HEAT & POWER CORPORATION, et al. v. AIR PRODUCTS & CHEMICALS, INC.
No. 91, Sept. Term, 1989
Court of Appeals of Maryland
Sept. 12, 1990
Motion for Reconsideration Denied Oct. 9, 1990
578 A.2d 1202
CHASANOW, Judge.
/s/__________
Frank Getson
...
Louis G. Close, Jr. (James R. Chason, Tricia D. O‘Neill, Whiteford, Taylor & Preston, all on brief) Towson, for respondent.
Argued before ELDRIDGE, COLE, RODOWSKY, MCAULIFFE, ADKINS,* HOWARD S. CHASANOW ** (specially assigned) and CHARLES E. ORTH, Jr., (retired, specially assigned), JJ.
CHASANOW, Judge.
Respondent, Air Products & Chemicals, Inc. (Owner), produces gas for industrial use. In April, 1977, Owner entered into a contract with Petitioner, Heat & Power Corp. (Contractor), to construct a silencer building1 at Owner‘s Sparrows Point plant. Owner designed and prepared all specifications for the building.
In July, 1987, an employee of Contractor, Ivor LaBarrie, was removing scaffolding from the silencer building roof
The relevant portion of Article 13 of the construction contract between Owner and Contractor states:
...
The Contractor shall indemnify [Owner] ... and save and hold each of them harmless from any and all loss, liability, fine, penalty or other charge, cost or expense by reason of any claim, fine or penalty, or any action or suit for injury to, or death of any persons, including agents and employees, or for damage to property, including the property of [Owner] and/or the Owner and their respective representatives, assigns, and successors, resulting from or arising out of or in connection with the performance of this Contract by Contractor and Subcontractor selected by Contractor if any. Contractor shall obtain appropriate insurance coverage with respect to such liability. (Emphasis added.)
In addition, the bidding instructions for the construction contract, expressly incorporated into the contract, required Contractor to name Owner as an “additional insured” on the comprehensive general liability policy Contractor maintained with its insurance carrier, Petitioner General Accident Fire and Life Assurance Corp., Ltd. (Insurer). Following Contractor‘s request, Insurer added Owner to Contractor‘s general liability policy in an endorsement which provides:
* Adkins, J., now retired, participated in the hearing and conference of this case while an active member of this Court; after being recalled pursuant to the Constitution,
** Howard S. Chasanow, a judge of the Seventh Judicial Circuit, was specially assigned to the Court of Appeals at the time the case was argued. He was sworn in as a judge of the Court on January 17, 1990.
In consideration of a flat charge of $25.00, it is agreed that the ‘Persons Insured’ provision is amended to include as insureds [Owner]. The provisions of this endorsement apply only in connection with work performed by the named insured for [Owner]. (Emphasis added.)
Owner maintains that Article 13 of the contract is unambiguous and clearly requires Contractor to indemnify and to secure insurance coverage for all claims made against Owner at this construction site, including claims made against Owner as a result of its own negligence. Contractor agrees with the Owner‘s contention that the language is unambiguous, but contends that clearly Article 13 only requires indemnification and insurance for Owner‘s vicarious liability, i.e., indemnification for any claims made against Owner as a result of Contractor‘s negligence for which Owner may be held vicariously liable.
In its dispute with Insurer, Owner contends that Insurer is obligated to defend and indemnify Owner for Owner‘s own negligence by virtue of the endorsement in Contractor‘s general liability policy with Insurer. Insurer, however, argues that the insurance contract endorsement is limited to protecting Owner against liability for work performed by Contractor for Owner. They maintain this language unambiguously limits any coverage to Owner‘s vicarious liability as the result of Contractor‘s work. Various judges of the Circuit Court for Baltimore City faced with the issue of ambiguity in the instant case “resolved” the issue four separate times, issuing four separate motions rulings.
Owner sought a defense and indemnity from Insurer based on the endorsement in Contractor‘s insurance policy. When Insurer refused, Owner filed a third-party complaint both against Insurer based on the endorsement, and against Contractor based on the indemnification provision in the construction contract. Owner‘s motion for summary judgment against Insurer was granted. Insurer then filed a motion for reconsideration of the summary judgment entered in favor of Owner. This motion for reconsideration
In an unreported opinion the Court of Special Appeals reversed the Circuit Court for Baltimore City holding that the matters were inappropriate for summary judgment. Contractor and Insurer petitioned this Court, and we granted certiorari.
