Appellate Court of

05/03/2023

Appellate
Court of Maryland applies equitable contribution principles to preserve
non-settling insurers potential right to contribution against settling
insurers.

 

Selective Way Insurance Company  v. Fireman’s Fund Insurance Company, et. al.

            On February 2, 2023, the Appellate Court of Maryland
issued its opinion in Selective Way Insurance Company v. Fireman’s Fund Insurance
Company, et. al. The opinion primarily analyzed the doctrine of equitable
contribution, particularly as it pertains to liability insurers with a mutual
obligation to the same insured.

            The original dispute arose from a Baltimore County
apartment complex construction project gone awry. In 2006, a subsequent
purchaser of the complex sued the general contractor, “Questar.” Questar was
insured with Nationwide and was an additional insured on various liability
policies held by Questar’s subcontractors. Nationwide defended Questar in the
underlying suit while also requesting defense and indemnification from the subcontractors’
insurers.  The underlying suit against
Questar was settled in 2009, however, not before Questar incurred approximately
one million dollars in attorneys’ fees and other costs.

            Nationwide brought a declaratory judgment action in
Baltimore County Circuit Court against the various subcontractors and their
insurers alleging that they breached a contractual duty to defend Questar in
the underlying construction suit. 
Nationwide eventually reached settlement agreements with all but one of
the other insurers: Selective Way. The settlement agreements included
substantially the same provisions requiring the settling insurers to waive
claims for contribution or indemnity against the other insurers. In 2017,
Nationwide’s case against Selective Way (the sole non-settling insurer)
proceeded to a jury trial after which the jury determined that Nationwide
proved damages in the amount of: $994,719.54.

            In March of 2020, Selective Way filed an action in
Baltimore County Circuit Court seeking contribution, restitution, and
subrogation from the various settling insurers. In June of 2021, the Circuit
Court disposed of Selective Way’s claims by dismissing and/or granting summary
judgement in favor of the defendant-insurers. The court ruled that Selective
Way failed to assert a cross claim against the settling insurers in the action
by Nationwide. Upon settlement with Nationwide, the court reasoned that there
was no longer a “common liability” between Selective Way and the settling
insurers and, absent a common liability, there was no right of contribution.

            On
Appeal, the Appellate Court of Maryland overturned the ruling against Selective
Way on the contribution claims. The Appellate Court took issue with the trial
court’s reliance on Selective Way’s failure to assert cross claims against the
other insurers in the action by Nationwide, noting that cross claims are not
mandatory and need not be brought in an original action.  Additionally, the Appellate Court analyzed
authority from other states to determine that insurer who pays “more than its
fair share” may have a right of contribution from another insurer that was
obligated to cover the same loss. The Appellate Court referenced Maryland
Cas. Co. v. W.R. Grace & Co., 218 F.3d 204, 210 (2d Cir. 2000) for the
proposition that “a settlement agreement that absolves an insurer of its
contractual obligations to the insured does not extinguish the rights of other
insurers to receive equitable contribution from the settling insurer.” The Appellate
Court ultimately remanded the case back to the Circuit Court for further
action, particularly on the viability of Selective Way’s contribution claim
against the settling insurers. 

 

 Joseph
Kavanagh, Associate