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Gables Construction, Inc. v. Red Coats, Inc.

Court of Special Appeals of Maryland

May 10, 2019


          Circuit Court for Montgomery County Case No. 397964.

          Fader, C.J., Wright, Eyler, James R., (Senior Judge, Specially Assigned), JJ.


          Wright, J.

         This appeal presents a question of first impression in Maryland: whether, and under what circumstances, a contractual waiver can shield a contracting party from both third-party contribution and direct liability, in addition to other issues. We shall affirm the Circuit Court for Montgomery County's rulings and hold that a contractual waiver of subrogation does not bar contribution under the Maryland Uniform Contribution Among Joint Tort-Feasors Act ("UCATA"), but part ways with the jury verdict and hold that the contractual waiver in the Vendor Services Agreement ("VSA") and the settlement agreement and release controls the relationship between appellant, Gables Construction ("GCI"), and the appellees, Red Coats, Inc./Admiral ("Red Coats"), appellee, a security and fire watch company.

         In the overnight hours between March 31, 2014, and April 1, 2014, a fire damaged a 139-unit apartment building (the "Project") that was nearing completion. The building sustained damages in excess of $22, 150, 000.00. Due to the fire, Upper Rock, Inc. ("Upper Rock"), the Project's owner, sued Red Coats, a security and fire watch company for gross negligence and breach of contract. In turn, Red Coats filed a third-party claim against GCI, the general contractor, seeking contribution under the UCATA in the circuit court. GCI responded by filing a Motion for Summary Judgment, which proved unsuccessful.

         After a hearing on April 1, 2016, the circuit court found that a waiver of subrogation involved in a contract between GCI and Upper Rock limited any indemnification claims, but did not limit GCI's liability for contribution. A jury found that GCI was a joint-tortfeasor which was liable for damages, and the court awarded $7, 000, 000.00 to Red Coats, half of the damages owed to Upper Rock. GCI timely appealed and presents the following questions for our review:

I. Whether the judgment should be reversed because GCI is not a "joint tortfeasor" under the UCATA.
II. Whether the judgment should be reduced because Red Coats contractually waived claims against [GCI] to the extent covered by insurance.
III. Whether the trial court erred when it entered partial summary judgment on the issue of [GCI's] negligence.
IV. Whether the trial court erred in giving ambiguous, misleading, and confusing answers to questions asked by the deliberating jury.
V. Whether the trial court erred in granting the motions for judgment made against [GCI] by Retana Contractors and Rosa's Painting.
VI. Whether the trial court erred in declining to give the superseding cause instruction.

         We answer question II in the affirmative and question I, III, IV, V, and VI in the negative and remand for proceedings consistent with this opinion. For the reasons to follow, we will affirm in part and reverse in part the circuit court's judgments.


         The Prime Contract

         In 2012, Upper Rock and GCI entered into a Document A102-2007 Standard Form of Agreement Between Owner and Contractor Contract (the "Prime Contract") to govern the construction of a complex, which included Building G, a 139-unit apartment building. The Prime Contract listed Upper Rock as the Owner and GCI as the Contractor.[1]

         Section 3.18.1 of the General Conditions of the Prime Contract contained an indemnification provision which read:

To the full extent permitted by law the Contractor shall indemnify and hold harmless the Owner, Architect, Architect's consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself), but only to the extent caused by the negligent acts or omissions of the Contractor, Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Section[.]

         Section 10.2 of the General Conditions which governed the safety of persons and property, stated, in relevant part:

10.2.4 When use or storage of explosives or other hazardous materials or equipment or unusual methods are necessary for execution of the Work, the Contractor shall exercise utmost care and carry on such activities under supervision of properly qualified personnel.
10.2.6 The Contractor shall promptly remedy damage and loss (with respect to any damage or loss insured under property insurance required by the Contract Documents, Owner shall provide the insurance proceeds therefor to Contractor) to property referred to in Sections and caused in whole or in party by the Contractor, a Subcontractor, a Sub-subcontractor or anyone directly or indirectly employed by any of them, or by anyone for whose acts they may be liable and for which the Contractor is responsible under Sections and, except damage or loss attributable to acts or omissions of the Owner or Architect or anyone directly or indirectly employed by either of them, or by anyone for whose acts either of them may be liable, and not attributable to the fault or negligence of the Contractor. The foregoing obligations of this Contractor are in addition to the Contractor's obligations under Section 3.18.

