Selective Way Ins. Co. v. Fireman's Fund Ins. Co.
| Decision Date | 02 February 2023 |
| Docket Number | 753-2021 |
| Parties | SELECTIVE WAY INSURANCE COMPANY v. FIREMAN'S FUND INSURANCE COMPANY, ET AL. |
| Court | Court of Special Appeals of Maryland |
Circuit Court for Baltimore County Case No. C-03-CV-20-001121
Berger, Arthur, Kenney, James A., III (Senior Judge Specially Assigned), JJ.
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This appeal principally concerns the doctrine of equitable contribution, as it applies among liability insurers that have a common obligation to defend the same insured.
The parties to this case are liability insurance companies that did not provide a defense for a common insured in an underlying lawsuit. All of those insurers, except one, settled claims against them for an alleged breach of a contractual duty to defend the insured. The non-settling insurer proceeded to trial, at which a jury found it liable for $994,719.54 of defense costs from the underlying lawsuit. The non-settling insurer received a $588,152.00 credit against the judgment amount to account for payments made by other insurers for the settlements of the claims against them.
The non-settling insurer brought a separate action against the other insurers in the Circuit Court for Baltimore County. The non-settling insurer alleged that the amount of defense costs that it has been ordered to pay exceeds its proportionate share of the defense obligation to the insured.
The circuit court entered summary judgment against the non-settling insurer. The court concluded that the contribution claim must fail because the settling insurers had already been released from their contractual obligations before the non-settling insurer asserted the contribution claims.
The non-settling insurer took this appeal. For the reasons discussed in this opinion, we reverse the judgment in part. Although the non-settling insurer might not necessarily prevail on its equitable contribution claim, we cannot uphold the grant of summary judgment on the ground on which the circuit court relied.
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From 2001 to 2004, Questar Builders, Inc., oversaw the construction of an apartment complex in Baltimore County. During that time, Questar maintained liability insurance coverage from Nationwide Mutual Insurance Co. and Nationwide Property Casualty Insurance Co. (collectively, "Nationwide").
As the general contractor for the project, Questar entered into contracts with various subcontractors. These contracts required each subcontractor to indemnify Questar from claims for damages resulting from the subcontractor's work, to maintain liability insurance with "primary and noncontributory" coverage, and to name Questar as an "additional insured[]" on those policies. Many subcontractors complied with these requirements. Thus, in addition to the liability insurance coverage that Questar maintained with Nationwide, Questar became an additional insured under various liability insurance policies maintained by its subcontractors.
In 2006, the purchaser of the apartment complex sued Questar, alleging that Questar did not properly oversee the construction project.[1] After initially refusing to defend the lawsuit, Nationwide agreed to defend Questar under a reservation of rights. Nationwide appointed counsel to represent Questar and paid all of the attorneys' fees incurred in defending the construction-defect litigation. Several months later, counsel for Questar gave notice of the lawsuit to various insurers for Questar's subcontractors and
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made requests for defense and indemnification from those insurers. Ultimately, Questar resolved the construction-defect lawsuit through a settlement in 2009, after incurring approximately $1 million in attorneys' fees and other defense costs.
In 2008, Nationwide initiated a declaratory judgment action in the Circuit Court for Baltimore County against various subcontractors that had performed work for Questar and against various insurance companies that allegedly insured those subcontractors.[2]Nationwide alleged that each of the subcontractors' insurers breached a contractual duty to defend Questar in the construction-defect lawsuit.
Nationwide contended that each of the subcontractors' insurers provided primary liability insurance coverage to Questar. Nationwide claimed that it became subrogated to Questar's rights against those insurers when it paid for Questar's defense. Nationwide sought reimbursement from those insurers for all attorneys' fees and expenses that Nationwide had paid for the defense of Questar in the construction-defect lawsuit. Nationwide also sought reimbursement for the attorneys' fees and expenses incurred in prosecuting the declaratory judgment action.[3]
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According to Nationwide, the insurers that had a duty to defend Questar under one or more policies issued to Questar's subcontractors included: American Fire and Casualty Co., American Home Assurance Co., Cincinnati Insurance Co., Continental Casualty Co., Harford Mutual Insurance Co., Montgomery Mutual Insurance Co., Mutual Benefit Insurance Co., Ohio Casualty Insurance Co., Penn National Mutual Insurance Co., Selective Way Insurance Co., Twin City Fire Insurance Co., and West American Insurance Co.
