Circuit Court for Baltimore County Case No. 03-C-08-006273
Arthur, Shaw Geter, Eyler, Deborah S. (Senior Judge,
Specially Assigned), JJ. [*]
case concerns a liability insurer's duty to defend. Under
its policies, the insurer was obligated to defend a general
contractor from claims with respect to work performed by four
subcontractors. The insurer declined to defend the general
contractor against a lawsuit based on allegations that its
subcontractors performed defective work.
subsequent declaratory judgment action, the Circuit Court for
Baltimore County determined that the insurer had been
obligated to defend the general contractor in the
construction-defect lawsuit. The court ordered the insurer to
pay the costs of defense, in an amount decided by a jury.
After the jury verdict, the court ordered the insurer to pay
prejudgment interest on those defense costs. The court also
ordered the insurer to pay all expenses incurred in the
declaratory judgment action, in an amount decided by the
court rather than by a jury. The insurer appealed.
reasons explained in this opinion, we shall affirm the
judgment with respect to the insurer's obligation to pay
defense costs from the construction-defect lawsuit; reverse
the judgment with respect to the award of prejudgment
interest by the court; and vacate the judgment with respect
to attorneys' fees and expenses incurred in the
declaratory judgment action. The case shall be remanded for a
jury trial solely to determine the amount of attorneys'
fees and expenses incurred in the declaratory judgment action
as a result of the insurer's breach of the duty to
and Procedural Background
Selective Way Liability Insurance for Questar's
2001, the Highpointe Business Trust engaged Questar Builders,
Inc., to oversee the construction of the Highpointe
Apartments in Hunt Valley. Construction was completed in
general contractor for the Highpointe project, Questar
entered into contracts with dozens of subcontractors. Four of
those subcontracts, executed between 2001 and 2003, are
pertinent here. SEH Excavating Contractors, Inc., agreed to
perform land development work for the project; Streett's
Waterproofing, Inc., agreed to perform waterproofing work for
certain buildings; Justice Waterproofing, Inc., agreed to
perform waterproofing work for tennis courts above a parking
garage; and King Carpentry Contractors, Inc., agreed to
perform rough carpentry work for certain buildings.
subcontract required the subcontractor to indemnify Questar
from claims for damages resulting from the
subcontractor's work; to maintain commercial general
liability insurance with "primary and
noncontributory" coverage; and to name Questar as an
"additional insured" under those policies.
various policy periods between 2001 and 2007, those four
subcontractors purchased commercial general liability
insurance from appellant Selective Way Insurance Company. In
the policies that it issued to the subcontractors, Selective
Way promised to indemnify its insureds if they became legally
obligated to pay damages based on claims covered by the
policy and to defend the insureds in any lawsuit seeking
Selective Way policy included provisions extending this
coverage to an additional party if the named insured entered
into a written contract requiring it to provide insurance for
that additional party. These provisions specified that any
party that became an additional insured because of a contract
would be treated as an insured "only with respect
to" the named insured's work for that additional
party. The policies further specified that the coverage
resulting from such a contract would be "primary and not
contributory" with respect to the additional insured, if
the contract so required.
the combined effect of these policies and subcontracts,
Selective Way became Questar's insurer with respect to
claims against Questar arising out of the work performed at
the Highpointe project by SEH Excavating Contractors,
Streett's Waterproofing, Justice Waterproofing, or King
The Construction-Defect Lawsuit against Questar
transaction that coincided with the completion of
construction, a third party purchased the Highpointe
Apartments. On July 13, 2006, the purchaser filed a lawsuit
based on "the defective construction of the Highpointe
Apartments" by Questar. As amended, the complaint
asserted four counts against Questar and two executives.
count against Questar rested on allegations that it had
failed to properly oversee the work of its subcontractors and
that defects in the construction resulted in extensive water
infiltration throughout the buildings. The purchaser sought
to recover $4.5 million for the property damage allegedly
caused by Questar's conduct.
undertake its defense, Questar turned to its liability
insurers: Nationwide Property and Casualty Insurance Company
and Nationwide Mutual Insurance Company (collectively,
"Nationwide"). Nationwide agreed to defend Questar
under a reservation of rights, appointing and paying for
counsel to represent Questar separately from the other
denied liability, but also filed a third-party complaint,
seeking indemnity or contribution from 26 subcontractors that
performed work at the Highpointe project. In the third-party
complaint, Questar claimed that, if it were found liable in
the construction-defect lawsuit, then the subcontractors
should be liable to it for all or some of its liability to
the purchaser. The third-party defendants included the four
subcontractors that Selective Way insured.
