Filed: Mar. 22, 2011
Latest Update: Feb. 21, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 09-1697 RED ROOF INNS, INCORPORATED, Plaintiff - Appellant, v. SCOTTSDALE INSURANCE COMPANY, Defendant - Appellee. No. 09-1760 RICKI KEYE; WARREN KEYE, Plaintiffs, v. RED ROOF INNS, INCORPORATED; ACCOR NORTH AMERICA, INCORPORATED; RED ROOF FRANCHISING, LLC; RRI ACQUISITION COMPANY, INCORPORATED, Defendants – Appellants, v. S & W PROTECTIVE SERVICES, INCORPORATED, Third Party Defendant – Appellee. Appeals from the United States
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 09-1697 RED ROOF INNS, INCORPORATED, Plaintiff - Appellant, v. SCOTTSDALE INSURANCE COMPANY, Defendant - Appellee. No. 09-1760 RICKI KEYE; WARREN KEYE, Plaintiffs, v. RED ROOF INNS, INCORPORATED; ACCOR NORTH AMERICA, INCORPORATED; RED ROOF FRANCHISING, LLC; RRI ACQUISITION COMPANY, INCORPORATED, Defendants – Appellants, v. S & W PROTECTIVE SERVICES, INCORPORATED, Third Party Defendant – Appellee. Appeals from the United States ..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-1697
RED ROOF INNS, INCORPORATED,
Plaintiff - Appellant,
v.
SCOTTSDALE INSURANCE COMPANY,
Defendant - Appellee.
No. 09-1760
RICKI KEYE; WARREN KEYE,
Plaintiffs,
v.
RED ROOF INNS, INCORPORATED; ACCOR NORTH AMERICA,
INCORPORATED; RED ROOF FRANCHISING, LLC; RRI ACQUISITION
COMPANY, INCORPORATED,
Defendants – Appellants,
v.
S & W PROTECTIVE SERVICES, INCORPORATED,
Third Party Defendant – Appellee.
Appeals from the United States District Court for the District
of Maryland, at Greenbelt. William Connelly, Magistrate Judge.
(8:08-cv-01841-WGC; 8:07-cv-02926-WGC)
Argued: January 28, 2011 Decided: March 22, 2011
Before DUNCAN and WYNN, Circuit Judges, and Irene C. BERGER,
United States District Judge for the Southern District of West
Virginia, sitting by designation.
Reversed by unpublished opinion. Judge Duncan wrote the
opinion, in which Judge Wynn and Judge Berger joined.
ARGUED: Angus R. Everton, MORGAN CARLO DOWNS & EVERTON, PA, Hunt
Valley, Maryland; Stephen Salvatore McCloskey, SEMMES, BOWEN &
SEMMES, Baltimore, Maryland, for Appellants. Kevin Bock
Karpinski, KARPINSKI, COLARESI & KARP, PA, Baltimore, Maryland,
for Appellees. ON BRIEF: Eric M. Leppo, SEMMES, BOWEN & SEMMES,
Baltimore, Maryland, for Appellants. Michael B. Rynd,
KARPINSKI, COLARESI & KARP, PA, Baltimore, Maryland, for
Appellees.
Unpublished opinions are not binding precedent in this circuit.
2
DUNCAN, Circuit Judge:
This consolidated appeal arises out of a dispute over
whether Plaintiff-Appellant Red Roof Inns, Inc. (“Red Roof
Inns”) 1 is entitled to indemnity and insurance coverage for a
personal injury claim filed against it. Red Roof Inns appeals
the grant of summary judgment in favor of Defendant-Appellees
S&W Protective Services, Inc. (“S&W”) and Scottsdale Insurance
Company (“Scottsdale”). 2 For the reasons that follow, we
reverse.
I.
S&W provides security guard services to Red Roof Inns
pursuant to a Security Services Agreement (“Agreement”). The
Agreement provides that S&W “shall defend, protect, indemnify
and hold [Red Roof Inns] harmless” for any claim for damages
which may “arise out of or in connection with” S&W’s performance
of the Agreement, J.A. 42 (¶ 11), including specifically any
“claims or suits arising out of injury to . . . any of [S&W’s]
employees . . . in connection with their performance under this
1
“Red Roof Inns” refers to the four entities sued in the
underlying action: Red Roof Inns, Inc., Accor North America,
Inc., Red Roof Franchising, LLC, and RRI Acquisition Co., Inc.
