Alpha Construction and Engineering v. The Insurance Company of

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 09-1394

ALPHA CONSTRUCTION AND ENGINEERING CORPORATION; RUMMEL,
KLEPPER & KAHL; UNITED STATES FIDELITY AND GUARANTY
COMPANY; THE AMERICAN INSURANCE COMPANY,

Plaintiffs - Appellants,

v.

THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA,

Defendant - Appellee.

Appeal from the United States District Court for the District of
Maryland, at Baltimore. J. Frederick Motz, District Judge.
(1:06-cv-02352-JFM)

Argued: May 13, 2010 Decided: September 22, 2010

Before KING and DAVIS, Circuit Judges, and C. Arlen BEAM, Senior
Circuit Judge of the United States Court of Appeals for the
Eighth Circuit, sitting by designation.

Affirmed in part, vacated in part, and remanded by unpublished
per curiam opinion. Senior Judge Beam wrote a concurring and
dissenting opinion.

ARGUED: Patrick James Attridge, KING & ATTRIDGE, Rockville,
Maryland; Robert Lawrence Ferguson, Jr., FERGUSON, SCHETELICH &
BALLEW, PA, Baltimore, Maryland, for Appellants. J. Gregory
Lahr, SEDGWICK, DETERT, MORAN & ARNOLD, New York, New York, for
Appellee. ON BRIEF: Michele Z. Blumenfeld, FERGUSON, SCHETELICH
& BALLEW, PA, Baltimore, Maryland, for Appellants. Stacey A.
Moffet, ECCLESTON & WOLF, PC, Hanover, Maryland, for Appellee.

Unpublished opinions are not binding precedent in this circuit.

2
PER CURIAM:

The plaintiffs in this declaratory judgment action, Alpha

Construction and Engineering Corporation (“Alpha”), Rummel,

Klepper & Kahl (“RKK”), United States Fidelity and Guaranty

Company (“USF&G”), and The American Insurance Company

(“American”) (collectively, the “Plaintiffs”), appeal from the

district court’s judgment in favor of defendant The Insurance

Company of the State of Pennsylvania (“ICSP,” or the

“Defendant”), resolving an insurance coverage dispute. See

Alpha Constr. & Eng’g Corp. v. Ins. Co. of State of Pa., 601 F.

Supp. 2d 684 (D. Md. 2009) (the “Opinion”) (awarding summary

judgment to ICSP and denying summary judgment to Plaintiffs).

As explained below, we are content to affirm the district court

on its insurance coverage declaration. On the other hand, we

vacate its reimbursement award and remand for further

proceedings.

I.

A.

The Maryland Transit Administration (“MTA”) is a state

governmental agency that provides rail, bus, and other transit

3
services within the confines of Maryland. 1 MTA’s Construction

Division manages its capital improvement programs. Most of the

Construction Division’s staff is leased by MTA from outside

independent firms through so-called “consultant contracts.”

Alpha and RKK were independent firms that provided inspectors

and resident engineers to MTA for its projects. Various

agreements between MTA, Alpha, RKK, and other firms allowed MTA

to have a labor pool readily available for its various

construction projects.

In January 2003, MTA was involved in construction and

improvement work at the Rogers Avenue Metro Station in Baltimore

(the “Weatherization Project”), and a firm called Maple

Construction (“Maple”) was the general contractor for this

undertaking. On January 13, 2003, MTA received a report of a

safety violation at the Rogers Avenue station, and two MTA

inspectors, Michael Gray and Anthony Combs (inspectors supplied

to MTA by Alpha and RKK, respectively), were dispatched to the

station. Upon arriving at the Rogers Avenue station, Gray saw a

large piece of plywood perched above an escalator. The evidence

reflects that Maple’s employees used several similar boards to

1
The MTA is liable for its contracts and torts and for the
torts of its officers, agents, and employees in connection with
the performance of the duties and functions of the agency. See
Md. Code Ann., Transp. § 7-702(a).

4
cover an opening to the escalator while they worked on the

Weatherization Project during daylight hours. During the night,

all but one board was removed, however, apparently because

Maple’s owner and project foreman decided there was no point in

taking the last board down. Although Gray noticed some wire on

or near the single board, he could not ascertain whether the

plywood was tied securely. While in the process of examining

the board, Gray lifted and dislodged it, causing the board to

fall onto the back and head of MTA passenger Mary Griffin as she

ascended the escalator. Griffin sustained serious and permanent

injuries as a result.

Griffin thereafter settled her personal injury lawsuit

arising from the foregoing incident for the sum of $855,000.

The settlement involved a number of parties —— MTA, Maple, MTA’s

and Maple’s general liability insurer (ICSP), Alpha and its

general liability carrier (USF&G), and RKK and its general

liability carrier (American). In the Settlement Funding

Agreement, each of the settling parties reserved the right to

seek reimbursement from one another for the defense costs and

indemnity payments incurred. Nonetheless, the actual settlement

funds came from the three insurers —— ICSP, USF&G, and American

— and the Settlement Funding Agreement was signed by

representatives of each of these insurers. The Agreement states

that the possible negligence and liability of the various

5
parties had not been adjudicated or apportioned and expressly

reserved such issues for future determination.

The general liability policy issued to MTA by ICSP for the

Weatherization Project (the “ICSP Policy”) was part of an owner

controlled insurance program, called an “OCIP.” OCIPs, also

known as wrap-around insurance programs, provide insurance

coverage for those contractors and subcontractors supplying

direct labor or personnel at a construction project, and insure

against the risk of loss arising from, inter alia, property

damage, personal injury, and workers’ compensation claims.

Under the ICSP Policy issued to MTA, ICSP provided a defense for

both MTA and Maple in the Griffin lawsuit, but denied coverage

for Alpha and RKK and their employees Gray and Combs.

B.

As a result of the foregoing events, Alpha and RKK, on

behalf of themselves and their insurers USF&G and American,

filed this declaratory judgment action in the district court,

alleging diversity jurisdiction and seeking a declaration that

Alpha and RKK and their employees, Gray and Combs, were insureds

under the ICSP policy. Alpha and RKK sought a declaration from

the district court that ICSP owed them and/or Gray and Combs a

duty to defend the Griffin lawsuit and a duty to indemnify them

for the settlement contributions made on their behalf. ICSP

counterclaimed against Alpha, alleging that it was entitled to

6
contribution or indemnity from Alpha for the costs it had

incurred in defending MTA and in paying the sum of $400,000 to

help settle the Griffin lawsuit.