I. STANDARD FOR APPELLATE REVIEW OF SUMMARY JUDGMENTS GRANTED ON THE BASIS OF A CONTRACT INTERPRETATION
The parties differ as to the proper standard for appellate review of a judgment entered on a motion for summary judgment. Petitioners, Contractor and Insurer, contend that the proper standard of review of summary judgment is “clearly erroneous.” They rely on subsection (c) of
(c) Action Tried Without a Jury.—When an action has been tried without a jury, the appellate court will review the case on both the law and the evidence. It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses.
Petitioners also rely on the child custody determination in Sewell v. Sewell, 218 Md. 63, 145 A.2d 422 (1958). In Sewell, this Court employed the clearly erroneous standard on review notwithstanding the fact that the trial court decided the case primarily on depositions, as well as the recorded testimony of a witness taken before an Examiner. Our review of the trial court‘s decision in Sewell, however, was very different from a review of a summary judgment motion.
In granting a motion for summary judgment, the trial court makes rulings as a matter of law, resolving no disputed issues of fact from the record. In Sewell, the trial court used the depositions and the record before the Examiner to resolve factual disputes and make factual determinations based on recorded testimony. Sewell involves a judgment following a court trial utilizing testimony from depositions and testimony taken before the Examiner. “Clearly erroneous” was the proper standard for review of a judgment following a court trial.
Respondent Owner contends, and we agree, that the standard for appellate review of a trial court‘s grant or denial of a motion for summary judgment is whether the trial court was legally correct. A trial court decides issues of law, not fact, when granting summary judgment.
II. INDEMNITY PROVISION IN THE CONTRACT
Article 13 of the contract required Contractor to indemnify Owner for any liability “resulting from or arising out of or in connection with the performance of this contract by Contractor....” This provision cannot be construed as indemnifying the Owner against its own sole negligence. Any such construction would render the provision against public policy and void pursuant to
A covenant, promise, agreement or understanding in, or in connection with or collateral to, a contract or agreement relating to the construction, alteration, repair, or maintenance of a building, structure, appurtenance or appliance, including moving, demolition and excavating connected with it, purporting to indemnify the promisee against liability for damages arising out of bodily injury to any person or damage to property caused by or resulting from the sole negligence of the promisee or indemnity, his agents or employees, is against public policy and is void and unenforceable. This section does not affect the validity of any insurance contract, workmen‘s compensation, or any other agreement issued by an insurer. (Emphasis added.)
As this statute states and as we construed it in Bethlehem Steel v. G. C. Zarnas & Co., 304 Md. 183, 498 A.2d 605 (1985), any covenant, promise, agreement, or understanding
Even if
Owner next contends that even if Contractor had no contractual obligation to indemnify Owner against its own negligence, Contractor did have a contractual duty to provide liability insurance which would insure Owner against its own negligence. We need not address the issue of whether
There are additional contractual provisions which Owner contends preclude summary judgment in favor of Contractor. The “Instructions to Bidders,” which were expressly incorporated into the contract, required the Contractor to have Owner named as an “additional insured” on certain listed insurance coverage.
The Instructions to Bidders stated:
...
[Owner] shall be made an additional insured on all of the above contracts ... and shall be given 30 days notice in the event of cancellation of any policy. Certificates evidencing this coverage shall be forwarded to [Owner] prior to commencing work under the Contract.
Owner was made an “additional insured” by endorsement on all of the enumerated policies, although there is now disagreement between Owner and Insurer as to the interpretation of the endorsements. Owner may be correct in asserting that the term “additional insured” is ambiguous; however, Contractor secured endorsements on each of the enumerated insurance coverages, and the unrebutted evidence was that the language in the endorsements was acceptable to Owner. Further, in response to a request for admissions, Owner acknowledged that it was made an additional “persons insured” on all policies of insurance obtained in accordance with that section of the contract. Contractor fulfilled the requirement of having Owner named as an “additional insured” by procuring endorsements on the named policies in language that was acceptable to Owner. Owner got what it asked for even though it may not have gotten what it wanted.