         Section 11.1.2 required GCI to carry different types of insurance including Workers Compensation and Employers' Liability Insurance, and General Liability Insurance.[2] Section 11.3.7 included a Waiver of Subrogation, at issue in this case. The Waiver reads, in pertinent part:

The Owner and Contractor waive all rights against (1) each other and any of their subcontractors, sub-subcontractors, agents and employees, each of the other, and (2) any of their subcontractors, sub-subcontractors and employees, for damages caused by fire or other causes of loss to the extent covered by property insurance obtained pursuant to this Section 11.4 or other property insurance applicable to the Work, except such rights as they have to proceeds of such insurance held by the Owner and Contractor. Furthermore, if and to the extent Contractor has its personal property located on or about the site which is not covered by the insurance obtained pursuant to this Section 11.3.7, the Contractor waives and releases Owner from all rights or causes of action (including rights of recovery and subrogation) resulting from any loss or damage to such other property, regardless of whether the same is insured by the Contractor and regardless of whether the cause for such damage is due to the NEGLIGENCE OF THE OWNER. The Owner or Contractor, as appropriate, shall require of the Architect, Architect's consultants, separate contractors described in Article 6, if any, and the subcontractors, sub-subcontractors, agents and employees of any of them, by appropriate agreements, written where legally required for validity, similar waivers each in favor of other parties enumerated herein. The policies shall provide such waivers of subrogation by endorsement or otherwise.

(Emphasis in original).

Notwithstanding anything to the contrary herein contained, in the event that either Owner or Contractor ("First Party") incurs a loss by fire or other casualty, which fire or other casualty shall have been caused in whole or in party by the negligence or acts or omissions of the other party or the other party's agents, contractors, employees or servants, then to the extent that the First Party is compensated by the Builder's Risk Insurance Coverage obtained pursuant to Section 11.3 or any other property insurance of the First Party applicable to the Project, then the First Party (for itself and its successors and assigns) hereby waives and releases any claim that it might have against the other party and no party shall have any rights against either Owner or Contractor by reason of any fire or casualty damage either by subrogation or assignment.

         The VSA between Gables Residential Services, Inc. ("GRSI") and Red Coats

         Gables Residential Services Incorporated ("GRSI"), the 100% owner of GCI, contracted with Red Coats, for the provision of fire watch and security services for the Project. This contract included a 2-page VSA and a 1-page Extra Coverage/Temporary Insurance Request Form.

         The VSA provided, in relevant part:

Vendors providing any type of good and/or service that require their company to send a representative to the apartment community must have a current certificate of insurance on file with Compliance Depot for general liability, auto liability, excess liability if applicable, and workers' compensation. All coverage shall be primary and non-contributory. The following parties must be added to the general liability policy as an additional insured as their interests may appear in regard to work performed by Vendor: GABLES RESIDENTIAL SERVICES, INC, ITS PARENT, MEMBERS, SUBSIDIARIES AND AFFILIATED COMPANIES; AND THEIR PARTNERS, JOINT VENTURERS; AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND REPRESENTATIVES. A waiver of subrogation shall apply in favor of the aforementioned parties on all policies as permitted by law.

(Internal quotations omitted).

         The Extra Coverage/Temporary Request Form, signed by Christopher Hauska, GCI's project manager, indicated that the Red Coats officer was to "patrol the property to watch for unauthorized individuals coming on the property. No one should be on the property outside of work hours without prior authorization from Gables personnel." The form also listed GCI's point of contact as Oscar Ancheta, GCI's assistant superintendent for the Project. As adduced at trial, Red Coats services were necessary because GCI had previously had a Bobcat[3] stolen from the premises.