1.

In addressing the cross-motions of the parties for summary

judgment, the district court declared in its Opinion that ICSP

was entitled to prevail on the insurance coverage contentions

presented by the Plaintiffs. 2 First, the court assessed the

2
Importantly, in issuing its coverage declaration, the
district court recognized that “[t]he contracts in dispute in
this case were made in Maryland and, accordingly, Maryland
substantive law governs.” Alpha Constr. & Eng’g, 601 F. Supp.
2d at 688. The court further recognized that,

[w]hen interpreting the meaning of an insurance
policy, Maryland courts “construe the instrument as a
whole to determine the intention of the parties.”
Clendenin Bros., Inc. v. U.S. Fire Ins. Co., 889 A.2d
387, 393 (Md. 2006) (citing Cheney v. Bell Nat’l Life
Ins. Co., 556 A.2d 1135, 1138 (Md. 1989)). Courts
will look first to the contract language employed by
the parties to determine the scope and limitations of
the insurance coverage. Id. (quoting Cole v. State
Farm Mut. Ins. Co., 753 A.2d 533, 537 (Md. 2000)).
The court is to give a term within the contract its
“usual, ordinary and accepted meaning unless there is
evidence that the parties intended to employ it in a
special or technical sense.” Id. (citations omitted).
Maryland courts will examine “the character of the
contract, its purpose, and the facts and circumstances
of the parties at the time of execution.” Id.
(quoting Pacific Indem. Co. v. Interstate Fire & Cas.
Co., 488 A.2d 486, 488 (Md. 1985)).

If the terms used in the insurance policy are
unambiguous, the court will determine the meaning of
the terms of the contract as a matter of law; however,
(Continued)
7
Plaintiffs’ contention “that Alpha and RKK are ‘insureds’ under

the ICSP Policy,” and concluded that “[t]he terms of the ICSP

Policy demonstrate that the Policy does not provide coverage to

Alpha and RKK.” Alpha Constr. & Eng’g, 601 F. Supp. 2d at 689.

The court explained:

Plaintiffs argue that Alpha and RKK are included
within the Policy’s definition of “Named Insured,”
which includes “[a]ll contractors, all tiers of
subcontractors, each separate contractor of [MTA],
others to whom [MTA] Contracts to furnish insurance
under the insurance program” for the Weatherization
Project. Plaintiffs describe Alpha and RKK as
“contractors,” “separate contractors of [MTA],” or,
alternatively, “others to whom [MTA] Contracts to
furnish insurance . . . .”

Alpha and RKK might appear to be insureds under
the Policy’s definition of “Named Insured”; however,
they are explicitly excluded from coverage by
Endorsement MS # 00006 of the Policy. The Endorsement
provides that “coverage for ‘Named Insured(s)’ shall
be automatically effected based upon issuance of a
workers compensation policy as afforded by the wrap-up
program/owner controlled insurance program.” The
Endorsement also states that the Policy “does not
apply to any of the following as an insured: . . .

if the language is ambiguous, extrinsic evidence may
be consulted. Id. (citations omitted). A term of a
contract is ambiguous “if, to a reasonably prudent
person, the term is susceptible to more than one
meaning.” Id. (citing Cole, 753 A.2d at 537).
Summary judgment is appropriate when the contract in
question is unambiguous or when an ambiguity can be
resolved by reference to extrinsic evidence.
Washington Met. Area Transit Auth. v. Potomac Inv.
Props., Inc., 476 F.3d 231, 235 (4th Cir. 2007).

Alpha Constr. & Eng’g, 601 F. Supp. 2d at 688-89.

8
[e]xcept as respects to any contractor or
subcontractor who will have employees engaged in work
at the project hereof who are not provided workers
compensation and employers liability coverage under
the owner provided insurance program, unless
specifically endorsed to the policy.” Although this
provision is not artfully worded, it is included among
provisions which explicitly list those entities and
individuals who are not covered under the Policy. Its
import is clear: those contractors or subcontractors
who are not provided workers’ compensation and
employer’s liability coverage under OCIP are not
insured under the ICSP Policy. Thus, if Alpha and RKK
were not provided workers’ compensation and employer’s
liability coverage under OCIP, they were not insured
under the ICSP Policy.

Plaintiffs present no evidence that Alpha and RKK
were provided any coverage under OCIP. In fact, the
record evidence indicates quite the opposite.
Catharine Jones, MTA’s project manager of OCIP,
testified in her deposition that neither Alpha nor RKK
was ever covered under OCIP. Jones identified at her
deposition a spreadsheet dated March 31, 2007, and
kept by MTA’s broker, listing all of the companies
that were ever enrolled in the OCIP starting in 2000.
Alpha and RKK do not appear on the list.
Additionally, the Alpha and RKK Contracts
(collectively “Consulting Contracts”) do not
incorporate, either directly or by reference, the
terms and conditions of the ICSP Policy, and they do
not reference participation in OCIP. John Cousins,
MTA’s Manager of Procurement, testified that
consultant contracts of the type entered into by Alpha
and RKK typically do not contain an application for
enrollment in OCIP because “[w]e [MTA] don’t enroll
consultants in OCIP.” In fact, the Consulting
Contracts require Alpha and RKK to enter into their
own workers’ compensation and comprehensive general
liability insurance and to name MTA as an additional
insured under their comprehensive general liability
policies. Moreover, both the RKK and Alpha Contracts
state that they are the “exclusive statement” of the
parties’ agreement, suggesting that Plaintiffs’
reliance on the provisions of the ICSP Policy is
misplaced.

9
Id. at 689-90 (alterations in original) (footnotes and citations

omitted). According to the court, “[b]ecause Alpha and RKK

cannot demonstrate that they were provided coverage under OCIP,

. . . they are not covered by the ICSP Policy.” Id. at 690.

