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Contractor Has Coverage for Sub’s Acts

A trial court erred in granting summary judgment to an insurance carrier for a general contractor seeking coverage under its CGL policy for collapse of a common wall during renovations, allegedly attributable to the subcontractor hired for foundation work; the 4th Circuit says the policy endorsement creates a duty to defend the contractor where it is being held liable for the sub’s acts or omissions.

Here, the relevant portion of the Policy by Certain Underwriters at Lloyd’s London is the Endorsement itself, which in this case is the Insurance Services Office’s ICG 20 10 07 04 Form, copyrighted by the ISO in 2004. It explicitly covers appellant as an additional insured for the 57 Bryant Street, Washington, DC, renovation project, but only with respect to liability for property damages caused in whole or in part by the foundation subcontractor’s acts or omissions, or the acts or omissions of those acting on behalf of the foundation subcontractor.

The Maryland Court of Appeals has not construed the Endorsement language presented in this case. However, the language is quite clear that coverage is provided for appellant as the additional insured for property damage caused in whole or in part by the subcontractor. Based on additional authority from the 5th Circuit and insurance law commentators, we conclude the plain language of the Endorsement provides for exactly what it says: coverage to appellant for property damage caused by the foundation subcontractor, either in whole or in part.

The Underwriters argue that coverage is limited to appellant’s vicarious liability for the subcontractor’s’ acts or omissions. However, there is no mention of vicarious or derivative liability in the Endorsement. The Endorsement language plainly lacks the vicarious liability limitation the Underwriters seek to impose. Even if we were to view the Endorsement language as ambiguous, we would be obligated to construe that ambiguity against the Underwriters and to find that the scope of the Endorsement extends to property damage caused by the subcontractor, either in whole or in part, regardless of whether the underlying complaint seeks to hold appellant vicariously liable for the subcontractor’s acts or omissions.

The court next asks whether the allegations in the tort action potentially bring the tort claim within the policy coverage. Here, the underlying complaint is silent as to the involvement of the subcontractor.  It is not named anywhere in the complaint. However, appellant has filed a third-party complaint against the subcontractor and its owner, and has introduced extrinsic evidence that the collapse of the common wall between 55 Bryant Street and 57 Bryant Street was caused by the foundation subcontractor. Given that the complaint filed by the carrier for the property at 55 Bryant Street alleges that the failure of defendants to properly excavate and support the structure at 57 Bryant Street constituted negligence, in that defendants failed to comply with the applicable standard of care while performing the 57 Bryant Street renovations, and given also that the subcontractor’s involvement in those renovations is undisputed, it cannot be said that the complaint does not seek to hold the named defendant liable for property damage caused in whole or in part by the subcontractor.

Because the underlying complaint does not make clear that the subcontractor conducted the foundation, structural and underpinning work that led to the collapse of the common wall, appellant is entitled to rely on its extrinsic evidence to establish those facts and to thereby establish a potentiality of coverage. It was error for the district court to conclude otherwise.

We vacate summary judgment for the carrier and remand for entry of summary judgment for the general contractor and a determination of whether the general contractor is entitled to expenses and attorney’s fees.

Capital City Real Estate LLC v. Certain Underwriters at Lloyd’s London (Gregory) No. 14-1239, June 10, 2015; USDC at Baltimore, Md. (Garbis) Robert L. Ferguson for appellant; Georgia S. Foerstner for appellee. VLW 015-2-095, 20 pp.

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