         The Fire at Building G

         In the overnight hours between March 31, 2014, and April 1, 2014, Building G caught fire, thirty days short of certification for occupancy. After the fire, several parties came to inspect the scene including a state trooper, Traveler's Insurance, and various causation experts, some of whom testified at trial. The parties dispute who placed the mushroom heaters in the hallway that led to the fire.[4]

         Upper Rock filed a complaint with the Circuit Court for Montgomery County against Red Coats and Tamika Shelton, Red Coats' security guard on duty the night of the incident, seeking damages for $22, 150, 000.00, and alleging that both Red Coats and Shelton were the proximate and negligent cause of the building's destruction. Upper Rock did not name GCI as a party to the complaint. In the settlement of that legal action, Red Coats paid $14 million to Upper Rock, $4 million of which it paid out of pocket, with the remaining $10 million paid by its insurer, and conceded that it was a joint tortfeasor.

         Red Coats' Third-Party Contribution Claim

         After settling with Upper Rock, Red Coats and Shelton filed an Amended Third-Party Complaint against GCI, Retana Contractors, LLC ("Retana"), Rosa's Painting ("Rosa's") and C&R Carpentry ("C&R")[5] (collectively "the third-party defendants") alleging that were Red Coats and Shelton found to be liable to Upper Rock, the third-party defendants were liable to Red Coats by way of contribution or indemnification.

         In response, GCI moved for summary judgment and argued that the VSA insulated GCI, as a named additional insured, from Red Coats' third-party complaint. GCI also denied joint tortfeasor status, averring that, at a minimum, Red Coats would need to plead that GCI was liable to Upper Rock for the same damages Upper Rock pursued against Red Coats.

         At trial, Red Coats moved for partial summary judgment as to GCI's negligence. GCI conceded its breach of the standard of care by way of the testimony of Richard Kreimborg, its withdrawn standard of care expert. The circuit court questioned "[w]here's the testimony that says that your client did not breach the standard of care[, ]" and asked "what's the factual question?" Counsel for GCI pointed to the fact that the testimony of an independent consultant, Donald Greene, infra, established that GCI's actions were reasonable related to the heaters and claimed that Red Coats did not have sufficient evidence establishing that GCI breached the standard of care. The court found that Kreimborg's testimony was "an admission of a party opponent," and that there was no genuine dispute of material fact regarding GCI's breach of the standard of care pursuant to Md. Rule 2-501.

         Testimony at Trial

         Blaine Wilson, the Executive Vice President for Corporate Human Resources for Red Coats, testified that Red Coats contracted with GRSI to "provide services during evening hours, approximately 5:00 p.m. to 6:00 a.m." Wilson testified that, initially, Red Coats was hired to patrol the exterior of the worksite to prevent thefts. Wilson confirmed that Shelton was on duty the evening the incident occurred, and that she performed her patrols as required under the contract. Wilson's testimony discredited GCI's testimony that one of its employees walked Shelton through Building G to show her where to patrol. In addition, Wilson testified that GCI never provided training for Shelton and never informed Red Coats that temporary mushroom heaters were in use. Finally, Wilson confirmed that Red Coats settled its suit with Upper Rock and paid $4 million out of pocket. On cross-examination, Wilson stated that it was a policy of Red Coats that security officers could not go into buildings that were under construction.

         Shelton testified that she had been on-duty the night in question, but that GCI never informed her that there were temporary mushroom heaters being used at the site. She also testified that GCI never ordered her to go inside the building. On cross-examination, Shelton testified that she received training on fire watch from Red Coats and that the "contractors were still there" when she arrived on the job.