2
The matter was heard by a United States magistrate judge,
acting by consent and agreement of the parties pursuant to 28
U.S.C. § 636(c), whom we shall refer to hereafter as the
district court.
3
Agreement,” J.A. 44 (¶ 12). S&W’s indemnification obligations
under the Agreement “extend to any damages resulting from any
action or omission of [Red Roof Inns], negligent or otherwise.”
Id. at 42 (¶ 11); see also
id. at 44 (¶ 12) (extending
indemnification to Red Roof Inns for claims of personal injury,
“whether or not caused or contributed by the negligence of [Red
Roof Inns]”). 3
3
The full text of the relevant provisions provides:
11. Indemnity and Insurance. . . . Contractor
[S&W] shall defend, protect, indemnify and hold
Customer [Red Roof Inns] harmless from and against any
liability, loss, cost, threat, suit, demand, claim and
expense . . . for damages to property or person which
may arise out of or in connection with any negligent
act or omission of Contractor in connection with its
performance under this Agreement . . . . It is
intended by the parties hereto that the
indemnification obligations of Contractor under this
Section shall extend to any damages resulting from any
action or omission of Customer, negligent or
otherwise, except for damages arising out of the
intentional or willful misconduct of Customer.
12. Injury or Death. . . . In addition,
Contractor, its employees and agents hereby waive and
release Customer . . . from any and all claims,
demands, causes of action for injury to property or
person . . . arising out of or in connection with
Contractor’s performance under this Agreement
. . . whether or not caused or contributed to by the
negligence of Customer . . . . Contractor further
agrees to defend, protect, indemnify, and hold
Customer harmless from and against any and all costs,
losses, claims and expenses . . . as a result of
claims or suits arising out of injury to or death of
any of Contractor’s employees . . . in connection with
their performance under this Agreement, whether or not
(Continued)
4
S&W also purchased a general liability insurance policy
(“Policy”) from Scottsdale that contained an endorsement naming
Red Roof Inns as an additional insured. The Policy insured Red
Roof Inns “with respect to liability arising out of [S&W’s]
ongoing operations performed for [Red Roof Inns].” J.A. 95.
On October 14, 2004, Warren Keye, an S&W employee, was
working as a security guard at a motel owned and operated by Red
Roof Inns. As Mr. Keye was ascending an exterior staircase to
investigate suspected criminal activity on an upper floor of the
motel, the metal rim of a concrete step on the stairway
collapsed, and he fell backward down several steps. Red Roof
Inns does not dispute its negligence for purposes of our
inquiry.
In October of 2007, Mr. Keye and his wife filed a personal
injury action against Red Roof Inns. Red Roof Inns made a
formal demand to S&W to defend and indemnify it under their
Agreement, and to Scottsdale to defend and indemnify it pursuant
to the Policy naming Red Roof Inns as an additional insured.
Both S&W and Scottsdale declined to defend or indemnify, and Red
caused or contributed by the negligence of Customer,
its employees or agents . . . .
J.A. 42-43.
5
Roof Inns brought suit against both. All parties moved for
summary judgment.
On May 20, 2009, the district court granted summary
judgment in favor of S&W and Scottsdale and dismissed Red Roof
Inns’ claims. The district court reasoned that “it [was] not
plainly evident from the face of the Agreement that S&W agreed
to indemnify Red Roof Inns for damages resulting from [its]
negligent inspection and maintenance of exposed exterior steel
stairwells.” J.A. 787. Finding ambiguity, the court considered
extrinsic evidence in the form of deposition testimony from
S&W’s President and Chief Executive Officer, who denied any
intention by the parties to hold S&W responsible under the
Agreement for building maintenance or structural inspections.
The court held that the parties did not intend to shield Red
Roof Inns from its own negligence in this circumstance.
In response to Red Roof Inns’ request for reconsideration, 4
on June 16, 2009, the court issued an order holding that
Scottsdale did not owe Red Roof Inns indemnity and a defense.