Thus, “ICSP had no duty to defend or indemnify [Alpha and RKK]

in the underlying suit.” Id. at 691. 3

Next, the district court assessed the Plaintiffs’

contention “that, under the doctrine of equitable subrogation,

they are entitled to reimbursement from ICSP based on their

common law indemnity rights against individuals (Gray and Combs)

who were . . . insured under the ICSP Policy.” Alpha Constr. &

Eng’g, 601 F. Supp. 2d at 691. The court concluded that,

because “Gray and Combs were not insured under the ICSP Policy,”

there was no merit to the Plaintiffs’ equitable subrogation

theory. Id. On this issue, the court explained:

In support of their claim that the ICSP Policy
includes Gray and Combs as insureds, Plaintiffs assert
that Gray and Combs were “employees” of MTA at the
time of the Griffin incident. Under the section “WHO
IS AN INSURED,” the ICSP Policy includes “employees”
of MTA. The Policy does not define “employee” except
to state that “employee” includes a “leased worker”
but not a “temporary worker.” “Leased worker” is
defined as “a person leased to [MTA] by a labor

3
Notably, the district court also rejected the Plaintiffs’
alternative theory “that Alpha and RKK should be covered under
the ICSP Policy as third-party beneficiaries of the Policy and
of the Maple Contract.” See Alpha Constr. & Eng’g, 601 F. Supp.
2d at 690-91.

10
leasing firm under an agreement between [MTA] and the
labor leasing firm, to perform duties related to the
conduct of [MTA’s] business.” A “temporary worker” is
“a person who is furnished to [MTA] to substitute for
a permanent ‘employee’ on leave or to meet seasonal or
short-term workload conditions.” Plaintiffs assert
that Gray and Combs were “leased workers.”

I need not determine whether Gray and Combs could
be properly characterized as “employee[s]” or “leased
worker[s]” of MTA because even if that
characterization were appropriate, Plaintiffs may not
use an equitable subrogation argument to circumvent
their clear exclusion under the terms of the ICSP
Policy. Under Maryland law, “any construction of a
contract that makes another provision superfluous is
generally disfavored.” National Cas. Co. v. Lockheed
Martin Corp., 415 F. Supp. 2d 596, 602 (D. Md. 2006)
(citing Baltimore Gas & Elec. Co. v. Commercial Union
Ins. Co., 688 A.2d 496, 503 (Md. Ct. Spec. App. 1996)
(“A contact must be construed as a whole, and effect
given to every clause and phrase, so as not to omit an
important part of the agreement.”)); see also 11
Richard A. Lord, Williston on Contracts § 32:5 (4th
ed. 1992) (“An interpretation which gives effect to
all provisions of the contract is preferred to one
which renders a portion of the writing superfluous,
useless or inexplicable”). In this case, if I were to
accept Plaintiffs’ reading and find that the terms
“employee[s]” or “leased worker[s]” applied to Gray
and Combs, the ICSP Policy’s exclusion of those
contractors or subcontractors not provided coverage
under OCIP, like Alpha and RKK, would be rendered
effectively meaningless. As discussed above,
Endorsement MS # 00006 of the ICSP Policy provides
that no contractor or subcontractor will receive
coverage under the Policy unless first provided
coverage under OCIP. The enrollment process for OCIP
gives MTA the discretion to choose which entities
participate in OCIP. IF MTA chose to explicitly
exclude entities like Alpha and RKK from coverage, but
the employees those entities provided to MTA were
nonetheless covered, the terms of Endorsement MS
# 00006 would have no effect. As Alpha and RKK have
no relationship with MTA but to provide “‘competent
personnel’ to work on MTA construction projects,”
insuring an Alpha or RKK employee against third-party

11
 claims would have essentially the same effect as
insuring Alpha or RKK themselves, a result clearly
contrary to the terms of Endorsement MS # 00006.

Alpha Constr. & Eng’g, 601 F. Supp. 2d at 691-92 (alterations in

original) (citations omitted). The court summarized that,

because “Gray and Combs are not insured under the ICSP Policy,

Plaintiffs are not entitled to equitable subrogation from

Defendant for their defense and settlement expenses in the

underlying suit.” Id. at 692.

2.

The district court then focused in its Opinion on ICSP’s

counterclaim for reimbursement, in which ICSP asserted “that

Alpha breached the Alpha Contract by failing to defend or

indemnify MTA in the Griffin suit.” Alpha Constr. & Eng’g, 601

F. Supp. 2d at 692. The court agreed with ISCP that, pursuant

to the Alpha Contract, “Alpha owed MTA a duty to defend and

indemnify in the underlying suit.” Id. The Opinion explained

the court’s reimbursement award as follows:

In Maryland, an insurer has a duty to defend when
there exists a “potentiality that the claim could be
covered by the policy.” Litz v. State Farm Fire and
Cas. Co., 695 A.2d 566, 570 (Md. 1997) (citation
omitted). In this case, the source of Alpha’s duty to
defend is not an insurance policy, but rather the
Alpha Contract, which provides “[t]he consultant
[Alpha] shall pay any claims for personal injury,
bodily injury, or property damage which the Consultant
is legally obligated to pay and shall indemnify the
State against such claims. The Consultant shall
undertake to defend any third party claim seeking such
damages.” The indemnity provision of the Alpha

12
Contract requires Alpha to indemnify MTA against all
claims arising from “errors, omissions, negligent acts
. . . of [Alpha] or those of his . . . agents or
employees under this Contract . . . .” A negligence
claim is clearly potentially covered. The Griffin
suit was a personal injury action by a third party
which specifically named Gray, an Alpha employee, as
committing the act which led to Griffin’s injury. The
facts alleged in the underlying complaint clearly
brought the claim within Alpha’s duty to defend under
the Alpha Contract.

The duty to indemnify is more narrow. While the
duty to defend depends only upon the facts as alleged,
the duty to indemnify depends upon liability. Walk v.
Hartford Cas. Ins. Co., 852 A.2d 98, 106 (Md. 2004)
(citation omitted). The Fourth Circuit has held that
the duty to indemnify may be triggered by a settled
liability. St. Paul Fire & Marine Ins. Co. v. Am.
Int’l Speciality Lines Ins. Co., 365 F.3d 263, 274
(4th Cir. 2004). The issue is whether the claims
against the named defendants in the underlying suit
and the facts pled in that action would give rise to
an indemnification obligation under the agreement
between the parties. Id. The indemnity provision of
the Alpha Contract provides that Alpha shall indemnify
MTA

from and against all claims, suits,
judgements, expenses, actions, damages and
costs of every name and description arising
out of or resulting from errors, omissions,
negligent acts, negligent performance or
nonperformance of the services of the
Consultant [Alpha] or those of his
subcontractors, agents or employees under
this Contract . . . .