April 1, 2008, Questar's attorney made written requests
for defense and indemnification under the policies issued by
Selective Way. Selective Way's parent corporation denied
the requests under the policies issued to Streett's
Waterproofing and SEH Excavating Contractors. The denial
letters cited a lack of "proof" or
"evidence" that the subcontractor's work caused
the alleged damages, stated that it was "not clear when
the work was completed or when the damages manifested[,
]" and noted that the lawsuit also involved
"separate allegations of negligence" by Questar
itself. Questar received no formal denial letters under the
policies issued to the other two subcontractors.
Nationwide's Declaratory Judgment Action Against
present action was commenced on June 10, 2008, when
Nationwide filed a complaint for a declaratory judgment in
the Circuit Court for Baltimore County, seeking to
"determin[e] insurance coverage under various policies
of insurance covering [Questar]." Nationwide initially
named 21 insurance companies as defendants, along with 24
subcontractors and Questar itself. The number of defendants
varied over time, as Nationwide added new defendants and
dismissed claims against others.
alleged that Questar was an additional insured under various
liability insurance policies issued to Questar's
subcontractors. Thus, Nationwide asked the court to declare
that, under those policies, the insurers were obligated to
provide a defense for Questar in the construction-defect
lawsuit. Nationwide contended that its own coverage for
Questar was secondary to the primary coverage issued by those
insurers. It sought reimbursement for all defense costs
incurred in the construction-defect lawsuit.
answer, Selective Way asserted that it had no duty to defend
Questar in the construction-defect lawsuit and that
"Questar and/or Nationwide ha[d] failed to provide
adequate notice" to Selective Way. Selective Way
demanded a jury trial on all issues.
the declaratory judgment action was still in its early
stages, Questar agreed to settle the construction-defect
declaratory judgment action proceeded, the court granted
Nationwide's motion to bifurcate the issues. The court
would first decide whether the defendant-insurers had a duty
to reimburse Nationwide for defense costs. If necessary, the
court would then proceed to determine the amount of damages
that Nationwide was entitled to recover.
2009, Nationwide moved for summary judgment as to the
liability of 12 insurers, including Selective Way, which had
issued polices to Questar's subcontractors. Nationwide
argued: that each of those insurers breached a contractual
duty to defend Questar in the construction-defect lawsuit;
that Nationwide's insurance policies provided excess
coverage over the primary coverage issued by those insurers;
and that Nationwide became subrogated to Questar's rights
against those insurers when Nationwide paid for Questar's
defense. Nationwide contended that, as a matter of law, those
insurers were obligated to reimburse Nationwide for all costs
incurred in defending Questar.
insurers collectively opposed Nationwide's motion for
summary judgment and moved for summary judgment in their
favor. Primarily, they argued that they were relieved of any
duty to defend because Questar had failed to notify them
until 16 months after the filing of the construction-defect
lawsuit. They further argued that Nationwide acted with
"unclean hands" by controlling the entire defense
during the period of delay. Selective Way and other insurers
also filed individualized responses and cross-motions to
address issues specifically related to their respective
in 2014, the court issued an order granting Nationwide's
summary judgment motion in part, denying it in part, and
denying various cross-motions. The court determined that each
of the 12 insurers, including Selective Way, "had a duty
to defend Questar because the allegations in the underlying
lawsuit raised claims that potentially arose from the
[s]ubcontractors' work at the Highpointe
Apartments." The court determined, however, that
"triable issues of fact" remained "as to
whether the [d]efendants were prejudiced by delayed notice
and whether Nationwide ha[d] unclean hands[.]"