         William Olin, a fire investigator, testified that he investigated the causes and origin of the fire, but was unable to determine whether the fire was caused by electrical wiring. Michael Newberry, a Fire Investigator for Atlantic Fire, testified that it was his opinion that the cause of the fire was the mushroom heaters owned by GCI. Newberry also testified that the hallway was five feet and six inches wide and that the heaters required four feet of space between the nearest combustible. Newberry's testimony also established that four heaters were found on the fourth floor of Building G.

         Brent Leisenring, a civil engineer with Robson Forensic, Inc., could not identify who placed the mushroom heater in the hallway but testified that GCI breached the relevant standard of care by failing to:

1. Perform and prepare a job hazard analysis and fire protection plan per [the National Fire Protection Association] ("NFPA") 241 [§§ 5.2.2 and 5.2.3].
2. Properly coordinate their Project specific requirements for fire watch, which should have been addressed with Red Coats.
3. Ensure that the temporary heating equipment was utilized in compliance with the equipment's operating instructions.
4. Train their own workers pursuant to [Occupational Safety and Health Administration] ("OSHA").
5. Place the heater in the proper place.
6. Ensure that [Red Coats'] workers with responsibility for fire watch were properly trained

         Jan Inguiagiato, a construction worker, testified that Travelers Insurance contacted his firm to assist with the loss after the fire. Inguiagiato physically inspected the building to ascertain "what work had been put into place at the time of the fire." He also testified that Red Coats' $14 million payout was "reasonable."

         Mark Nelson, a forensic engineer, testified that a mushroom heater caused the damage to the building, and that a manual said that clearance from the top of the heater to the ceiling required a clearance of five feet and ten inches. Christopher Graham, an electrical engineer, testified that he could not find an electrical cause for the fire.

         Next, the circuit court heard testimony from Retana employee, Julio Retana. Retana testified that none of the painters brought the mushroom heaters to the worksite and stated "I suppose somebody who worked for [GCI]" brought the heaters to Building G.

         On June 5, 2017, the parties notified the circuit court that Red Coats had resolved its claims with Retana, Rosa's, and C&R, leaving GCI as the sole non-settling defendant. GCI's counsel preserved its objection that any duty GCI may have had was contractual in nature, as opposed to a duty arising from tort, and that it was precluded from having a duty because of the waiver of subrogation. GCI further noted that it was precluded from a direct negligence action because of the VSA. At this point, GCI moved for judgment which was denied. The court stated the following:

I am persuaded that [GCI] had, and the jury could find, an independent tort duty to Upper Rock arising out of, among other things, Section 324(a), the Restatement (Second) of Torts . . . It is obvious to me that you had four mushroom heaters with no training, no supervision, used against their protocols, against the instruction manual, it [is] an explosion waiting to happen, and the fact that nobody was hurt is a great thing, but it doesn't take [GCI] off the hook.

         Bill Stewart, GRSI's Director of Construction, testified that GCI hired Red Coats to provide security and fire watch services on the site after GCI had to fire its previous vendor. Stewart testified that GCI was a subsidiary of GRSI and testified as to the corporate structure of GRSI. When questioned about whether GCI had a written policy regarding fire watch, Stewart said "I don't believe so." Lastly, Stewart testified that it was Hauska's responsibility to review the owner's manual for the mushroom heaters to determine how to safely operate the heaters. On cross-examination, Stewart testified that Oscar Ancheta, GCI's Assistant for the Project, Mario Branco, the Project superintendent, and Hauska handled fire watch. Stewart also noted that he was not aware of any training programs that GCI had regarding the use of temporary heating equipment, and that it was Ancheta's responsibility to walk the job site to make sure no hazardous conditions were present.

         On June 6, 2017, the circuit court heard testimony from Branco, Jorgen Punda, GRSI's Regional Vice President of Investments, [6] and Donald Greene. Branco testified that all GCI employees were aware that the mushroom heaters were not to be used in a confined space, that the heaters were to be turned off every night before everyone left the construction site, and that these instructions would have been communicated to the foremen of the subcontractors. Branco testified that he did not see the mushroom heaters in the hallway, and that it would have been a violation of GCI's policy if the heaters remained operational after hours. Greene testified that "fire watch" is "a security patrol to identify potential fire hazards which could be dangerous to property and persons."