The court observed that the Policy covers claims of “bodily
injury,” but only if the bodily injury is caused by an
“occurrence.” J.A. 816. An “occurrence” is defined in the
4
Red Roof Inns requested reconsideration of the May Order
on the grounds that the court did not address the issue of
whether Scottsdale was obligated to provide coverage by virtue
of Red Roof Inns’ status as an additional insured.
6
Policy as “an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.”
J.A. 76. Although the court determined Mr. Keye’s fall was an
accident, it nonetheless found that Mr. Keye’s fall did not
qualify as an “occurrence” under the Policy. It reasoned that
the Policy’s coverage was restricted to liability “arising out
of S&W’s ongoing operations” performed for Red Roof Inns, and
because the court had already determined in its May Order that
Mr. Keye’s fall did not arise out of the security services
provided by S&W under the Agreement, the Policy’s coverage did
not extend to Red Roof Inns as an additional insured. J.A. 817-
18.
II.
Red Roof Inns challenges the district court’s
determinations in both cases, which have been consolidated for
appeal. As to S&W, Red Roof Inns asserts that the Agreement
unambiguously provides for coverage irrespective of its
negligence. As to Scottsdale, Red Roof Inns argues that it
qualifies as an “additional insured” under the Policy. The
issues are governed by the laws of the District of Columbia and
Maryland, respectively, and we consider each in turn. As to
both, we review the grant of summary judgment de novo, resolving
all doubts and inferences in favor of the non-moving party.
7
Seabulk Offshore, Ltd. v. Am. Home Assurance Co., 377 F.3d 408,
418 (4th Cir. 2004). When reviewing cross-motions for summary
judgment, we consider “each motion separately on its own merits
to determine whether either of the parties deserves judgment as
a matter of law.” Bacon v. City of Richmond,
475 F.3d 633, 638
(4th Cir. 2007) (internal citations and quotations omitted). In
such cases, “we may, if appropriate, direct entry of judgment in
favor of the party whose motion was denied by the district
court.” Bakery & Confectionery Union & Indus. Int’l Pension
Fund v. Ralph’s Grocery Co.,
118 F.3d 1018, 1020 (4th Cir.
1997).
A.
We first consider whether the Agreement requires S&W to
defend and indemnify Red Roof Inns for a claim alleging its own
negligence. Under District of Columbia law, 5 the first step in
contract interpretation is determining “the intent of the
parties entering into the agreement.” Steele Founds., Inc. v.
Clark Constr. Grp., Inc., 937 A.2d 148, 154 (D.C. 2007). The
question of intent is resolved by deciding “what a reasonable
person in the position of the parties would have thought the
5
Both parties agree that, pursuant to a choice of law
provision in the Agreement (Section 15), the laws of the
District of Columbia govern the interpretation of the security
services contract. See J.A. 774; Appellant’s Br. at 16,
Appellee’s Br. at 12.
8
disputed language meant.” Psaromatis v. English Holdings I,
LLC, 944 A.2d 472, 481 (D.C. 2008) (quoting 1010 Potomac Assocs.
v. Grocery Mfrs. of Am., Inc.,
485 A.2d 199, 205 (D.C. 1984)).
In so doing, the contractual provisions “must be interpreted as
a whole,”
id., “so as to give effect, if possible, to all of the
provisions in the contract,” Steele
Founds., 937 A.2d at 154.
If the instrument is facially unambiguous, “its language
should be relied upon as providing the best objective
manifestation of the parties’ intent.” 1010 Potomac, 485 A.2d
at 205. Only in the event of ambiguity may a court consider
extrinsic evidence of the parties’ subjective intent.
Id.
Whether a contract’s language is ambiguous is a question of law.
Steele
Founds., 937 A.2d at 153. Ambiguity exists “only if the
court determines that the proper interpretation of the contract
cannot be derived from the contractual language exclusively, and
requires consideration of evidence outside the contract itself.”
Id.
Parties are free to enter into indemnification contracts
under District of Columbia law. See W.M. Schlosser Co., Inc.
v. Md. Drywall Co., Inc.,
673 A.2d 647, 653 (D.C. 1996).
However, indemnity provisions should be construed to permit an
indemnitee to recover for its own negligence only if “the court
is firmly convinced that such an interpretation reflects the
intention of the parties.”