Jury Trial on Selective Way's Obligation to Pay
and after the summary judgment ruling, Nationwide reached
settlements with the insurers for all of the subcontractors
except Selective Way. Hence, the case proceeded towards a
trial on Nationwide's claims against Selective
made a second summary judgment motion relating solely to
Selective Way's liability. The court granted the motion
in part, rejecting the defense of unclean hands. The court
determined, however, that a genuine dispute of material fact
remained as to whether Selective Way sustained actual
prejudice because of delayed notice.
weeks before the trial in March of 2017, Selective Way filed
a barrage of motions raising arguments that either had been
raised or could have been raised in its earlier
memoranda. The court deferred its ruling on those
issues pending a motion for judgment made during the trial.
scope of the jury trial was limited to determining whether
Selective Way was prejudiced by the receipt of untimely
notice and, if it was not, how much Selective Way was
obligated to pay in damages to compensate Nationwide for the
expense of defending the construction-defect lawsuit. The
trial did not include the separate issue of how much
Selective Way might be obligated to pay in additional damages
to compensate Nationwide for the expense of proving that
Selective Way breached the duty to defend.
adjusters from both insurance companies testified concerning
the issue of delayed notice. Nationwide presented testimony
from the attorneys who represented Questar and from an expert
who opined that the fees charged were fair and reasonable.
Selective Way countered with its own expert, who opined that
the billing records were deficient because they did not
detail how many of the hours were related to construction
work performed by each individual subcontractor. The court
denied the parties' motions for judgment at the close of
parties submitted competing proposals for extensive
non-pattern jury instructions and special verdict sheets. The
court ultimately adopted a verdict sheet based on those
written proposals and on oral arguments made on the final day
the questions on the verdict sheet, the jury first found that
Selective Way had received timely notice of the lawsuit
against Questar. The jury also found, by a preponderance of
evidence, that Nationwide had proven total damages of $994,
the jury answered two questions about the
"apportion[ment]" of defense costs. Selective Way
had proposed a question asking the jury whether it found
"by a preponderance of the evidence, that the costs were
readily apportionable" among the various subcontractors.
Nationwide had suggested that, if the court included the
question proposed by Selective Way, then it should also ask
the jury whether it found "by a preponderance of the
evidence, that Nationwide was required to apportion the costs
to each subcontractor[.]" The court included both
questions on the verdict sheet. In response, the jury found
that the defense costs were "readily
apportionable," but that Nationwide was not
"required to apportion" those costs.
the verdict, the court formally dismissed Nationwide's
remaining claims against any parties other than Selective
Way. The clerk of the circuit court sent notice of the entry
of a "judgment" against Selective Way and in favor
of Nationwide in the amount of $994, 719.54. At the time of
the "judgment," the court had not yet decided how
much in additional fees and expenses Nationwide could recover
in proving that Selective Way breached its duty to defend.
Way moved for a declaration stating that it was not liable
for any damages. It argued that the jury's finding that
defense costs were "readily apportionable" defeated
Nationwide's right to recover defense costs that were not
apportioned to the subcontractors that obtained insurance
from Selective Way. In the alternative, Selective Way moved
for judgment notwithstanding the verdict. Selective Way also
filed a notice of appeal, which this Court dismissed as
premature, because the circuit court had not yet determined
the amount of fees to which Nationwide was entitled in
successfully establishing that Selective Way had breached its
duty to defend.
Awards for Prejudgment Interest and for Expenses Incurred
in the Declaratory Judgment Action
the case returned to the circuit court after the dismissal of
Selective Way's premature appeal, Nationwide made a
"Motion for Attorneys' Fees," asking the court
to determine Selective Way's liability for the fees and
expenses incurred in the declaratory judgment action.
