James G. Davis Constr. Corp. v. Erie Ins. Exch.

• Decision Date: 28 October 2015
• Docket Number: No. 802, Sept. Term, 2014.,802, Sept. Term, 2014.
• Citation: 126 A.3d 753,226 Md.App. 25
• Parties: JAMES G. DAVIS CONSTRUCTION CORPORATION v. ERIE INSURANCE EXCHANGE.
• Court: Court of Special Appeals of Maryland

226 Md.App. 25

126 A.3d 753

JAMES G. DAVIS CONSTRUCTION CORPORATION

v.ERIE INSURANCE EXCHANGE.

No. 802, Sept. Term, 2014.

Court of Special Appeals of Maryland.

Oct. 28, 2015.

Reconsideration Denied Dec. 31, 2015.

William H. White, Washington, D.C., & James D. O'Connor (Kirk O. Kolbo, Maslon, Edelman, Borman & Brand, LLP, Minneapolis, MN, Clifton M. Mount, Bode & Fierberg, LLP, Washington, D.C.), on the brief, for Appellant.

Edward J. Brown, Ellicott City, MD, for Appellee.

Panel: MEREDITH, BERGER, and LEAHY, JJ.

BERGER, J.

This appeal arises out of an order of the Circuit Court for Montgomery County, entered on May 30, 2014, granting a motion for summary judgment filed by Erie Insurance Exchange ("Erie"). The circuit court further denied a motion for partial summary judgment filed by James G. Davis Construction Corporation ("Davis"). In granting Erie's motion for summary judgment, the circuit court found that Erie did not have a duty to defend Davis in a tort suit filed in the Circuit Court for Prince George's County, despite the fact that Davis was listed as an "additional insured" on an insurance policy issued by Erie to Erie's subcontractor, Tricon Construction, Inc. ("Tricon").

On appeal, Davis presents one issue for our review, which we have rephrased as follows:

Whether the circuit court erred in granting Erie's motion for summary judgment and denying Davis's motion for partial summary judgment.

For the reasons that follow, we reverse the judgment entered by the Circuit Court for Montgomery County and remand this case to the Circuit Court for Montgomery County for additional proceedings consistent with this opinion.

FACTUAL AND PROCEDURAL BACKGROUND

I. Subcontract Agreement and Indemnification

In 2009, Davis served as the general contractor for a home construction project in Washington, D.C. (the "Project"). On January 6, 2009, Davis subcontracted Tricon to provide drywall, insulation, and fireplace services on the Project. The terms of the subcontract agreement between Davis and Tricon (the "Subcontract Agreement"), as amended on January 22, 2009, provided that:

To the fullest extent permitted by applicable state law [Tricon] shall indemnify, save harmless [Davis] ... from any and all claims, and liabilities for property and personal injury, including death, arising out of or resulting from or in connection with any negligent act or omission of [Tricon], its sub-subcontractors, vendors or anyone else for whom [Tricon] is responsible in the execution of the work, whether or not caused in part by the active or passive negligence or other fault of a party indemnified hereunder.

The Subcontract Agreement further provided that this indemnity "shall be insured from an acceptable insurance carrier with minimum A.M. Best rating of A, naming [Davis] as an additional insured by ISO form CG 2010, 11/89 edition endorsement or equivalent...." Pursuant to the Subcontract Agreement, Tricon was to indemnify Davis for up to $1,000,000 per occurrence and up to $2,000,000 in the aggregate for all work performed on the Project.

Upon execution of the Subcontract Agreement, Tricon presented Davis with a certificate of liability insurance as proof that it had procured insurance coverage for Davis as required by the Subcontract Agreement. Attached to the certificate of liability insurance was an additional insured endorsement (the "Certificate Additional Insured Endorsement"). Read together, these documents provided that Tricon was issued a commercial general liability policy by Erie (the "Policy") and that Davis was named as an additional insured on the Policy. The Certificate Additional Insured Endorsement provided the following:

A. Section II—Who is an insured is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of [Tricon's] ongoing operations performed for that insured.

B. With respect to the insurance afforded to these additional insureds, the following exclusion is added:

2. Exclusions

This insurance does not apply to "bodily injury" or "property damage" occurring after:

(1) All work, including materials, parts or equipment furnished in connection with such work, on the project (other than service, maintenance or repairs) to be performed by or on behalf of the additional insured(s) at the site of the covered operations has been completed; or

(2) That portion of "[Tricon's] work" out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing operations for a principal as a part of the same project.