Id. (internal quotations and
9
citation omitted). The question here becomes, then, whether the
Agreement “clearly reflects” the parties’ intention to indemnify
Red Roof Inns for claims involving its own negligence. Id. We
find that it does.
The Agreement requires S&W to defend and indemnify Red Roof
Inns for “any injury to any person . . . resulting from or
arising out of any act . . . in connection with [S&W’s]
performance under this Agreement.” J.A. 42 (¶ 11). It
expressly states that the indemnification “is intended by the
parties” to “extend to any damages resulting from any action or
omission of [Red Roof Inns], negligent or otherwise.” Id.
(emphasis added). Paragraph 12 of the Agreement is even more
specific, explicitly providing that S&W will defend and
indemnify Red Roof Inns for any claims or suits brought by S&W
employees against Red Roof Inns for injuries “arising out of or
in connection with [S&W employees’] performance under this
Agreement . . . whether or not caused or contributed [to] by the
negligence of [Red Roof Inns].” J.A. 44 (emphasis added).
S&W argues that the language in the Agreement is, at best,
ambiguous because it is “susceptible to more than one reasonable
interpretation.” Appellees’ Br. at 20. S&W contends that a
reasonable person could interpret the Agreement to mean that S&W
agreed to defend and indemnify Red Roof Inns for “the potential
hazards that would normally attend the performance of a contract
10
for security services.” Id. at 17-18. As support for this
proposition, S&W cites Paragraph 11(b) of the Agreement, which
requires S&W to maintain
Comprehensive General Liability insurance (with
independent contractor’s coverage and coverage for
liability assumed under contract, for libel, slander,
defamation, false arrest, detention or imprisonment,
malicious prosecution, wrongful entry or eviction,
invasion of privacy, and for any claim for loss of
property of Customer caused by a dishonest or
fraudulent act of an employee of Contractor) . . . .
J.A. 43. S&W asserts that this description of the liability
insurance coverage S&W is responsible for procuring for Red Roof
Inns limits the scope of S&W’s indemnification to “the list of
specifically covered events” enumerated in Paragraph 11(b).
Appellee’s Br. at 17-18. However, a plain reading of Paragraph
11(b) in no way suggests that the examples listed are meant to
be exhaustive, or that the type or scope of liability insurance
coverage is intended to limit the general indemnification
provisions found in Paragraphs 11 and 12.
Recognizing the Agreement’s specificity with respect to
negligence, S&W contended at oral argument that the language was
too specific. In response to the question of what more the
Agreement would have to say to demonstrate its intent to cover
negligence, counsel asserted that the indemnification provisions
would need to be so broad and inclusive as to state that “the
Contractor [S&W] agrees to defend and indemnify the Customer
11
[Red Roof Inns] for any and all negligence claims by an S&W
employee,” and to not include the qualifier “under this
Agreement.” S&W’s proposed language is unrealistic and
unworkable. The fallacy of its contention is readily apparent.
If the indemnification provisions were not limited to
performance under this Agreement, S&W would be required to
defend and indemnify Red Roof Inns for any and all claims of
negligence brought by S&W employees, whether or not they worked
for Red Roof Inns.
As written, Paragraphs 11 and 12 of the Agreement
specifically and unambiguously evidence an intent by the parties
to indemnify Red Roof Inns for its negligence. District of
Columbia law confirms this reading. For example, in W.M.
Schlosser Co., Inc. v. Md. Drywall Co., Inc., 673 A.2d 647 (D.C.
1996), an employee of the subcontractor-indemnitor sustained
serious injuries after falling through a door-sized opening
three stories high on a construction site. The employee sought
damages from the general contractor, Schlosser, whose site did
not meet safety standards.
Id. at 649. Schlosser sought
indemnification from the subcontractor under contractual
language providing indemnity for “any and all claims . . .
arising out of . . . or in connection with the execution of the
work” contemplated by the contract.
Id. at 653. The Schlosser
court viewed the provision as “clear and certain in its terms
12
giving rise to no ambiguity.” Id. at 654. It was “satisfied
that the language of the contract is sufficiently clear that
[indemnitor] is responsible not only for its own negligence, but
that its liability also stretches to encompass [indemnitee’s]
negligence as well.”
Id. (internal quotations omitted).