The facts pled and the claims asserted in the
underlying action provide sufficient evidence to
determine that the settled liability is encompassed by
Alpha’s indemnification obligation. See St. Paul Fire
& Marine Ins. Co., 365 F.3d at 273-74. The Griffin
complaint charged the defendants (including Alpha) “by
and through their various agents, servants, and/or
employees” with negligence. Specifically, the
complaint alleged that the plywood which injured

13
 Griffin fell when Gray, an Alpha employee, was
handling it, and the testimony in the underlying
action demonstrates that Gray was indeed inspecting
and lifting the plywood when it fell, a duty that was
part of his performance under the Alpha Contract.
Plaintiffs themselves admit that the fact that Griffin
was injured when Gray was inspecting the plywood “may
be some evidence of Gray’s negligence.” Though
Griffin charged the named defendants collectively with
negligence, she alleged that it was Gray’s actions or
omissions which caused her injury. As Gray was an
“employee[]” of Alpha, the settlement of Griffin’s
allegations against him triggered Alpha’s duty to
indemnify MTA.

Alpha Constr. & Eng’g, 601 F. Supp. 2d at 692-93 (alterations in

original) (footnotes and citations omitted). In these

circumstances, the court concluded “that Alpha breached its

duties to defend and indemnify MTA in the underlying action, and

ICSP is entitled to reimbursement from Alpha [in the amount of]

the costs it incurred in the underlying suit.” Id. at 694. The

court awarded ICSP $400,000 — “the specific amount requested by

ICSP in its counterclaim” and the amount “that ICSP paid . . .

in settling the Griffin suit.” Id. at 694 & n.10.

In accordance with its Opinion, the district court entered

an Order on March 9, 2009, denying the Plaintiffs’ request for

summary judgment, awarding summary judgment to ICSP, and

imposing a reimbursement award of $400,000 plus prejudgment

interest and costs. The Plaintiffs timely noted this appeal,

and we possess jurisdiction pursuant to 28 U.S.C. § 1291.

14
 II.

We review de novo a district court’s award of summary

judgment, applying the standards set forth in Federal Rule of

Civil Procedure 56 and viewing the facts in the light most

favorable to the nonmoving party. See Lee v. York Cnty. Sch.

Div., 484 F.3d 687, 693 (4th Cir. 2007). Where “an appeal from

a denial of summary judgment is raised in tandem with an appeal

of an order granting a cross-motion for summary judgment, we

have jurisdiction to review the propriety of the denial of

summary judgment by the district court.” Monahan v. Cnty. of

Chesterfield, Va., 95 F.3d 1263, 1265 (4th Cir. 1996) (internal

quotation marks omitted).

III.

On appeal, the Plaintiffs challenge two aspects of the

district court’s Opinion. First, they contend that the court

erred in its insurance coverage declaration, in that Alpha and

RKK are entitled to reimbursement from ICSP under the doctrine

of equitable subrogation, because Gray and Combs were “insureds”

under the ICSP Policy. 4 We reject the Plaintiffs’ contention in

4
The Plaintiffs have abandoned on appeal their theory that
Alpha and RKK were “insureds” under the ICSP Policy. See Br. of
Appellants 21 n.10. (“While Appellants maintain that the
District Court’s ruling was incorrect, Appellants do not raise
that issue in this Appeal.”).

15
this regard and affirm the insurance coverage declaration on the

reasoning of the district court. See supra Part I.B.1.

Second, the Plaintiffs assert that the district court erred

in imposing the $400,000 reimbursement award. On this aspect of

the Opinion, we agree with the district court that, under the

Alpha Contract, Alpha was obliged to defend MTA in the

underlying Griffin suit. Nevertheless, we cannot endorse the

court’s ruling that, as a matter of law, Alpha was required to

indemnify MTA, thus entitling ICSP to reimbursement of the full

amount of costs it incurred in settling Griffin’s claims. See

supra Part I.B.2.

As the Plaintiffs maintain, the issue of whether Alpha had

a duty to indemnify MTA depends on whether Gray’s negligence was

the sole (or at least a contributing) cause of Griffin’s

injuries. That is so because, under the express terms of the

Alpha Contract, Alpha is required to indemnify MTA for only

Alpha’s or its employee’s negligence. Significantly, Alpha did

not agree to indemnify MTA for the negligence of MTA or anyone

else. See Heat & Power Corp. v. Air Prods. & Chems., Inc., 578

A.2d 1202, 1208 (Md. 1990) (recognizing “that a [non-insurance]

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” (internal

quotation marks omitted)). Thus, the $400,000 reimbursement

16
award is appropriate only if Gray was 100% at fault for the

Griffin incident.

Although Gray was conceivably negligent at the Rogers

Avenue station, this question has not yet been determined as

required by the parties’ Settlement Funding Agreement. There

was, at best, a comedy of errors leading to Griffin’s injuries.

Surely the Maple employee that left the board in place after-

hours, and perhaps failed to properly secure it, was possibly

negligent as well. In paragraph seventeen of Griffin’s

complaint, she alleges that all of the defendants (including

MTA, Maple, Alpha, and RKK) and their various agents and

employees were negligent for, inter alia, (1) failing to prevent

falling objects, (2) failing to remedy the dangerous situation,

(3) failing to give notice of the dangerous condition, (4)

failing to prevent the accident, (5) failing to properly oversee

and inspect the site, (6) failing to close the site during

construction, (7) failing to inspect the site entrance, and (8)

failing to secure the materials at the site. In other words,

Griffin’s complaint did not single out Gray as the sole

tortfeasor.

The district court thus erred when it concluded that “[t]he

facts pled and the claims asserted in the underlying action

provide sufficient evidence to determine that the settled

liability is encompassed by Alpha’s indemnification obligation.”

17
Alpha Constr. & Eng’g, 601 F. Supp. 2d at 693. Rather, Alpha’s

negligence-based liability, if any, must actually be adjudicated

or agreed upon before it can be determined whether Alpha is

obliged to indemnify MTA and, if so, in what amount. Cf. St.