         After the circuit court heard testimony and dismissed the jury, Retana moved for judgment against GCI.[7] Retana argued that the contract between GCI and Upper Rock contained a waiver of subrogation, arguing that it was in privity with GCI as a sub subcontractor. Next, Retana argued that GCI had not met its burden in proving a duty on behalf of Retana to turn the mushroom heaters off at the end of the day because the contract does not explicitly mention heaters, thus there is no duty. Retana pointed to the testimony of Stewart, who testified that GCI oversaw the heaters and was in charge of distributing manuals to subcontractors and sub-subcontractors. Retana also noted the testimony of Retana employee, Julio Retana, who testified that he never received instructions or direction related to the mushroom heaters. Lastly, Retana pointed to the testimony of Hauska, who testified that he "had no idea" who operated the heaters.

         In summary, Retana claimed that there was no evidence that either Retana or Rosa's had a duty to turn the heaters off at the end of the day. According to Retana, the only reasonable explanation for the fire is that the heaters were turned on after both Retana and Rosa's had left for the day. Regarding the contribution claim, Retana's counsel argued that "[c]ontribution is the same argument with the added wrinkle of the waiver of subrogation which bars that claim."

         Rosa's also moved for judgment, adopting Retana's arguments. Rosa's argued that there was no evidence showing who was the last to leave. What was known, according to Rosa's, was that GCI's protocol was to turn off the heaters at 6:00 p.m. Lastly, Rosa's argued that it was a borrowed employer of Retana.

         GCI opposed Retana and Rosa's Motions for Judgment but agreed that the contract between GCI and Upper Rock contained a waiver of subrogation.[8] On the breach of contract claim, GCI conceded that there was nothing in the job safety manual or the job procedures manual stating that subcontractors were responsible for the heaters. As the circuit court questioned GCI on its defense, the following colloquy ensued:

THE COURT: Where is there anywhere in any writing that's in evidence, anything at all, about whose job it was or what the requirements were, if you will, about the operation or maintenance of the mushroom heater.
MS. RUSSELL: I think, as the Court is aware, the evidence that has been presented, both orally and in writing, there is no such memo. There is no such line that says, specifically, has specifically anything to do with the handling of the heaters. But there are provisions that talk about fire safety, combustibles, things like that, that we believe are applicable in this case.
THE COURT: Well, you agree, I take it that your client owned the heaters, right?
THE COURT: And do you also agree that if your client is the owner of a potentially dangerous device that before they allow somebody to use it, they have to give them some kind of training or safety instruction?

         The circuit court granted both Retana's and Rosa's Motions for Judgment based on their counsel's arguments and because GCI presented "no evidence, at all, from which a reasonable jury could find a breach of contract, written or oral."

         Next, the circuit court addressed C&R's motion for judgment. Counsel for C&R argued that there was an absence of evidence related to "who took the heater and put it into that position in that hallway[.]" The court granted C&R's motion because, again, there was no evidence suggesting a connection between C&R and the heaters.

         Lastly, Red Coats moved for judgment against GCI for the remaining issue on its contribution claim - causation. Red Coats argued that the circuit court's grant of Red Coats' motion for partial summary judgment established that GCI breached its duty by putting the mushroom heaters in the hallway. The court chose to send the issue of causation to the jury.

         Jury Notes

         During its deliberation, the jury sent five notes to the court:

1. Does the waiver of subrogation in the vendor services agreement only apply to insurance coverage/claims, that is specifically, $10 million? ([Red Coats'] insurance payout) [?]
2. Is [GCI] a subsidiary/affiliate of [GRSI]?
3. How many pages are included in the contract between [Red Coats] and Gables (RC Exhibits 4 and 5)?
4. Is [the VSA] the only agreement/contract between [Red Coats] and [GCI] (Exhibits -RC - 4 and 5)?
5. How do we decide Question 3:
a. Can we base the amount on assignment of blame or
b. Does it need to be a percentage of the full settlement ($14 million) or only the insurance payout ($10 million) or the [Red Coats] contribution ($4 million)?

