- James G. Davis Constr. Corp. v. Erie Ins. Exch.
- January 7, 2016 | Author: S. Joseph Cardile
- Law Firm: Thomas, Thomas & Hafer LLP - Baltimore Office
- Maryland Court of Special Appeals No. 802, September Term, 2014 Decided: October 28, 2015
For an insurer to be obligated to defend, the underlying tort suit need only allege action that is potentially covered by the policy, no matter how attenuated, frivolous, or illogical that allegation may be.
Davis, a general contractor, subcontracted Tricon to provide services on a home construction project. The terms of agreement required Tricon to obtain indemnification insurance naming Davis as an insured. Tricon presented Davis with a certificate of liability insurance in which Davis was a named insured under the Policy Additional Insured Endorsement. Attached to the certificate was a “Certificate Additional Insured Endorsement,” which sought to limit the definition of an insured to “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.”
Tricon erected a scaffold used by employees of another subcontractor allegedly under the authorization of Davis. The scaffold collapsed, injuring two employees. The employees filed suit against Tricon and Davis in the Circuit Court for Prince George’s County for negligence. Erie declined to assume Davis’ defense, claiming the Policy did not cover Davis, as an additional insured, for Davis’ own negligence, but only covered Davis’ vicarious liability through Tricon. Davis sued Erie in the Circuit Court for Montgomery County alleging breach of contract by failing to honor its duty to defend and indemnify. Davis filed a motion for partial summary judgment alleging Erie had a duty to defend it. In turn, Erie filed an opposition and cross-motion for summary judgment. The Circuit Court denied Davis’ partial motion for summary judgment and granted summary judgment in favor of Erie.
The Court of Special Appeals reversed, explaining that two questions guide a court’s determination of whether an insurer has a duty to defend its insured: (1) What is the coverage and what are the defenses under the terms and requirements of the insurance policy? (2) Do the allegations in the tort action potentially bring the tort claim within the policy’s coverage? Thus, it held that under the Policy Additional Insured Endorsement, Erie had a duty to defend Davis even if the allegations were not based solely on vicarious liability, as long as Davis was alleged to be liable, by the acts or omissions of Tricon. The Court explained that: “in order for an insurer to be obligated to defend an insured, the underlying tort suit need only allege action that is potentially covered by the policy, no matter how attenuated, frivolous, or illogical that allegation may be.” Because the Complaint alleged negligence against both Davis and Tricon, and Davis was an insured under Tricon’s policy for “any liability ‘caused, in whole or in part, by’ Tricon’s work on the project,” the Complaint alleged acts by Davis which were potentially covered by the policy.