Paul Fire & Marine Ins. Co. v. Am. Int’l Speciality Lines Ins.

Co., 365 F.3d 263, 273-75 (4th Cir. 2004) (concluding summary

judgment appropriate where one party had agreed to indemnify all

parties for ordinary negligence and it was undisputed that

settlement liability was for ordinary negligence only). In

these circumstances, we are constrained to vacate the

reimbursement award and remand for further proceedings.

IV.

Pursuant to the foregoing, we affirm in part, vacate in

part, and remand for such other and further proceedings as may

be appropriate.

AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED

18
BEAM, Senior Circuit Judge, concurring and dissenting:

The plaintiffs, Alpha, RKK, USF&G and American raise

discrete and intertwined issues of insurance and indemnity

contract interpretation. The district court entered judgment in

favor of defendant ICSP on all issues. The majority of this

panel acting for the court (the court) affirms the district

court on all points except for the question of whether total

indemnification is due ICSP under an indemnity/save harmless

agreement between MTA and Alpha. I concur in the court’s

vacation of the district court’s indemnification award to ICSP

and in its remand of the question of Alpha’s duty to ICSP in

this regard. I respectfully dissent from the balance of the

issues affirmed by the court.

I.

I begin with the indemnity contract dispute between MTA and

Alpha over whether Alpha and USF&G owed MTA a duty to defend

against claims asserted by Griffin against MTA and its

employees. The district court found the “save harmless” portion

of the indemnification agreement, which I set out in detail

below, required Alpha, or its insurer USF&G, to reimburse MTA,

or its insurer ICSP, for all costs incurred in defending the

various third-party claims asserted by Griffin against MTA in

the Maryland trial court. This “duty to defend,” according to

19
the district court, was separate and apart from the obligation

of Alpha (through USF&G) to indemnify ICSP for ICSP’s (for MTA)

settlement payments to Griffin, an obligation now correctly

vacated by the court. It is undisputed that the costs of

defending MTA against the Griffin allegations were paid by ICSP.

Accordingly, imposition by the district court of this duty to

defend MTA upon Alpha and USF&G allows ICSP to step into the

shoes of MTA and to be reimbursed for these costs by Alpha or

USF&G under the doctrine of equitable subrogation.

This duty to defend MTA, says ICSP, the district court and

now this court, emerges from the language of the indemnity

agreement between the parties.

The words from which this obligation of Alpha purportedly

springs are as follows:

The Consultant(s) [Alpha] shall indemnify and save
harmless the Department of Transportation [MTA], the
Administration, their Officers, agents, and employees
from and against all claims, suits, judgements,
expenses, actions, damages and costs of every name and
description arising out of or resulting from errors,
omissions, negligent acts, negligent performance or
nonperformance of the services of the Consultant
[Alpha] or those of his subcontractors, agents or
employees [Gray] under this Contract, or arising from
or based on the violation of applicable federal, state
or local law, ordinance, regulations, order or decree,
whether by himself or his employees or subcontractors.

Further, the consultant [Alpha] shall pay any claims
for personal injury, bodily injury or property damage
which the Consultant [Alpha] is legally obligated to
pay and shall indemnify the State against such claims
[against Alpha]. The Consultant [Alpha] shall

20
 undertake to defend any third party claim seeking such
damages.

J.A. 157. From this language, neither Alpha nor its insurer

USF&G acquired a duty to defend or to indemnify MTA against

allegations of negligence or liability leveled against anyone

except Alpha and its employees. At best, Alpha’s duty to defend

MTA extended no further than a claim against MTA “arising out of

or resulting from errors, omissions, negligent acts, negligent

performance or nonperformance” of Alpha and Alpha’s employees.

However, such an obligation is not in play in this dispute.

USF&G, Alpha’s insurer, incurred all defense costs arising from

all claims made against Alpha or its employees. Indeed, ICSP

specifically denied Alpha coverage and refused to defend Alpha

and its employees. Accordingly, I dissent from the holding of

the court that extends Alpha’s duty beyond the indemnity

agreement’s specific obligation. It seems probable that the

district court’s decision in this regard, now affirmed by the

court, arose from the district court’s misinterpretation of the

breadth of the indemnity agreement, a misinterpretation that

leads the court to reverse and remand the district court’s

indemnity judgment.

21
 II.

I next consider the insurance coverages. At the outset, I

adopt by reference the facts and circumstances set forth in Part

IA of the court’s opinion. I accept in part and reject in part

segments of Part IB and repeat other components of the court’s

opinion to facilitate and, hopefully, simplify this dissent.

The comprehensive general liability policy issued to MTA by

ICSP for the Rogers Avenue station improvement project was part

of an "owner controlled insurance program" (OCIP), a program

formulated by MTA for most, but not all, of its major projects.

OCIPs, also known as wrap-around insurance programs, provide

insurance, such as the coverage provided by ICSP, for the

contractors or subcontractors providing direct manual or non-

manual labor or service personnel at the weatherization

construction sites. J.A. 73. An OCIP policy insures against

risk of loss arising from, among other things, property damage,

personal injury and workers’ compensation claims. Endorsement

MS #00005 of the ICSP agreement states that the ICSP "policy is

primary." J.A. 53. Accordingly, under MTA’s OCIP, ICSP was the

primary (first to pay) insurer for the Rogers Avenue station

improvement project even when MTA’s contractors and their

subcontractors provided their own contract-mandated insurance

coverage. See, e.g., id. at 77. Alpha purchased comprehensive

liability coverage for itself and its employees from USF&G and

22
RKK purchased similar coverage from American. MTA and its

employees, as required by the contract, were named additional

insureds under the USF&G and American contracts. Thus, MTA and

its employees were insured under at least these three policies.

However, since ICSP is the primary policy for the project, the

USF&G and American insurance represents excess coverage which

comes into play only if the limits of the primary policy are

exhausted. There is no evidence that ICSP’s total obligations

in this regard have been exceeded. And, although ICSP provided

both a defense and indemnification for MTA and some of its

employees, as well as for Maple and its employees, for the

Griffin claim, it has denied coverage for Alpha and RKK and

their employees Gray and Combs.