Nationwide submitted an affidavit from its attorney; an
affidavit from an expert on legal fees; and a summary of
invoices that it had paid.
the motion, Selective Way argued that it was entitled to a
jury trial, or at least a formal evidentiary hearing,
regarding the attorneys' fees and expenses incurred in
the declaratory judgment action. Selective Way disputed the
assertions that all fees and expenses claimed were necessary
and reasonable. It argued that Nationwide was not entitled to
recover all fees and expenses sought, because much of the
work performed by Nationwide's attorneys was unrelated to
the claim against Selective Way.
before the hearing on Nationwide's motion for
attorneys' fees, Nationwide wrote a letter asking the
court to award $430, 534.82 in prejudgment interest on the
damages previously found by the jury. Nationwide asked the
court to calculate prejudgment interest at the legal rate of
six percent, from the end of the construction-defect lawsuit
in 2009 until the date of the upcoming hearing on
attorneys' fees. In response, Selective Way argued, among
other things, that the jury should have decided whether to
award prejudgment interest as part of its verdict and that
the court could not award prejudgment interest after the
hearing solely on the motion for attorneys' fees, the
court rejected Selective Way's request for a jury trial
or an evidentiary hearing. The court proceeded to grant the
motion based on the parties' written submissions and the
oral arguments made at the hearing. The court awarded
Nationwide $810, 556.72, the full amount it had requested.
2, 2018, the court filed a separate document titled
"Order and Declaratory Judgment." The court
declared that Selective Way owed a duty to defend Questar in
the construction-defect lawsuit under policies issued to
Questar's subcontractors between 2001 and 2007. The court
determined that Selective Way was liable in the amounts of:
$994, 719.54 for defense costs in the construction-defect
lawsuit; $430, 534.82 for prejudgment interest on those
defense costs; and $810, 556.72 for attorneys' fees and
expenses incurred in the declaratory judgment action. The
court reduced Selective Way's total liability by $588,
152.00, to account for the amounts that Nationwide had
received from settlements with other insurers. In aggregate,
the court granted judgment in the amount of $1, 647, 659.00
against Selective Way in favor of Nationwide.
Way made a timely motion to alter or amend the judgment,
asking the court to set aside the award of prejudgment
interest. Selective Way also renewed its prior requests for a
judgment entirely in its favor. The court denied Selective
Way's post-judgment motions. Meanwhile, Selective Way
noted this timely appeal.
Way's brief raises 12 questions and various
sub-questions. The full list is reproduced in the appendix to
this opinion. This opinion will address all issues raised by
Selective Way, but not in the order in which those issues
this opinion will address challenges to the declaratory
judgment that Selective Way owed a duty to defend Questar in
the construction-defect lawsuit. Second, this opinion will
address challenges to the determination of damages for the
costs incurred by Nationwide in defending Questar. Because we
see no merit to those challenges, we shall affirm the
judgment with respect to the declaration of rights and the
award of damages in the amount of $994, 719.54.
this opinion will address the award of prejudgment interest
on the damages found by the jury. In the circumstances of
this case, we conclude that the court erred in awarding
prejudgment interest that was not separately stated in the
jury's verdict. Therefore, we shall reverse the award of
$430, 534.82 for prejudgment interest.
this opinion will address the award of $810, 556.72 for
attorneys' fees and expenses incurred by Nationwide in
the declaratory judgment action. Because we conclude that
Selective Way was entitled to a jury trial on that element of
damages, we shall vacate that part of the judgment. The case
shall be remanded for a jury trial solely to determine the
amount of reasonable and necessary attorneys' fees and
expenses incurred by Nationwide in the declaratory judgment
action as a result of Selective Way's breach of its duty
Declaratory Judgment Regarding Selective Way's Duty
Way contends that the circuit court erred when it granted
partial summary judgment and, ultimately, a declaratory
judgment in favor of Nationwide. Selective Way contends that
the court was "incorrect" in determining that
Selective Way owed a duty to defend Questar in the underlying
construction-defect lawsuit. We review these matters de novo.
See, e.g., James G. Davis Constr. Corp. v. Erie
Ins. Exch., 226 Md.App. 25, 34-35 (2015). As explained
below, the court's determinations were correct.
