Capital City Real Estate, LLC v. Certain Underwriters at Lloyd's London, Subscribing to Policy Number: Arte018240, 2015 U.S. App. LEXIS 9662

Capital City was the general contractor renovating 57 Bryant St.; Marquez Brick Work, Inc. was the subcontractor for foundation/underpinning work and was insured by Underwriters, which issued a policy with an ISO additional-insured endorsement naming Capital City.
The Endorsement (ISO CG 20 10 07 04) covered Capital City "only with respect to liability for . . . property damage . . . caused in whole or in part by" Marquez or those acting on Marquez's behalf.
During the renovation, the common wall between 57 Bryant St. and neighboring 55 Bryant St. (owned by Yates and insured by Standard Fire) collapsed; Standard Fire (as subrogee) sued Capital City and others in D.C. Superior Court alleging negligence causing property damage.
Capital City tendered the defense to the Underwriters; Underwriters denied coverage. Capital City filed a declaratory judgment action in the District of Maryland; the district court granted summary judgment to Underwriters.
On appeal, the Fourth Circuit considered (1) whether the Endorsement requires proof that Capital City is vicariously liable for Marquez to trigger coverage, and (2) whether the underlying complaint and extrinsic evidence create a potentiality of coverage triggering a duty to defend.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Scope of additional-insured coverage under the Endorsement	Endorsement covers Capital City for property damage "caused in whole or in part" by Marquez — no vicarious-liability requirement	Coverage should be limited to Capital City’s vicarious/derivative liability for Marquez	Held for Capital City: plain Endorsement language covers property damage caused in whole or part by Marquez; no vicarious-liability limitation in the text
Duty to defend given underlying complaint and extrinsic evidence	Even though the underlying complaint doesn’t name Marquez, Capital City may rely on extrinsic evidence and its third-party complaint to show a potentiality of coverage	Underlying complaint fails to plead Marquez’s involvement; insurer need not defend absent express allegations of named insured’s fault	Held for Capital City: Maryland law permits insured to use extrinsic evidence when complaint does not foreclose coverage; allegations + extrinsic evidence create a potentiality of coverage so duty to defend attaches
Entitlement to costs and attorneys’ fees	If duty to defend exists, Capital City seeks recovery of defense expenses and fees	Underwriters did not contest below in this appeal	Court remanded for district court to decide entitlement to expenses/fees in first instance

French v. Assurance Co. of Am., 448 F.3d 693 (4th Cir. 2006) (standard of review for summary judgment)
St. Paul Fire & Marine Ins. Co. v. Pryseski, 438 A.2d 282 (Md. 1981) (two-step duty-to-defend test: policy scope and potentiality from pleadings)
Perini/Tompkins Joint Venture v. Ace Am. Ins. Co., 738 F.3d 95 (4th Cir. 2013) (insurance choice-of-law and contract interpretation principles)
Empire Fire & Marine Ins. Co. v. Liberty Mut. Ins. Co., 699 A.2d 482 (Md. 1997) (apply ordinary contract rules to insurance policies; ambiguities construed for insured)
Gilbane Bldg. Co. v. Admiral Ins. Co., 664 F.3d 589 (5th Cir. 2011) (construing similar ISO endorsement to require underlying pleading that named insured proximately caused damage)
Continental Cas. Co. v. Bd. of Educ., 489 A.2d 536 (Md. 1985) (insurer must defend if there is any potentiality of coverage)
Aetna Cas. & Sur. Co. v. Cochran, 651 A.2d 859 (Md. 1995) (insured may use extrinsic evidence to establish potentiality of coverage)
Baltimore Gas & Elec. Co. v. Commercial Union Ins. Co., 688 A.2d 496 (Md. Ct. Spec. App. 1997) (insurer lacked duty to defend where underlying plaintiff redefined liability theory to exclude coverage)