As noted by the court, Alpha and RKK and their insurers,

USF&G and American, filed this action seeking a declaratory

judgment that Alpha and RKK were insured by the ICSP policy and

that their employees, Gray and Combs, were also employees of MTA

and, thus, insureds under the ICSP policy. Alpha and RKK

likewise sought a declaration that ICSP owed Alpha and RKK and

Gray and Combs a duty to defend the Griffin suit and a duty to

indemnify and reimburse their insurers USF&G and American for

the Griffin settlement contributions made by them in return for

the Griffin release. ICSP counterclaimed against Alpha or its

insurer, alleging that it is entitled to contribution or

23
indemnity from Alpha or its insurer for the costs it incurred in

defending MTA and in paying $400,000 to settle the Griffin

lawsuit.

Upon cross-motions for summary judgment, the district court

granted judgment in favor of ICSP, finding that clear policy

language precluded Alpha and RKK, or their employees, from being

insureds under MTA's OCIP policy. The district court found that

Alpha and RKK were excluded from the policy because they were

not listed as companies on the enrollment list kept by MTA as

part of the OCIP. Furthermore, the district court concluded

that though possibly qualifying as "Named Insured[s]" under the

insuring language of the ICSP policy, Alpha and RKK were

specifically excluded from protection by virtue of Endorsement

MS #00006 (Endorsement 6) * which was appended to the policy. In

support of this holding, the district court found that the

employees provided to MTA by Alpha and RKK were not endorsed for

workers' compensation and employer’s liability coverage as

*
Endorsement 6 provides that "coverage for 'Named
Insured(s)' shall be automatically effected based upon issuance
of a workers compensation policy as afforded by the wrap-up
program/owner controlled insurance program." Endorsement 6 also
states that the policy "does not apply to any of the following
as an insured: . . . [e]xcept as respects to any contractor or
subcontractor who will have employees engaged in work at the
project hereof who are not provided workers compensation and
employers liability coverage under the owner provided insurance
program, unless specifically endorsed to the policy.”

24
required by Endorsement 6. Accordingly, said the district court,

such employees were not “insureds” under the ICSP policy and

because of this Alpha and RKK were, likewise, not entitled to

reimbursement from ICSP. Finally, the court ruled in favor of

ICSP on its counterclaim, holding that Alpha was required to

reimburse ICSP for the $400,000 ICSP contributed to the Griffin

settlement. Alpha, RKK, USF&G and American appeal the district

court’s judgment.

III.

On appeal, rather than continuing to argue that they, as

entities, are covered by ICSP, Alpha and RKK confine their

arguments to the employment status of Gray and Combs as they

performed their duties for MTA at Rogers Avenue at the time of

Griffin’s injury. Such status raises two separate issues, one

under Maryland tort law and the other under the insurance

contracts. But, both issues affect ICSP’s insurance

obligations.

A.

Maryland tort law, and duties and obligations arising

thereunder, is not, of course, governed by the content of

insurance policies or even the existence, or not, of insurance

coverage. Insurance indemnity benefits come into play only

25
after liability to a tort claimant has been determined under

Maryland law.

Gray and Combs were furnished to MTA by Alpha and RKK

respectively. As established by their MTA contracts, Alpha and

RKK were the general or administrative employers of Gray and

Combs and MTA was the functioning and controlling employer.

Specifically, Alpha, RKK, Gray and Combs had no authority to

make changes in the plans and specifications of the Rogers

Avenue work or any other portion of the weatherization project

to which they were assigned. They had no input into work

assignments and were, in fact, dispatched to Rogers Avenue by

their immediate MTA supervisor on the day in question. They

were directed, supervised and managed on the project by MTA

employees and supervisors. Under the agreement, MTA reviewed

and approved their qualifications and had the right to accept,

or not, their services and to terminate them at any time for any

reason. Indeed, MTA was in full control of their actions at the

Rogers Avenue site. Upon receiving contract-specified payments

from MTA, Alpha and RKK paid Gray and Combs, made and submitted

required deductions, paid fringe benefits, if any, and provided

workers’ compensation benefits, if necessary, although it is

virtually certain that under Maryland law MTA also had a

workers’ compensation undertaking to Gray and Combs as well. In

Maryland when an employee is employed jointly by two employers,

26
both are liable, primarily or secondarily, for workers’

compensation benefits regardless of any agreements between the

two employers. Temp. Staffing, Inc. v. J.J. Haines & Co., 765

A.2d 602, 606 n.7 (Md. 2001). The Code of Maryland Regulations

14.09.01.08 permits a party to implead alleged co-employers in a

compensation case. Chaney Enters. Ltd. P’ship v. Windsor, 854

A.2d 233, 246 (Md. Ct. Spec. App. 2004).

Alpha and RKK provided Gray and Combs small tools (rulers

and hand levels), safety equipment (hard hats and safety vests)

and mobile phones all of which items were also available to MTA

personnel. For tort liability purposes, the recognized factors

in determining the existence of an employment relationship under

Maryland law are: (1) who has the power to select and hire the

employee; (2) who pays the wages; (3) who has the power to

discharge; (4) who has the power to control the employee’s

conduct; and (5) whether the work is part of the regular

business of the employer. Mackall v. Zayre Corp., 443 A.2d 98,

103 (Md. 1982). If both employers have the power to perform a

number of these five functions, the employee will be considered

an employee of both. Id. Of these five factors, “control is

paramount and, in most cases, decisive.” Great Atl. & Pac. Tea

Co. v. Imbraguglio, 697 A.2d 885, 894 (Md. 1997). Thus, under

the circumstances of this case, Gray and Combs were, under

Maryland precedent, borrowed servants. And, in this regard, it

27
is a settled principle of Maryland law that a worker may

simultaneously be the employee of two employers. Lovelace v.

Anderson, 785 A.2d 726, 741 (Md. 2001). That an employee can

concurrently serve two employers is not a novel concept in

Maryland. Id. Thus, the initial question is whether under the

applicable facts, MTA, as a joint employer, became vicariously

liable to Griffin for negligent acts, if any, performed by Gray

and Combs at the Rogers Avenue station at the time Griffin was

injured. As a matter of Maryland law, there seems to be little

doubt that MTA did become liable. Gray and Combs were going

about MTA’s business, acting within the scope of their

contracted-for relationship with MTA and, at the time of the

incident with Griffin, were under the complete control of MTA

supervisors. See S. Mgmt. Corp. v. Taha, 836 A.2d 627, 638 (Md.