The Contractual Duty to Defend Under a Liability
"insurer's duty to defend is a contractual duty
arising out of the terms of a liability insurance
policy." Litz v. State Farm Fire & Cas.
Co., 346 Md. 217, 225 (1997). "Under the typical
liability insurance policy," the insurer must
"indemnify the insured . . . for the payment of a
judgment based on a liability claim which is covered" by
the policy and must "defend the insured against a
liability claim which is covered or which is potentially
covered" by the policy. Mesmer v. Maryland Auto.
Ins. Fund, 353 Md. 241, 257 (1999). The dual promises to
defend and indemnify the insured are "the consideration
received by the insured for payment of the policy
premiums." Brohawn v. Transamerica Ins. Co.,
276 Md. 396, 409 (1975). This type of insurance "is in
effect 'litigation insurance' procured by an insured
to protect the insured 'from the expense of defending
suits brought against [it].'" Aetna Cas. &
Sur. Co. v. Cochran, 337 Md. 98, 110 (1995) (quoting
Brohawn v. Transamerica Ins. Co., 276 Md. at 410).
Court of Appeals has "consistently held that the duty to
defend should be construed liberally in favor of the
policyholder." Springer v. Erie Ins. Exch., 439
Md. 142, 167 (2014). The insurer has the duty to defend the
insured from all claims that are "potentially
covered" by the policy. See, e.g., Walk v.
Hartford Cas. Ins. Co., 382 Md. 1, 15 (2004). Thus,
"'[e]ven if a tort plaintiff does not allege facts
which clearly bring the claim within or without the policy
coverage, the insurer still must defend if there is a
potentiality that the claim could be covered by the
policy.'" Id. at 16 (emphasis in original)
(quoting Brohawn v. Transamerica Ins. Co., 276 Md.
at 408). Under this rule, "'any potentiality of
coverage, no matter how slight, gives rise to a duty to
defend.'" Litz v. State Farm Fire & Cas.
Co., 346 Md. at 226 (quoting Andrew Janquitto,
Insurer's Duty to Defend in Maryland, 18 U.
Balt. L. Rev. 1, 13-14 (1988)). "[W]here a potentiality
of coverage is uncertain from the allegations of a complaint,
any doubt must be resolved in favor of the insured."
Aetna Cas. & Sur. Co. v. Cochran, 337 Md. at
107. Because the "duty to defend is broader than the
duty to indemnify[, ]" a liability insurer "will be
obligated to defend more [suits] than it will be required to
indemnify[.]" Litz v. State Farm Fire & Cas.
Co., 346 Md. at 225.
suit to trigger the insurer's duty to defend, the
plaintiff "need only allege action that is
potentially covered by the policy, no matter how
attenuated, frivolous, or illogical that allegation may
be." Sheets v. Brethren Mut. Ins. Co., 342 Md.
634, 643 (1996) (emphasis in original). The plaintiff in the
underlying suit need not "allege every fact necessary to
establish [the insurer's] coverage," as long as the
allegations sufficiently indicate that "the injury in
question was caused by some act or omission covered by the
terms of the contract." U.S. Fid. & Guar. Co. v.
National Paving & Contracting Co., 228 Md. 40, 54-55
(1962). An insurer may have a duty to defend "even
though the claim asserted against the insured cannot possibly
succeed because either in law or in fact there is no basis
for a plaintiff's judgment." Litz v. State Farm
Fire & Cas. Co., 346 Md. at 225 (citations and
quotation marks omitted).
insurer breaches its duty to defend if it refuses to defend a
suit where a claim is potentially covered by the policy.
See Mesmer v. Maryland Auto. Ins. Fund, 353 Md. at
258. A cause of action against an insurer for breach of the
duty to defend "sounds in contract" (Vigilant
Ins. Co. v. Luppino, 352 Md. 481, 488 (1999)) and is
"governed by the principles applicable to breach of
contract actions." Luppino v. Vigilant Ins.
