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Federal Insurance Co. v. Firemen's Insurance Company of Washington, Dc

United States District Court, D. Maryland

April 21, 2014

FEDERAL INSURANCE COMPANY
v.
FIREMEN'S INSURANCE COMPANY OF WASHINGTON, DC, et al.

MEMORANDUM OPINION

DEBORAH K. CHASANOW, District Judge.

There is one issue remaining for resolution in this insurance dispute in connection with a motion for summary judgment filed by Federal Insurance Company ("Federal"), which Judge Alexander Williams granted in part. ( See ECF Nos. 46 & 47).[1] This case concerns a dispute among three insurers regarding their obligation to provide insurance coverage in connection with an arbitration initiated by William Hammerash and his wife against Case Design/Remodeling, Inc. ("Case Design") and its subsidiary Case Handyman Services ("Case Handyman") for deficient performance on a home remodeling contract ("the Hammerash Arbitration"). In orders dated February 9, 2011 (ECF No. 47) and July 11, 2011 (ECF No. 55), Judge Williams requested that Defendants Firemen's Insurance Company ("Firemen's") and Netherlands Insurance Company ("Netherlands") submit supplemental briefing regarding the extent to which contribution was owed to Federal and the amounts in contribution. The issues have been fully briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, Netherlands will be ordered to contribute to Federal in the amount of $103, 228.61.

I. Background

The factual and procedural background of this action was documented in previous opinions, thus only a brief summary of the underlying issues in the case is necessary. ( See ECF Nos. 46, 54, 67). Federal, Netherlands, and Firemen's are insurance companies. Case Design, operating under the service mark, "Case Handyman, " provides home remodeling services. Case Design is Case Handyman's parent company. Case Handyman entered into a franchise agreement on October 15, 2003 with Shaun Arnold, principal of Professional Home Repair ("PHR"), which allowed PHR to conduct business as Case Handyman's franchisee. ( See ECF No. 29-7).[2] The agreement also gave PHR a license to use the Case Handyman service mark and logo. Netherlands insures Case Handyman, as an additional insured under a policy issued to PHR. ( See ECF No. 29-6). A condition of the franchise agreement between PHR and Case Handyman required PHR to name Case Handyman as an additional insured in Netherlands' insurance policy pursuant to the Commercial General Liability Extension Endorsement, and Case Handyman was so named.

Mr. Hammerash and his wife entered into several contracts with PHR for home remodeling. As a result of alleged performance deficiencies, the Hammerashes brought a complaint in arbitration against Case Design/Remodeling, Inc. on October 5, 2007. ( See ECF Nos. 29-9, 29-10, 29-13). The Hammerashes thereafter filed an amended complaint in the arbitration proceeding on March 25, 2009, naming Case Handyman as an additional respondent.[3] Case Design and Case Handyman moved for summary judgment on March 13, 2009, arguing, inter alia, that the arbitrator should dismiss the Hammerashes' claims because they failed to demonstrate that "the Case franchisee [PHR] who allegedly wronged them was the actual or apparent agent of the Case franchisor." (ECF No. 29-16, at 2). For reasons discussed infra, the arbitrator granted the motion in part on June 24, 2009.

Case Design submitted the arbitration for coverage to Federal, its insurance carrier.[4] Case Design also had policies with other insurance carriers, specifically Firemen's (ECF No. 29-5). Case Handyman sought coverage pursuant to the endorsement clause of a general liability insurance policy issued to PHR by Netherlands. (ECF No. 29-6). Federal argued that pursuant to the insurance policies entered into by Case Design with Defendants in this case, both Netherlands and Firemen's were obligated to provide coverage for, or contribute to, the defense of the Hammerash Arbitration.[5] Both Defendants denied coverage to either respondent in the Hammerash Arbitration.

Consequently, Federal filed a complaint against Firemen's, Netherlands, and Case Design/Remodeling, Inc. on September 9, 2009 (ECF No. 1), and later amended the complaint on April 28, 2010 (ECF No. 32).[6] Federal sought a declaration that Firemen's and Netherlands were obligated to provide insurance coverage for the Hammerash Arbitration (counts I & II) and also asserted a claim for subrogation/contribution to reimburse Federal for the defense costs Federal incurred on behalf of Case Design (and to the extent applicable, Case Handyman) (count III). ( Id. ).

Federal moved for summary judgment, and Firemen's and Netherlands filed cross-motions. ( See ECF Nos. 29, 38, & 39). Federal argued that its insurance policy with Case Design contained an "other insurance" clause, which obligated Netherlands and Firemen's to provide primary insurance coverage, and required Federal to provide "excess" coverage in instances where all of the insurance providers covered the "same claim." Federal maintained that because Netherlands and Firemen's were required to provide primary coverage for the Hammerash Arbitration, Federal had no duty to provide coverage for the Hammerash Arbitration, as its coverage was excess to claims over $1 million. Judge Williams rejected this argument, but granted in part Federal's motion, holding that although Netherlands was not required to indemnify Federal, it had to contribute to the defense costs of the Hammerash Arbitration. ( See ECF No. 47 ¶ 2).[7] In the February 9, 2011 memorandum opinion and order, Judge Williams granted Firemen's cross-motion, holding that Firemen's had no duty to defend the Hammerash Arbitration because its policy was excess to Netherlands' policy. ( Id. ¶ 3).[8] Thus, Judge Williams dismissed Firemen's from the case in the February 9, 2011 order. He ordered Federal and Netherlands to brief further the issue of the specific amount that should be awarded to Federal from Netherlands for the defense of the Hammerash Arbitration. (ECF No. 46, at 24).

Netherlands and Federal then moved for partial reconsideration. Judge Williams denied Netherlands' motion, but granted in part Federal's motion, finding persuasive Federal's argument that "after supplemental briefings are filed regarding the amount of contribution that the Netherlands owes to Federal, the Court could potentially conclude that the Netherlands' duty to defend ended when the [arbitrator in the] Hammerash Arbitration issued its decision on summary judgment on June 24, 2009." (ECF No. 54, at 8-9).[9] Consequently, Judge Williams ordered that Firemen's be reinstated as a party in the case "pending further briefings from the parties on the contribution amounts that the Netherlands owes Federal." ( Id. at 9).[10] Netherlands, Federal, and Firemen's submitted supplemental briefs on the contribution issue, the only remaining issue in the case. ( See ECF Nos. 61-65).

II. Analysis

Federal asserts that it is entitled to reimbursement for fifty (50) percent of all of the costs it has paid to date in connection with the Hammerash Arbitration, either from Netherlands only or from Netherlands and Firemen's. Federal informs that it has paid a total of $206, 457.22 in defense costs in connection with the Hammerash Arbitration.[11] Netherlands maintains that it should only provide coverage up until the point when the arbitrator issued his decision on summary judgment on June 24, 2009. Specifically, Netherlands believes that it is liable to Federal for contribution in the amount of $49, 249.00, representing half of the defense costs before the June 24, 2009 decision. (ECF No. 61, at 2).

The Additional Insured Endorsement in Netherlands' insurance policy with PHR states:

WHO IS AN INSURED is amended to include as an insured any person or organization when [PHR] and such person or organization have agreed in writing in a contract, agreement, or permit that such person or organization be added as an additional insured on your policy to provide insurance such as is afforded under this Coverage Part. Such person ...

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