2003).

As a panel of this circuit previously noted:

The borrowed servant doctrine arose as a means of
determining which of two employers, the general
employer or the borrowing employer, should be held
liable for the tortious acts of an employee whose
conduct injured a third party and who, although in the
general employ of the former, was performing a task
for the latter. See Standard Oil Co. v. Anderson, 212
U.S. 215, 220 (1909) (“[W]hen . . . an attempt is made
to impose upon the master the liability for [the
servant’s tortious acts], it sometimes becomes
necessary to inquire who was the master at the very
time of the negligent act or omission.”). The Supreme
Court summed up the doctrine as follows: “One may be
in the general service of another, and, nevertheless,
with respect to particular work, may be transferred .

28
 . . to the service of a third person, so that he
becomes the servant of that person, with all the legal
consequences of the new relation.” Id.

NVR, Inc. v. Just Temps, Inc., 31 F. App’x 805, 807 (4th Cir.

2002) (alterations in original).

Thus, if Gray’s and/or Combs’s acts of negligence, if any,

were the cause, in whole or in part, of Griffin’s damages, MTA

was vicariously liable for the consequences of such behavior.

So, whether or not Gray and Combs were insureds under the ICSP

policy, MTA had tort liability to Griffin covered by ICSP’s

primary policy. With regard to MTA’s responsibility to Griffin,

ICSP’s insuring agreement states: “[ICSP] will pay those sums

that the insured [MTA] becomes legally obligated to pay . . .

because of [damages] to which this insurance applies.” J.A. 24.

The ICSP insurance clearly applies in this situation and ICSP as

primary carrier is obligated to first pay all MTA losses within

the limits of its coverage.

While Maryland law permits contractual allocation of risk

between a general employer and a borrowing employer under the

borrowed servant doctrine, Sea Land Industries, Inc. v. General

Ship Repair Corp., 530 F. Supp. 550, 563 (D. Md. 1982), the

record discloses no indemnity agreement whatever between MTA and

RKK and the indemnity agreement between MTA and Alpha set forth

above fails to allocate all risk of a controlling employer to a

non-controlling employer or if it does, the contract is void

29
under that reading. Bethlehem Steel Corp. v. G.C. Zarnas & Co.,

498 A.2d 605, 610-11 (Md. 1985). And, this court has already

unanimously determined that the MTA/Alpha agreement does not

shift all risk of loss from MTA to Alpha.

Accordingly, at the bottom line, if Gray and/or Combs were

negligent, MTA, as their employer, incurred liability to Griffin

arising out of such acts under the doctrine of respondeat

superior. Thus, ICSP had a duty to MTA under the coverage

extended by its primary policy to pay for any provable damages

suffered by Griffin. If negligent, Gray and Combs were, of

course, also jointly and severally liable to Griffin. Taha, 836

A.2d at 638. However, there is no evidence, or even an

allegation, in the record that Gray and Combs were solely liable

for the injury. Indeed, the record indicates that Gray and

Combs were dispatched to Rogers Avenue by MTA upon receipt of a

report of a pre-existing safety hazard at that location,

possibly the handiwork of Maple, the general contractor. On

these facts, ICSP denied coverage under its policy to Gray and

Combs who then looked to USF&G and American, the excess

carriers, for indemnification. USF&G and American responded to

ICSP’s primary insurance obligations and are now entitled to

indemnification by and reimbursement from ICSP.

30
 B.

Analysis under Maryland tort law does not end the inquiry

into ICSP’s responsibilities to Gray and Combs. As noted above,

even though an employer is vicariously liable for the negligent

acts of its employee, the employee may also be personally liable

to a tort claimant and possibly, in a few instances, to a

totally blameless employer. Hartford Accident & Indemnity Co.

v. Scarlett Harbor Assocs. Ltd., P’ship, 674 A.2d 106, 135 (Md.

Ct. Spec. App. 1996). As such, Gray and Combs had an insurable

interest in acquiring comprehensive liability coverage for

themselves to provide indemnification for such potential

obligations. As employees of Alpha or RKK, they acquired such

coverage through the USF&G or American policies. But, if Gray

and Combs were also employees of MTA as defined in the ICSP

policy, they acquired their primary indemnity coverage under

that policy. Such coverage would entitle them to a policy

defense and indemnification for liability arising from any

actionable behavior.

With that background, I turn to the key question in this

coverage dispute: were Gray and Combs ICSP-covered employees of

MTA at the time of the Griffin incident? I turn to the policy’s

language for the answer. I digress, however, to mention some

interpretational rules applied in Maryland insurance contract

disputes. The initial burden of proof is placed upon an insured

31
seeking coverage under a policy’s insuring language. Perdue

Farms Inc. Co. v. Nat’l Union Fire Ins. Co., 197 F. Supp. 2d

370, 376 (D. Md. 2002). However, when the insurer seeks to

diminish or restrict, by endorsement or written addendum,

otherwise proffered policy coverages, the burden of proof is

reversed because the exceptions or exclusions essentially become

affirmative defenses. As such, validation of the application

and efficacy of policy limitations is the burden of the insurer.

Mut. Fire Ins. Co. v. Ackerman, 872 A.2d 110, 114 (Md. Ct. Spec.

App. 2005). Cf. Boyd & Stevenson Coal Co. v. Director, Office

of Workers’ Compensation Programs, 407 F.3d 663 (4th Cir. 2005)

(applying applicable state insurance law in construing insurance

contract). Any coverage exclusions or exceptions in policy

definitions must be conspicuous and plainly and clearly set

forth in the contract. Megonnell v. United States Auto. Ass’n,

796 A.2d 758, 772 (Md. 2002). Also, terms of exclusion cannot

be extended by interpretation but must be given strict and

narrow construction. Id. Since exclusions are designed to

limit or avoid liability, they will be construed more strictly

than coverage clauses and must be construed in favor of finding

coverage. Id.

As stated by the court, the district court relied upon

Endorsement 6 and some related collateral actions to answer the

question posed above in the negative. Endorsement 6, according

32
to the district court, required a contractor (here Alpha or RKK)

to “effect” ICSP coverage by specifically endorsing its

employees for workers’ compensation and employer liability

coverage “to the policy.” Finding no such endorsement in the

OCIP spreadsheet maintained by MTA, the district court concluded

that Gray and Combs were not ICSP insureds.

