Owner Controlled Insurance Policy Does not Wrap-Around All Workers
(September 2010) By Gregory L. Arbogast, Associate
For more information, contact Paul Farquharson.
Alpha Constr. & Eng'r Corp. v. Ins. Co. of the State of Pa.,
No. 09-1394 (4th Cir. Sept. 22, 2010)
In Alpha Construction and Engineer
Corporation v. Insurance Company of the State of Pa., the Court of
Appeals for the Fourth Circuit found that the Maryland Transportation
Authority's ("MTA") wrap-around construction insurance policy, which provided
liability coverage to MTA, did not cover two (2) contractors who were only on
the jobsite to ensure safety compliance. The Court found that the language of
the policy expressly exempted coverage of these two (2) workers. However, the
Court found that the United States District Court had to apportion fault before
MTA's insurance company could seek indemnity for money it spent in defending the
two (2) workers.
MTA initiated "the weatherization project," which was a
construction project on an MTA train station in Maryland. Before commencing the
project, MTA purchased a wrap-around insurance policy from The Insurance Company
of the State of Pennsylvania ("ICSP"). That policy provided insurance to, "all
contractors, all tiers of subcontractors, each separate contractor of [MTA],
others to whom [MTA] contracts to furnish insurance under the insurance
program." During the project, workers of Maple, the general contractor, placed
sheets of plywood above an escalator. When the Maple workers left for the day,
they took all of the sheets of plywood down, except one. MTA dispatched Michael
Gray and Anthony Combs, two MTA consultants, to the train station to ensure that
the sheet of plywood was safe. During their inspection, the sheet of plywood
fell, injuring a passenger on the escalator.
ICSP filed an action for declaratory judgment in the
United States District Court of Maryland, claiming that Gray and Combs were
not insured under the wrap-around policy. The United States District Court
agreed and entered judgment against Gray and Combs in the amount of
$400,000, which is the amount that ICSP spent in defense and indemnification
costs. Gray and Combs appealed the decision to the Court of Appeals for the
Fourth Circuit.
The Court of Appeals agreed with the District Court
that Gray and Combs were not covered under the insurance policy. Though the
definition of "insured" appeared to cover Gray and Combs, Endorsement MS #
00006 exempted Gray and Combs from coverage. That exemption stated that the
policy only covered contractors and subcontractors who were provided
workers' compensation insurance through ICSP. Gray and Combs were general
consultants to MTA who were not directly involved with the weatherization
project. Therefore, MTA had not purchased workers' compensation insurance
for Gray and Combs through ICSP. As such, the Court found that they were
excluded from the policy.
However, the Court of Appeals reversed the award of
$400,000. The Court found that a question of fact remained as to who was
negligent and in what portion. The Court found that it was possible that the
Maple workers were negligent, at least in part. Since, ICSP did insure the
Maple workers, ICSP could still have to cover a portion of the $400,000
judgment. Therefore, the Court remanded the case for determination as to the
amount of culpability of each party.
Top