III. EXTENT OF INSURANCE COVERAGE UNDER THE CONTRACT
Although we need not address the issue of whether a provision in a construction contract requiring a promisor to provide insurance coverage for the promisee‘s sole negligence is voided by
Contractor‘s obligations under the contract were only to provide insurance coverage to Owner for Owner‘s vicarious
We hold that the insurance endorsement in the instant case could insure owner against its own negligence. We do not hold that the endorsement does provide such coverage. The rule of construction that a “contract will not be construed to indemnify a person against his own negligence unless an intention to do so is expressed in those very words or in other unequivocal terms,” Crockett, supra, does not apply to an insurance contract. The policy consideration against implying agreements to indemnify one for one‘s own negligence are inapplicable to liability insurance contracts which generally have as their primary purpose indemnification against one‘s own negligence. Also, one of the reasons why contracts to indemnify must be expressed in unequivocal terms is to protect the unwary or uninformed promisor. A liability insurer is rarely an unwary or uninformed promisor.
In interpreting a contract, the trial judge must first consider “the character of the contract, its purpose, and the facts and circumstances of the parties at the time of execution.” Pacific Indem. Co. v. Interstate Fire & Cas. Co., 302 Md. 383, 388, 488 A.2d 486, 488 (1985). Second, with this background, the judge examines the four-corners of the contract to determine if the contract is unambiguous. An ambiguity exists when, to a reasonably prudent person, the language used in the contract is susceptible of more than one meaning. Truck Ins. Exchange v. Marks Rentals, Inc., 288 Md. 428, 433, 418 A.2d 1187, 1190 (1980). If the contract is ambiguous, the court must consider any extrin-
In the instant case, Contractor had a comprehensive general liability policy with Insurer. Owner was added as an additional insured pursuant to an endorsement which provided:
[T]he “person‘s insured” provision is amended to include as insureds [Owner]. The provisions of this endorsement apply only in connection with work performed by the named insured for [Owner].
The Court of Special Appeals held that the endorsement was ambiguous, and that there were factual disputes about the true intention of the parties which must be resolved by the trier of fact. Owner and Insurer both contend that the endorsement is unambiguous, but they disagree as to the unambiguous meaning of the endorsement. Owner contends that the endorsement provides Owner with complete liability coverage for all negligent acts committed on this construction site. Insurer contends the endorsement only provides coverage for negligent acts of the Contractor or its agents. We agree with the Court of Special Appeals that the endorsement is ambiguous, and that factual findings about the intention of the parties will have to be made by the trier of fact.
JUDGMENT OF THE COURT OF SPECIAL APPEALS AFFIRMED IN PART AND REVERSED IN PART. COSTS IN THIS COURT AND IN THE COURT OF SPECIAL APPEALS TO BE PAID BY AIR PRODUCTS & CHEMICALS, INC. AND GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORP., LTD.
ELDRIDGE, Judge, concurring in part and dissenting in part, in which COLE, J., concurs.
The majority does not address whether the Owner could enforce a contractual provision requiring the Contractor to obtain an insurance policy that would indemnify the Owner for the Owner‘s sole negligence. The majority opinion does
I.
The holding in this case makes it unnecessary for the majority to address whether the Owner could enforce a provision in a contract, under which the Contractor promises to obtain an insurance policy that indemnifies the Owner for the Owner‘s sole negligence. It will, however, be necessary for me to address this issue. I have little doubt that
As the majority observes, the Contractor can not, under
This Court held in Bethlehem Steel v. G. C. Zarnas & Co., 304 Md. 183, 498 A.2d 605 (1985), that the public policy embodied in
“This is not a situation where Maryland law is simply different from the law of another jurisdiction. Here, the General Assembly of Maryland has specifically addressed clauses in construction contracts providing for indemnity against the results of one‘s sole negligence, and has unequivocally told the Maryland judiciary that such a clause ‘is void and unenforceable.’