The district court additionally opined, somewhat

inconsistently, that it “need not determine” whether Gray and

Combs could be properly characterized as employees or leased

workers of MTA because to do so would “circumvent” the

endorsement’s “clear exclusion” under the policy and render the

endorsement superfluous because it would permit Alpha and RKK as

uninsured entities under the ICSP policy to use an equitable

subrogation remedy to override a written policy exclusion. J.A.

780. These conclusions are problematic for at least three

reasons.

First, an ambiguity exists as to who the district court

believes is clearly excluded by the endorsement—the contractors,

the contractors’ employees or both. Second, while Endorsement 6

uses the nonendorsement of a contractor’s employees for workers’

compensation benefits and employer liability coverage as the key

to excluding the contractor, here Alpha and RKK, from ICSP

coverage, nothing in the endorsement excludes the contractor’s

separately insurable workers, especially ICSP-policy-defined MTA

33
leased workers. So, there is no “clear exclusion” of Gray and

Combs stated, especially when the aforementioned rules of

interpretation are correctly applied.

Third, Endorsement 6 is not superfluous. The endorsement

may be inoperative when a contractor’s worker is entitled to

ICSP insurance coverage under policy language unrelated to

Endorsement 6’s “contractor” exclusion. But, otherwise, the

endorsement is fully effective to fulfill its purpose. Indeed,

it has served to exclude Alpha and RKK and any employees not

under the control of MTA, if any, performing services for the

weatherization project. But even if Endorsement 6 is deemed

superfluous and collides with the other clearly stated insuring

language in the ICSP policy, the endorsement must yield because

terms of exclusion cannot be extended by interpretation but must

be given strict and narrow construction. Megonnell, 796 A.2d at

772. I turn now to the coverage language.

Section II.2.a. of the ICSP policy states that an MTA

employee is “an insured.” J.A. 29. Section V.5. of the

contract further notes that an employee “includes a ‘leased

worker’” but such an employee “does not include a ‘temporary

worker.’” Id. at 32. The ICSP policy defines “leased worker”

as “a person leased to you by a labor leasing firm under an

agreement between you and the labor leasing firm, to perform

duties related to the conduct of your business.” Id. at 33. A

34
“temporary worker” is defined as “a person who is furnished to

you to substitute for a permanent ‘employee’ on leave or to meet

seasonal or short-term workload conditions.” Id. at 34-35.

In Gray’s case, he was assigned to MTA by Alpha in July

2002 and worked solely and continuously thereafter on the

weatherization improvement project. He testified that during

his Alpha employment, he worked only for MTA. And, there is no

evidence that he worked seasonally or short-term or that he

substituted for anyone. In Combs’s case, he had worked at MTA

long enough that he had reached the highest class of inspector.

Although the terms “leased worker” and “temporary worker”

appear in numerous insurance contracts, and are mentioned in

numerous court opinions, there is a dearth of cases

definitionally analyzing leased worker status. As noted by the

parties, Scottsdale Ins. Co. v. Torres, 561 F.3d 74 (1st Cir.

2009), stands almost alone in this regard. We look to it for

some guidance.

In Torres (a case not quite factually on point because it

involved an “employer’s liability” exclusion under which a

“temporary worker,” as defined, was protected against the

negligent acts of an employer but a “leased worker,” as defined,

received, instead, scheduled workers’ compensation benefits),

Venturi hired individuals and placed them with client companies

for varying lengths of time. CTC contracted with Venturi to

35
supplement its workforce. Venturi paid the supplied worker,

withheld taxes and took responsibility for workers’ compensation

benefits. While Venturi retained the right to hire, place,

discipline and terminate its employees, CTC was responsible for

training, supervision and assigning work tasks. CTC could ask a

worker not to return. Torres worked from August to December

2003 and from January 2004, except for a week in June, until

August 2004, when an accident occurred. While the Venturi/CTC

contract did not mention the term “lease,” it used definitions

of “leased” and “temporary” workers identical to those used in

this case. On these facts, the First Circuit found Venturi to

be a “labor-leasing firm,” found the agreement to be a lease and

found that Torres was a “leased” worker within the applicable

definition. Id. at 78. In Torres, evidence not present in this

case made the temporary worker exclusion a fact question. In

this case, however, under the narrow interpretation to be given

coverage limiting language, it is clear that Gray and Combs do

not fit within the “temporary worker” definition. They were

leased workers under the ICSP policy as a matter of law.

As leased workers, Gray and Combs were insured employees of

MTA and, thus, fully insured by the ICSP policy. Even so, ICSP

denied them coverage. At that point, Gray and Combs looked to

USF&G and American who provided them with a defense and

indemnified them from losses in the amount of $400,000.

36
Accordingly, USF&G and American, as excess carriers to the

primary policy issued by ICSP, are entitled to step into the

shoes of their insureds Gray and Combs and to be reimbursed by

ICSP under the doctrine of equitable subrogation. See Fireman’s

Fund v. Cont’l Ins. Co., 519 A.2d 202, 204 (Md. 1987)

(“Equitable subrogation arises by operation of law when a person

pays the debt of another under such circumstances that equity

entitles the person to reimbursement.”).

In Fireman’s Fund, Glen Falls Insurance, a subsidiary of

Continental, issued Publication Press a primary comprehensive

general liability policy with limits of $500,000. Fireman’s

issued Publication an excess policy with a $2 million limit. A

former employee sued Publication for $15 million in compensatory

and $15 million in punitive damages. Although warned by its

counsel of the likelihood of a verdict in excess of its policy

limits, Glen Falls repeatedly refused to settle within the

limits. Upon the rendering of a jury verdict of $1 million,

settled for $900,000, Fireman’s was forced to pay the $400,000

excess. The Maryland Court of Appeals ruled that Fireman’s was

entitled under the doctrine of equitable subrogation to step

into the shoes of Publication to pursue Publication’s bad faith

claim (for not settling within policy limits) against Glen Falls

to recover Fireman’s payment of $400,000. Id. at 205.

37
 Applying this precedent, USF&G and American are entitled to

reimbursement from ICSP in the amount of $400,000 plus Gray’s

and Combs’s defense costs. I dissent from the court’s

conclusion to the contrary.

38