Similarly, in N.P.P. Contractors, Inc. v. John Canning &
Co., 715 A.2d 139 (D.C. 1998), the general contractor sought
indemnification from the subcontractor for its own alleged
“negligence in erecting, maintaining and/or inspecting the
scaffolding [which] was a proximate cause of” injuries suffered
by the subcontractor’s employee.
Id. at 140. The
indemnification clause required the subcontractor-indemnitor to
“indemnify and save harmless the [indemnitee] from any and all
claims and liability for property damage and personal
injury . . . arising out of or resulting from or in connection
with the execution of the work.”
Id. The court found this
language “unambiguous and enforceable.”
Id. at 142 (agreeing
that the indemnification clause before it is “so broad and
sweeping” as to cover damages “incurred in whole or in part by
the negligence of the indemnitee”) (emphasis omitted); 6 see also
6
S&W argues that because the above-cited cases are
construction law cases, they are distinguishable because of the
“differing natures of the work to be executed, and the
respective frame of reference of the parties.” Appellees’ Br.
at 27. It cites no law to support its proposition, nor do the
(Continued)
13
Princemont Constr. Corp. v. Baltimore and Ohio R.R. Co., 131
A.2d 877, 877-78 (D.C. 1975) (deeming an indemnification clause
for “all liability for any and all loss and damage to property
and claims for injury to or death of persons in connection with
or growing out of” the contract to be “broad and comprehensive”
enough “to exonerate the [indemnitee] from liability for its own
negligent acts”).
In short, if the indemnification language in the above-
cited cases unambiguously evidenced the parties’ intent to
encompass the indemnitee’s negligence, surely the Agreement’s
indemnification language does here as well. For the Agreement
goes one step further by expressly stating that it is “intended
by the parties” that S&W’s indemnification obligations extend to
any damages resulting from Red Roof Inns’ acts or omissions,
“negligent or otherwise.” J.A. 42 (¶ 11). In other words, even
if the “negligent or otherwise” phrases were missing from the
Agreement, District of Columbia precedent establishes that the
remaining provisions, with their repeated use of “any,” are
sufficiently broad and comprehensive to find indemnification of
damages or injuries resulting from an indemnitee’s negligent
acts. See Schlosser, 673 A.2d at 654 (finding that clauses at
challenged cases themselves suggest that their holdings only
apply in the construction law context.
14
issue in other cases--such as “indemnify . . . from any and all
claims,” “indemnify against any loss,” or “assume all liability
for any and all loss”--were all “sufficiently comprehensive as
to include indemnification for damages resulting from the
negligence of [indemnitee]”) (emphasis added). Because we find
that the Agreement’s indemnification language is not susceptible
to more than one reasonable interpretation, we need not consider
the testimony of S&W’s President and CEO, or any other extrinsic
evidence.
The Agreement’s defense and indemnification provisions are
unambiguous and clearly show that the parties agreed S&W would
bear the financial burden for injuries sustained in connection
to S&W’s performance of the Agreement--even those injuries
resulting “from any action or omission of [Red Roof Inns],
negligent or otherwise.” J.A. 42. As a result, S&W must defend
and indemnify Red Roof Inns against Mr. Keye’s claim. J.A. 43
(requiring S&W to “defend,” “indemnify,” and “hold harmless” Red
Roof Inns “from and against any and all costs, losses, claims
and expenses” resulting from “claims or suits arising out of
injury to . . . any of [S&W’s] employees . . . in connection
with their performance under this Agreement”). It is undisputed
that Mr. Keye was injured while working as an employee for S&W.
Moreover, S&W conceded at oral argument that there is no dispute
Mr. Keye was ascending the staircase in the performance of his
15
duties as a security guard, as he was investigating suspected
criminal activity on an upper floor. This is the very type of
security service contemplated by the Agreement. We see no
reasonable interpretation under District of Columbia law other
than that Mr. Keye’s injury “ar[o]se out of or in connection
with” S&W’s performance under the Agreement. See, e.g.,
Schlosser, 673 A.2d at 653 (holding that injuries sustained by
indemnitor’s employee while performing contract work on
indemnitee’s work site arose out of or “in connection with the
execution of the work” despite being caused by indemnitee’s own
negligence); Grunley Constr. Co. v. Conway Corp.,
676 A.2d 477,
477-78 (D.C. 1996) (same). Pursuant to the terms of the
Agreement, Red Roof Inns is entitled to both indemnity and a
defense from S&W as a matter of law.