         Pertinent is the circuit court's supplement to its previous instructions on the waiver of subrogation issue as follows:

[GCI] contends that [Red Coats] and Ms. Shelton may not recover for any monies that they paid to Upper Rock against it by reason of a waiver of subrogation. [GCI] contends that there is a contract to that effect and that this contract bars any contribution claim. [Red Coats] and Ms. Shelton disagree. They contend that the parties did not contract to waive subrogation, either in whole or in part. That is, either for any money paid on their behalf to Upper Rock by an insurance carrier or any money they paid directly to Upper Rock.
I remind you that a waiver of subrogation is (1) an affirmative defense on which (2) [GCI] bears the burden of proof by (3) a preponderance of the evidence.
The party with the burden of proof must prove that something is more likely so than not so. If you believe that the evidence on a question of fact that you must decide is evenly balanced, then your finding on that issue must be against the party who has the burden of proving it.

         By way of special verdict sheet and in response to the question "[w]as the fire that occurred on the evening of March 31-April 1, 2014, a direct result and a foreseeable consequence of [GCI's] negligence," the jury responded "yes." In response to the question "[i]s [Red Coats] precluded from recovering for contribution against [GCI] based upon a contractual waiver of subrogation, in whole or in part," the jury answered "no."

         Following the jury's verdict, the circuit court entered the following notices of judgment: . . .

6. A partial verdict in favor of [Red Coats] against [GCI] as to negligence.
7. A verdict in favor of [Red Coats] against [GCI], as to Red Coats's preclusion from recovering for partial or total contribution against [GCI] based upon a contractual waiver of subrogation.
8. A judgment against [GCI] in the amount of seven million dollars ($7, 000, 000.00).

         Unhappy with the outcome of the trial, GCI timely filed an appeal on July 3, 2017. Additional facts will be included as necessary below.




         At the outset, Red Coats asserts that GCI did not specify the ruling it appeals related to its joint tortfeasor status. Red Coats further argues that GCI is precluded from appellate review because it only raised the issue of joint tortfeasor status in a pre-trial judgment motion and by moving for judgment after Red Coats closed its case-in-chief.

         The record reflects that GCI moved to appeal the circuit court's judgment against it for a one half pro rata share of Red Coats' settlement with Upper Rock. This judgment was based upon the jury finding that Red Coats was not precluded, either in whole or in part, from recovering contribution from GCI based on a waiver of subrogation. Thus, to properly preserve this claim for appellate review, GCI would have had to preserve in the record its objections to whether or not Red Coats was precluded by the waiver of subrogation in the Prime Contract, which it did. In fact, GCI claimed several times in pleadings and at trial that it was not a joint tortfeasor. See Collins/Snoops Associates, Inc. v. CJF, LLC, 190 Md.App. 146, 165-66, cert. denied, 414 Md. 331 (2010). Contrary to Red Coats' assertions, this claim continued after the court ruled in partial summary judgment that GCI breached its duty. Therefore, we hold that this issue was preserved.

         History of UCATA in Maryland

         At common law and before the enactment of the UCATA in 1941, "a statutory right of contribution among joint tortfeasors . . . did not exist[.]" Central GMC, Inc. v.Helms, 303 Md. 266, 276 (1985). As early as the 1700s, courts in England did not allow a joint tortfeasor to seek contribution from additional liable parties. Montgomery Countyv. Valk Mfg. Co., 317 Md. 185, 189 (1989) (citing Merryweather v. Nixan, 8 Term. Rep. 186, 101 Eng. Rep. 1337 (1799)). Sister courts in the United States, too, barred contribution in cases of willful misconduct. Valk, 317 Md. at 189. While neither of these early courts ...

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