The Certificate Additional Insured Endorsement also included a schedule, listing Davis an additional insured under the Policy.

The Policy actually issued to Tricon, however, included an additional insured endorsement (the "Policy Additional Insured Endorsement") with slightly different terms from those in the Certificate Additional Insured Endorsement. The Policy Additional Insured Endorsement provided as follows:

A. Section II—Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for "bodily injury," "property damage" or "personal and advertising injury" caused, in whole or in part, by:

1. [Tricon's] acts or omissions; or

2. The acts or omissions of those acting on [Tricon's] behalf;

in the performance of [Tricon's] ongoing operations for the additional insured(s) at the location(s) designated above.

B. With respect to the insurance afforded to these additional insureds, the following additional exclusions apply:

This insurance does not apply to "bodily injury" or "property damage" occurring after:

1. All work, including materials, parts or equipment furnished in connection with such work on the project (other than service, maintenance or repairs) to be performed by or on behalf of the additional insured(s) at the location of the covered operations has been completed; or

2. That portion of "[Tricon's] work" out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing operations for a principal as a part of the same project.

(emphasis added). The Policy Additional Insured Endorsement further referred to a set of declarations within the Policy. One such declaration, effective January 22, 2009, indicated that Davis was added onto the Policy as an additional insured.¹

II. Tort Litigation

As part of its work on the Project, Tricon erected a scaffold, which it owned, at the site of the Project's construction. Another of Davis's subcontractors, American Mechanical Services, subcontracted Frost Fire Insulation ("Frost Fire") to perform air conditioning and insulation work on the Project. On September 24, 2009, two employees of Frost Fire were using Tricon's scaffold to complete their work on the Project when the scaffold collapsed, injuring the two Frost Fire employees. The injured Frost Fire employees alleged that they were authorized to use Tricon's scaffold and were assured by Davis that the scaffolding was safe and secure.

The two injured Frost Fire employees filed suit against Tricon and Davis in the Circuit Court for Prince George's County (the "Tort Litigation"). The Frost Fire employees alleged one count of negligence against Tricon and one count of negligence against Davis. After being served with the Frost Fire employees' complaint, Davis notified Erie of the Tort Litigation and tendered its defense to Erie. Erie, however, declined to assume Davis's defense. Erie claimed that the Policy did not cover Davis, as an additional insured, for Davis's own negligent acts.

III. Breach of Contract Litigation

On June 5, 2013, Davis filed a complaint in the Circuit Court for Montgomery County alleging that Erie breached its contract with Davis by failing to honor its duty to defend and indemnify Davis in the Tort Litigation. Davis claimed that the terms of the Policy required Erie to defend Davis in the underlying litigation. Furthermore, Davis requested a declaratory judgment from the circuit court that would declare that Davis is entitled to a defense from Erie in the Tort Litigation; that Davis is entitled to indemnity from Erie with respect to all costs, fees, expenses, settlements and/or judgments paid for or incurred by Davis in the Tort Litigation; that Davis is entitled to reimbursement from Erie for all attorneys' fees Davis incurred defending against the Tort Litigation; and that Davis is entitled to reimbursement from Erie for all attorneys' fees Davis incurred in its lawsuit against Erie.

On February 10, 2014, Davis filed a motion for partial summary judgment in which it alleged that Erie had a duty to defend Davis in the Tort Litigation. Davis asserted that it was added to the Policy as an additional insured and that the claims asserted against it in the Tort Litigation were covered by the Policy. Davis, therefore, claimed that Erie's duty to defend Davis was triggered by the complaint in the Tort Litigation. On February 25, 2014, Erie filed an opposition to Davis's motion for partial summary judgment that also functioned as a cross-motion for summary judgment.

The circuit court heard the parties' cross-motions for summary judgment on April 23, 2014 and issued an oral opinion and order on the motions on May 27, 2014. The court denied Davis's motion for partial summary judgment and granted summary judgment in favor of Erie. In its oral opinion and order, the court, finding no genuine dispute of material fact, concluded that Davis was covered by the Policy as an additional insured. The court further found that Erie did not have a duty to defend Davis in the Tort Litigation because the Policy did not cover Davis for Davis's own negligence, and the complaint in the Tort Litigation "contain[ed] a separate allegation of negligence against Davis for Davis'[s] own acts...