§ 5-305 of the Courts and Judicial Proceedings Article . Moreover, in the same sentence of the statute, the General Assembly expressly stated that such indemnity provision ‘is against public policy.‘”
A promise by the Contractor to insure the Owner against the Owner‘s sole negligence clearly falls into the category of “clauses in construction contracts providing for indemnity against the results of one‘s sole negligence.”
This is illustrated by a New Mexico case, Amoco Production v. Action Well Service, 107 N.M. 208, 755 P.2d 52 (1988). In that case, the Supreme Court of New Mexico affirmed the dismissal of an action in which an oil well owner had sought to enforce an indemnification agreement against a lessee. One of the lessee‘s employees had died, allegedly because of the owner‘s negligence, and the owner had settled with the decedent‘s estate. The owner asserted that the lessee was obligated to indemnify up to the amount of liability insurance which the lessee was required to purchase under the agreement. The Court disagreed, rejecting the owner‘s contention that a New Mexico statute similar to
In Peeples v. City of Detroit, 99 Mich.App. 285, 297 N.W.2d 839 (1980), the Court of Appeals of Michigan reversed a lower court order granting summary judgment in favor of a general contractor against a subcontractor, premised on the subcontractor‘s failure to provide “requisite” liability insurance on behalf of the general contractor. This insurance purportedly would have covered the general con-
“We have previously noted that the legislature has declared it to be contrary to public policy in Michigan for anyone in the construction industry to make any agreement which would absolve him from liability for his sole negligence, declaring that any such agreement is void and unenforceable,
M.C.L. § 691.991 ;M.S.A. § 26.1146(1) . Any agreement whereby a subcontractor must procure insurance which includes coverage for the general contractor‘s sole negligence would contravene Michigan public policy as expressed by the statute and would be unenforceable.”
But cf. Sentry Insurance Co. v. National Steel Corp., 147 Mich.App. 214, 382 N.W.2d 753 (1985).
There are a few states where intermediate appellate courts, interpreting statutes like
As this Court emphasized in Bethlehem Steel v. G. C. Zarnas & Co., supra, 304 Md. at 190, 498 A.2d at 608, the General Assembly in
In his dissenting opinion in Zarnas, Judge Rodowsky opined that one purpose of
For these reasons, I believe it is clear that the Owner could not enforce a contractual provision requiring the Contractor to procure an insurance policy that would indemnify the Owner for the results of its solely negligent acts. I will now address the issue that the majority did decide.
II.
The majority holds that
The majority‘s reliance on the final sentence in
In my view, the final sentence in
Other courts, interpreting similar statutory provisions, have construed them in ways consistent with state public policy objectives. In Amoco Production v. Action Well Service, supra, 755 P.2d at 55, the Supreme Court of New Mexico concluded that the phrase “[t]his provision shall not affect the validity of any insurance contract ...” only “applies to insurance purchased by the indemnitor to protect its interests, and not the interests of the indemnitee.”
In Quevedo v. City of New York, supra, 56 N.Y.2d at 156 n. 3, 451 N.Y.S.2d at 653 n. 3, 436 N.E.2d at 1255 n. 3, the Court of Appeals of New York noted that a proviso that the state statute “‘shall not affect the validity of any insurance contract ...‘” “merely ensures that the contractor will not lose insurance coverage simply because the coverage may extend to liability sought to be imposed under an unenforceable agreement.” The Court emphasized that “the existence of insurance would not save an indemnification clause otherwise unenforceable under [the statute].”
“We are persuaded that it would frustrate the purposes of the Act to allow [the owner] to obtain from [the insurer] the indemnification it cannot obtain from [the contractor].”
The endorsement in the present case, to the extent that it indemnifies the Owner for the results of the Owner‘s sole negligence, was not an existing insurance provision. It was procured by the Contractor to fulfill a requirement of the present construction contract.
I would reverse the entire judgment of the Court of Special Appeals, and instruct that court to affirm the summary judgments entered by the Circuit Court for Baltimore City.
Notes
Finally, the intermediate appellate court in Arizona, without any analysis, simply concluded that the Arizona statute had “no application to an agreement as to which an insurer will be liable for the negligence of a party.” U.S. Fid. & Guar. v. Farrar‘s Plumbing, 158 Ariz. 354, 355, 762 P.2d 641, 642 (Ariz.App.1988).