Co., 110 Md.App. 372, 381 (1996), aff'd,
352 Md. 481 (1999). The "damages for breach of the
contractual duty to defend are . . . the insured's
expenses, including attorney fees, in defending the
underlying tort action, as well as the insured's expenses
and attorney fees in a separate contract or declaratory
judgment action . . . to establish that there exists a duty
to defend." Mesmer v. Maryland Auto. Ins. Fund,
353 Md. at 264.
Duty to Defend a General Contractor Under Liability
Insurance Policy Issued to Subcontractor
occasions, this Court has held that a liability insurer was
obligated to defend a general contractor where, as here, the
policy for a subcontractor made the general contractor an
additional insured with respect to claims arising out of the
subcontractor's work. James G. Davis Constr. Corp. v.
Erie Ins. Exch., 226 Md.App. 25 (2015), cert.
denied, 446 Md. 705 (2016); Baltimore Gas &
Elec. Co. v. Commercial Union Ins. Co., 113 Md.App. 540
(1997). Both cases are instructive here.
older case, the subcontractor performed excavation work for a
public utility company. Baltimore Gas & Elec. Co. v.
Commercial Union Ins. Co., 113 Md.App. at 547-48. The
subcontractor's liability insurance policy made the
utility an additional insured, but "specified that, as
an additional insured, [the utility] was protected only with
respect to liability arising out of" the
subcontractor's work for the utility. Id. at
557. The policy excluded coverage for claims arising out of
the utility's own acts or omissions, other than its
supervision of the subcontractor. Id. at 558.
plaintiff who sustained injuries at the excavation site sued
the utility and the subcontractor for damages. Baltimore
Gas & Elec. Co. v. Commercial Union Ins. Co., 113
Md.App. at 548. The plaintiff alleged that "the
negligent, careless and reckless construction activities of
the [d]efendants, their agents, servants and employees"
caused the plaintiff's injuries. Id. at 561-62.
These "general" allegations did not "specify
the particulars of the negligence claim" against the
utility, but rather "include[d] a claim against [the
utility] grounded on derivative liability, based on [the
utility's] failure to supervise its agents, and a claim
of liability based on its own conduct." Id. at
562. The Court was "amply satisfied" that these
allegations created the potentiality for coverage, and thus
that the subcontractor's insurer had a duty to defend the
utility (id. at 562-63) until the plaintiff
dismissed the claims against the subcontractor. Id.
Court construed slightly different terms in James G.
Davis Construction Corp. v. Erie Insurance Exchange, 226
Md.App. 25 (2015). In that case, a subcontractor's
insurance policy made the general contractor an additional
insured with respect to liability for injury or damage
"caused, in whole or in part, by" the
subcontractor's work for the general contractor.
Id. at 30 (emphasis omitted). Under those terms, the
insurer owed a duty to defend the general contractor "as
long as [the general contractor] [was] alleged to be liable,
in whole or in part, by the acts or omissions of [the
subcontractor]." Id. at 41. In other words, the
insurer "ha[d] a duty to defend [the general contractor]
against any liability that could potentially [have been]
proximately caused by [the subcontractor's] acts."
Id. at 43.
construction, a scaffold collapsed, injuring two employees
for another company. James G. Davis Constr. Corp. v. Erie
Ins. Exch., 226 Md.App. at 31. The injured employees
sued both the general contractor and the subcontractor for
negligence, alleging "that the negligence of [the
subcontractor], the negligence of [the general contractor],
or the negligence of both . . . contributed to the
injury[.]" Id. at 43. These allegations
"demonstrate[d] that the claim of liability against [the
general contractor] f[ell] within the additional insured
endorsements of the [p]olicy." Id. at 45.
Furthermore, even if it were "not clear" that the
allegations were covered, the allegations "establish[ed]
at least the potentiality that the claim could be
covered by the [p]olicy's endorsements."
Id. (citation and quotation marks omitted). Thus,
the subcontractor's insurer owed a duty to defend the
general contractor. Id.