In May 2009, shortly after the resolution of the construction-defect lawsuit, Nationwide agreed to settle its claims against Harford Mutual Insurance Co. (as well as its affiliate, Firstline National Insurance Co.). The record does not disclose the amount for which Nationwide agreed to settle its claims against those two companies.[4] The agreement did not include provisions specifying the effect of the settlement on any claims by or against the other defendant insurers.
In December 2009, counsel for Twin City Fire Insurance Co. filed a proposed stipulation among the remaining parties to the declaratory judgment action. The stated purpose of the stipulation was to permit any defendant to settle with Nationwide "without
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thereafter being subject to contribution or indemnity claims by non-settling defendants." Under the proposal, each defendant would promise not to assert any "claim for contribution or indemnity, whether brought as a cross claim in th[e] action or otherwise," against any defendant that reached a settlement with Nationwide. For each separate policy as to which Nationwide settled its claims, Nationwide would reduce its total damages claimed in the action by the settlement amount or $20,000.00, whichever was greater. For reasons that are not disclosed by the record, the parties did not agree to this proposed stipulation.
In September 2011, Nationwide entered into a settlement agreement with four defendants: American Home Assurance Co., Cincinnati Insurance Co., Continental Casualty Co., and Twin City Fire Insurance Co.
The September 2011 settlement agreement included provisions concerning potential claims for contribution or indemnity brought by or against the settling insurers. The four settling insurers agreed not to "institute an action to enforce any rights of contribution, indemnification, subrogation or similar relief" against the other defendant insurers. Nationwide promised that it would not settle with any other defendant insurer unless the settlement agreement included a "substantially identical" provision requiring the settling insurer "not to seek reimbursement from and not to assert an indemnification, contribution, subrogation, or other similar action" against the other insurers. In addition, Nationwide promised that, in the event that a non-settling insurer might obtain a judgment for contribution or indemnity against a settling insurer, Nationwide would
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reduce its judgment against that non-settling insurer to reflect the settlement payments made to Nationwide.
As a condition of the September 2011 settlement agreement, Nationwide promised to provide a written statement of its willingness to settle with all other defendant insurers. In accordance with that promise, Nationwide extended an offer to seven remaining defendants: American Fire and Casualty Co., Montgomery Mutual Insurance Co., Ohio Casualty Insurance Co., West American Insurance Co., Mutual Benefit Insurance Co., Penn National Mutual Insurance Co., and Selective Way Insurance Co. Nationwide offered to settle its claims against any of those defendants on what it called "the same terms" as the terms of the September 2011 settlement agreement, except for a relatively small increase in the settlement payments to account for additional attorneys' fees incurred after that settlement.
At the time of the uniform settlement offer, Nationwide was seeking to recover a total of $1,002,142.00 of defense costs from the construction-defect lawsuit and $566,983.00 of attorneys' fees and expenses incurred in prosecuting the declaratory judgment action. Nationwide offered to dismiss its claims against any defendant in exchange for payment of "65% of the pro rata per policy share of the total" damages claimed. Nationwide identified 34 separate "applicable policies" under which, it claimed, a defendant insurer was liable for reimbursement.[5] Nationwide determined the "total
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share per applicable policy" by calculating 65 percent of the total damages claimed and dividing that amount among the "applicable policies" of the defendant insurers. Using that method, Nationwide offered to settle its claims with respect to any defendant's insurance policy in exchange for the payment of $29,998.00 per policy. That amount included $19,159.00 for defense costs in the construction-defect lawsuit and $10,839.00 for the costs of prosecuting the declaratory judgment action.
The uniform settlement...
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