Explorer Insurance Company v. Nagel Farm Service, Inc.
1:24-cv-01346
| D. Maryland | Jun 30, 2025Background
- Nagel Farm Service, Inc. was sued for indemnification by third parties in Delaware after the electrocution death of an employee while performing work related to Nagel's Maryland business.
- Nagel held relevant insurance policies: a workers' compensation and employers liability policy from Explorer Insurance (covering Maryland but not Delaware) and an umbrella policy from Penn Millers Insurance.
- Both insurers initially denied Nagel's request for defense and indemnity; Penn Millers later agreed to defend under a reservation of rights and sought to preserve a right to reimbursement of defense costs.
- The geographic scope and coverage potential of the Explorer and Penn Millers policies were disputed, particularly whether the policies covered incidents occurring outside Maryland.
- Nagel moved to dismiss Penn Millers's counterclaim seeking reimbursement of defense costs on the grounds that the underlying claims potentially triggered a duty to defend under Maryland law.
- The sole issue decided in this opinion was whether Penn Millers could seek reimbursement from Nagel for defense costs if ultimately determined no indemnity was owed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend arises when coverage is potential | No potential coverage under policy; duty to defend not triggered | Potential for coverage exists due to policy language and facts | There is at least a potential for coverage, triggering duty to defend |
| Reimbursement of defense costs when no indemnity | Reservation of rights allows reimbursement | Maryland law disallows reimbursement for covered/potentially covered claims | No right to reimbursement for defense costs under Maryland law |
| Geographic limitations of policy coverage | Policy covers only incidents in Maryland | Policy covers work incidental/necessary to Maryland business; Delaware accident related | Possible that coverage extends to Delaware, sufficient for duty to defend |
| Applicable law for indemnification claims | Only Maryland law bars indemnification | Delaware law allows indemnification in this situation | Sufficient possibility Delaware law applies; duty to defend triggered |
Key Cases Cited
- Perdue Farms, Inc. v. Travelers Cas. & Surety Co. of America, 448 F.3d 257 (4th Cir. 2006) (Maryland law prohibits insurers from seeking reimbursement of defense costs when there is a duty to defend, even if no ultimate duty to indemnify)
- Cowan Sys., Inc. v. Harleysville Mut. Ins. Co., 457 F.3d 368 (4th Cir. 2006) (Duty to defend under Maryland law arises for any claim potentially covered by the policy)
- Walk v. Hartford Cas. Ins. Co., 382 Md. 1 (2004) (Duty to defend is broader than duty to indemnify under Maryland law)