eNotes: Liability – March 2023 – Maryland

SIGNIFICANT CASE SUMMARIES

Maryland Case Summary

Selective Way Ins. Co. v. Fireman’s Fund Ins. Co.
Maryland Appellate Court
2023 Md. App. LEXIS 82

Decided: February 2, 2023

The Appellate Court of Maryland held that Plaintiff-insurer’s equitable contribution rights against Defendants for defense costs in a construction defect lawsuit were not extinguished by Defendants’ settlements with another insurer.

Background

In the early 2000s, Questar Buildings, Inc. oversaw the construction of an apartment complex in Baltimore County (the “project”). Questar held a liability insurance policy with Nationwide. Quester held contracts with various subcontractors on the project which required those subcontractors to indemnify Quester and to obtain insurance policies which named Quester as an additional insured. The purchaser of the complex sued Quester, claiming that Quester did not properly oversee the project, resulting in construction defects (“the construction defect suit”). Nationwide defended Quester in the construction defect suit under a reservation of rights, and the case eventually settled. The construction defect suit generated approximately $1 million in attorneys’ fees and defense costs. Nationwide then brought declaratory judgment actions (“declaratory judgment actions”) against various subcontractors on the project and their insurers, claiming that the subcontractors’ insurers breached the contractual duty to defend Quester in the construction defect suit.

Nationwide reached settlements with most of the subcontractors’ insurers (“settling insurers”) in the declaratory judgment actions. However, Nationwide did not reach a settlement with one insurer, Selective, and continued to trial on its claims against Selective. At trial, Nationwide obtained a $994,152.00 judgment against Selective, an amount which reflected the defense costs of the construction defect suit. Selective then brought a separate contribution action in the Circuit Court for Baltimore County against the settling insurers, claiming that the settling insurers had an obligation to pay Selective their proportionate shares of the $994,152.00 judgment. The settling insurers filed a Motion to dismiss, or in the alternative, for summary judgment against Selective. The settling insurers claimed that Selective’s right to obtain contribution from the settling insurers was extinguished by their settlements with Nationwide, which were obtained prior to the filing of Selective’s lawsuit. The Circuit Court granted summary judgment in favor of the settling insurers on those grounds. Selective appealed to the Appellate Court of Maryland.

Holding

The Appellate Court of Maryland reversed the Circuit Court’s decision to enter summary judgment in favor of the settling insurers on the grounds identified above. The Appellate Court determined that the Circuit Court erred when it found that the settling insurers no longer had any common liability with Selective after they settled with Nationwide. The Appellate Court found that Selective’s right to equitable contribution against the settling insurers was not extinguished by the settling insurers’ settlement agreements with Nationwide. The Appellate Court acknowledged that while Selective may not ultimately prevail on its equitable contribution claim, it could not uphold the entry of summary judgment on the grounds relied upon by the Circuit Court. The case was remanded to the Circuit Court for further proceedings.

Questions about this case can be directed to Andrew White at (443) 641-0572 or awhite@tthlaw.com.