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Selective Way Insurance Co. v. Nationwide Property and Casualty Insurance Co.

Court of Special Appeals of Maryland

October 30, 2019

SELECTIVE WAY INSURANCE COMPANY
v.
NATIONWIDE PROPERTY AND CASUALTY INSURANCE COMPANY, ET AL.

          Circuit Court for Baltimore County Case No. 03-C-08-006273

          Arthur, Shaw Geter, Eyler, Deborah S. (Senior Judge, Specially Assigned), JJ. [*]

          OPINION

          Arthur, J.

         This 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.

         In a 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.

         For the 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 defend.

         Factual and Procedural Background

         A. Selective Way Liability Insurance for Questar's Subcontractors

         In 2001, the Highpointe Business Trust engaged Questar Builders, Inc., to oversee the construction of the Highpointe Apartments in Hunt Valley. Construction was completed in early 2004.

         As the 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.

         Each 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.

         For 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 those damages.

         Each 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.

         Through 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 Carpentry Contractors.

         B. The Construction-Defect Lawsuit against Questar

         In a 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.

         Each 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.

         To 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 defendants.

         Questar 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.

         On 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.

         C. Nationwide's Declaratory Judgment Action Against Various Insurers

         The 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.

         Nationwide 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.

         In its 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.

         While the declaratory judgment action was still in its early stages, Questar agreed to settle the construction-defect lawsuit.

         As the 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.

         In 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.

         The 12 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 policies.

         Eventually, 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[.]"

         D. Jury Trial on Selective Way's Obligation to Pay Defense Costs

         Before 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 Way.[1]

         Nationwide 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.

         A few 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.[2] The court deferred its ruling on those issues pending a motion for judgment made during the trial.

         The 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.

         Claims 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 all evidence.

         Both 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 of trial.

         Answering 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, 719.54.

         Finally, 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.

         After 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.

         Selective 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.

         E. Awards for Prejudgment Interest and for Expenses Incurred in the Declaratory Judgment Action

         When 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.

         Opposing 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.

         Shortly 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 verdict.

         At a 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.

         On May 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.[3]

         Selective 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.

         Discussion

         Selective 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 were presented.

         First, 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.

         Next, 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.

         Finally, 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 to defend.

         I. Declaratory Judgment Regarding Selective Way's Duty to Defend

         Selective 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.

         A. The Contractual Duty to Defend Under a Liability Insurance Policy

         An "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).

         The 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.

         For a 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).

         An 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.

         B. Duty to Defend a General Contractor Under Liability Insurance Policy Issued to Subcontractor

         On two 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.

         In the 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.

         A 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. at 576.

         This 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.

         During 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.

         C. Extent of Selective Way's Liability Insurance Coverage

         To 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).

         For 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."

         The 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, [4] 'your work,' 'your product,' or premises owned or used by you[.]"

         Certain 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 insured[.]"

         Between 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[.]"

         Because 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 (2015).

         D. Allegations from the Lawsuit Against Questar

         Our 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).

         The 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 Questar's conduct.

         All 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 ...


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