Extent of Selective Way's Liability Insurance
determine whether Selective Way owed a duty to defend Questar
in the construction-defect lawsuit, we first examine
"the language and requirements of the polic[ies]"
to determine the extent of coverage. St. Paul Fire &
Marine Ins. Co. v. Pryseski, 292 Md. 187, 193 (1981).
various policy periods between 2001 and 2007, Selective Way
sold commercial general liability insurance to four of
Questar's subcontractors. These policies included
standard promises to "pay those sums that the insured
becomes legally obligated to pay as damages because of
'bodily injury' or 'property damage'"
and to "defend the insured against any 'suit'
seeking those damages."
four subcontractors were the "Named Insured[s]" in
their respective policies. In addition, each policy included
the following language: "WHO IS AN INSURED is amended to
include as an additional insured any person or organization
with whom you agreed, because of a written contract, . . . to
provide insurance . . ., but only with respect to . . .
[y]our ongoing operations,  'your work,' 'your
product,' or premises owned or used by you[.]"
policies also included more specific "Additional
Insured" endorsements. Some endorsements stated that any
person or organization made an additional insured because of
a contract would be treated as an insured "only with
respect to their liability arising out of 'your work'
. . . performed for that insured[.]" Some endorsements
stated that any person or organization made an additional
insured because of a contract would be treated as an insured
"only with respect to their liability for 'bodily
injury' or 'property damage' caused, in whole or
in part, by 'your work' performed for that additional
2001 and 2003, each of the four subcontractors executed
written contracts with Questar to perform construction work
at the Highpointe project. Each subcontract required the
subcontractor to maintain commercial general liability
insurance "with respect to" the subcontractor's
work on the project. Each subcontract further provided:
"The Subcontractor's coverage shall be primary and
noncontributory; [Questar] and [the property owner] . . .
shall be named as additional insureds[.]"
each subcontractor agreed, in a written contract, to provide
insurance for Questar, Questar became an additional insured
under each policy "with respect to" the
subcontractor's work for Questar. Under the policies in
which Questar became an additional insured "with respect
to [Questar's] liability arising out of" the
subcontractor's work, Selective Way was obligated to
defend Questar against any claim grounded on the failure to
properly supervise the subcontractor's work. See
Baltimore Gas & Elec. Co. v. Commercial Union Ins.
Co., 113 Md.App. 540, 562 (1997). Under the policies in
which Questar became an additional insured with respect to
its liability for injury or damage "caused, in whole or
in part, by" the subcontractor's work, Selective Way
was obligated to defend Questar against any claim for
liability alleged to be proximately caused by the
subcontractor's work for Questar. See James G. Davis
Constr. Corp. v. Erie Ins. Exch., 226 Md.App. 25, 43
Allegations from the Lawsuit Against Questar
focus now shifts to the allegations in the lawsuit against
Questar to assess whether those allegations potentially fall
within the coverage provided by Selective Way. See St.
Paul Fire & Marine Ins. Co. v. Pryseski, 292 Md.
187, 193 (1981).
allegations against Questar are set forth in an original
complaint filed in 2006 and an amended complaint filed in
2007. Both complaints concerned "the defective
construction of the Highpointe Apartments[.]" In both
versions, the plaintiffs sued Questar for breach of a
construction contract, negligent construction, and negligent
misrepresentation. In each count, the plaintiffs sought $4.5
million for property damage that allegedly resulted from
counts against Questar rested on common allegations that
Questar failed to properly oversee and supervise the
construction of the Highpointe Apartments. The plaintiffs
alleged that two Questar executives supervised "all
construction activities with regard to the Highpointe
Apartments on behalf of" Questar; that during
construction "there were failures to comply with
applicable building codes, use of faulty, inferior and
unspecified materials, deviations from plans and
specifications and unworkmanlike construction that did not
meet the minimum industry standards and building practices
for construction and design of residential apartments";
that "[t]hese defective conditions . . . resulted in
damage to real and personal property, including, but not
limited to damages of other portions of the apartment
buildings, such as water damage, water infiltration at
windows, roofs and exterior walls"; and that Questar