, LLC ("Upper Rock"), brought suit against Red Coats, Inc. ("Red Coats"), a firm hired to perform security and fire watch, alleging gross negligence and breach of contract. Red Coats filed a third-party claim against Gables Construction, Inc. ("GCI"), the project's general contractor, as well as other parties, seeking contribution under the UCATA.

Prior to construction, Upper Rock and GCI entered into a contract ("the Prime Contract"), which included a waiver of subrogation, which required Upper Rock to purchase property insurance and transfer all risk of loss for fire-related claims to the insurer, rather than Upper Rock and GCI. Under the waiver provisions, the parties waived the right to recover damages from fire-related claims from each other or any of their subcontractors, sub-subcontractors, and employees. As a result of the waiver of subrogation, Upper Rock could not hold GCI liable for any damages from the fire.

After Upper Rock and Red Coats settled, GCI moved for summary judgment. GCI argued that, because it was not liable to Upper Rock, GCI did not fit the definition of joint tortfeasor under the UCATA and, therefore, Red Coats’ action for contribution must fail as a matter of law. The circuit court denied GCI's motion, and the case proceeded to trial. After hearing testimony from various witnesses, the jury found that the fire was a direct and foreseeable consequence of GCI's negligence and that Red Coats was entitled to contribution from GCI in the amount of $7 million.

GCI appealed, and the Court of Special Appeals affirmed Red Coats’ ability to recover contribution, but reduced the amount to $2 million, half of what Red Coats paid out of pocket in its settlement with Upper Rock. GCI petitioned for a writ of certiorari , which we granted to consider the following question: "As a matter of first impression, did [the Court of Special Appeals] err in holding that a defendant can be liable for joint tortfeasor contribution even though it is not liable to the injured person in tort by virtue of a contractual waiver of claims covered by insurance?"

For reasons set forth below, we hold that where a waiver of subrogation precludes liability to the injured party, the third-party defendant does not fall within the definition of a "joint tortfeasor" under the UCATA and there is no statutory right of contribution.

I. BACKGROUND

Upper Rock and GCI entered into the Prime Contract on August 2, 2012. Under the terms of the Prime Contract, GCI would serve as the general contractor for the construction of a multi-building apartment complex in Rockville, Maryland (the "Project"). The Prime Contract was an American Institute of Architects ("AIA")¹ standard form general contract and consisted of two main documents: (1) AIA Document A102™ – 2007, Standard Form Agreement Between Owner and Contractor (the "A102 Document"); and (2) AIA Document A201™ – 2007, General Conditions of the Contract for Construction (the "General Conditions"). Upper Rock and GCI modified or eliminated certain provisions of these AIA standard forms. However, in the General Conditions, they retained language relating to the purchase of property insurance, and they retained the fundamental concepts contained in a related waiver of subrogation, as those provisions had been drafted by the AIA.

Those provisions placed the responsibility on the Owner, Upper Rock, to purchase and maintain a policy of property insurance on the work being performed. The waiver of subrogation provision, Section 11.3.1, provided that the Owner waive all rights against the Contractor, GCI, as well as other project participants, including subcontractors, for damages caused by fire or other causes of loss to the extent covered by insurance.

Section 11.3.1 provided:

[T]he Owner [Upper Rock] shall purchase and maintain ... property insurance written on a builder's risk "all-risk" or equivalent policy form in the amount of the ... total value for the entire Project at the site on a replacement cost basis[.] ... Such property insurance shall be maintained ... until final payment has been made as provided in Section 9.10 or until no person or entity other than the Owner [Upper Rock] has an insurable interest in the property required by this Section 11.3 to be covered, whichever is later. This insurance shall include interests of the Owner [Upper Rock], the Contractor [GCI], Subcontractors and Sub-subcontractors in the Project.²

The General Conditions § 11.3.1.1 provided that the insurance obtained by Upper Rock pursuant to § 11.3 "shall include, without limitation, insurance against the perils of fire (with extended coverage) and physical loss or damage[.]" Additionally, if the property insurance required deductibles, "the Owner [Upper Rock] shall pay costs not covered because of such deductibles as a Cost of the Work." General Conditions, § 11.3.1.3.

Section 11.3.1.2 provided:

If the Owner [Upper Rock] does not intend to purchase such property insurance required by the Contract and with all of the coverages in the amount described above, the Owner [Upper Rock] shall so inform the Contractor [GCI] in writing prior to the commencement of the Work. The Contractor [GCI] may then effect insurance that will protect the interests of the Contractor [GCI], Subcontractors and Sub-subcontractors in the Work, and by appropriate Change Order the costs thereof shall be charged to the Owner [Upper Rock]. If the Contractor [GCI] is damaged by the failure or neglect of the Owner [Upper Rock] to purchase or maintain insurance as described above, without so notifying the Contractor [GCI] in writing, then the Owner [Upper Rock] shall bear all reasonable costs properly attributable thereto.³

Section 11.3.7 provided, in pertinent part:

The Owner [Upper Rock] and Contractor [GCI] waive all rights against (1) each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other, and (2) any of their subcontractors, sub-subcontractors and employees, for damages caused by fire or other causes of loss to the extent covered by property insurance obtained pursuant to this Section 11.[3]⁴ or other property insurance applicable to the Work[.]⁵

Read together, the waiver of subrogation and property insurance provisions transferred the entire risk of loss by fire to the builder's risk insurer, rather than Upper Rock and GCI, and waived all fire-related claims between Upper Rock and GCI.

In January 2014, GCI's parent company, Gables Residential Services, Inc. ("GRSI"), hired Red Coats to perform fire watch and security services for the Project. Typically, GCI's assistant superintendent for the Project would sweep the buildings each day for hazards after the jobsite closed. After that, a Red Coats security officer would provide security for the Project.

During the night of March 31, GCI's superintendent did not perform the typical sweep of the building. After the last worker left and the gates were locked, no one was inside the buildings. Red Coats security officer, Tamika Shelton, was on duty that evening. However, she did not enter the buildings.

At some point during the night and into the early morning, a fire broke out in the building destroying most of the building and causing approximately $17.6 million in...