B.
We next consider Red Roof Inns’ argument that the district
court erred by finding that Scottsdale does not have a duty to
defend or indemnify it in the underlying Keye action. Applying
the same de novo standard of review, we determine whether an
insurer has a duty to defend an insured by following the two-
part inquiry set forth under Maryland law. 7 We first assess the
7
Maryland law governs the insurance policy issued by
Scottsdale. The primary purpose in construing insurance
contracts under Maryland law “is to ascertain and give effect to
(Continued)
16
nature of the coverage and terms of the insurance policy, and
then determine whether the allegations in the tort action
potentially bring the tort claim within the insurance policy’s
coverage. Aetna Cas. & Surety Co. v. Cochran, 651 A.2d 859,
862 (Md. 1995); see also Walk v. Hartford Cas. Ins. Co.,
852
A.2d 98, 106 (Md. 2004). In undertaking this analysis, we look
to (1) the language and requirements of the liability insurance
policy and (2) the allegations of the complaint. Aetna Cas. &
Surety
Co., 651 A.2d at 862.
i.
With regard to the first step of the inquiry--the nature of
the insurance policy’s terms--the Policy here provides coverage
for Red Roof Inns “with respect to liability arising out of
[S&W’s] ongoing operations performed for [Red Roof Inns].” J.A.
95. Paragraph 1(a) of Section I of the Policy specifically
states:
[Scottsdale] will pay those sums that [Red Roof Inns]
becomes legally obligated to pay as damages because of
“bodily injury” or “property damage” to which this
insurance applies. [Scottsdale] will have the right
and duty to defend [Red Roof Inns] against any “suit”
seeking those damages. However, [Scottsdale] will
have no duty to defend [Red Roof Inns] against any
the intentions of the parties at the time of contracting,” which
requires construing the instrument “as a whole.” Catalina
Enter., Inc. Pension Trust v. Hartford Fire Ins. Co., 67 F.3d
63, 65 (4th Cir. 1995) (internal citations and quotations
omitted).
17
“suit” seeking damages for “bodily injury” or
“property damages” to which this insurance does not
apply. [Scottsdale] may, at [its] discretion,
investigate any “occurrence” and settle any claim or
“suit” that may result.
J.A. 63 (¶ 1(a)). The Policy covers claims of “bodily injury,”
but only if the injury is caused by an “occurrence.” Id. (¶
1(b)(1)). According to the Policy, an “occurrence” means “an
accident, including continuous or repeated exposure to
substantially the same general harmful conditions.” J.A. 76.
The Policy does not define the word accident, but the Court of
Appeals of Maryland has held that “an act of negligence
constitutes an ‘accident’ under a liability insurance policy
when the resulting damage . . . is unforeseen or unexpected by
the insured.” Sheets v. Brethren Mut. Ins. Co.,
679 A.2d 540,
548 (Md. 1996) (internal citations and quotations omitted). As
the district court found, Mr. Keye’s fall was an “accident”--it
was not within Red Roof Inns’ foresight or expectation, nor that
of anyone else. And an “accident” in the Scottsdale policy is,
by definition, an “occurrence.” But Scottsdale asserts Red Roof
Inns is nonetheless precluded from coverage. It reasons that
the Policy limits Red Roof Inns’ coverage to “liability arising
out of [S&W’s] ongoing operations performed for [Red Roof
Inns],” J.A. 80, and an occurrence/accident resulting from Red
Roof Inns’ negligent maintenance of the stairs is not a failure
that arose out of the work which S&W was contracted to perform.
18
While the phrase “arising out of” has been the subject of
prior interpretation by Maryland courts, it does not have a
single, “settled meaning” that applies to every insurance
policy. Phila. Indem. Ins. Co. v. Md. Yacht Club, Inc., 742
A.2d 79, 86 (Md. Ct. Spec. App. 1999). The phrase “arising out
of” must be construed on a “contract by contract or case by case
basis.”
Id. Scottsdale argues that the phrase “arising out of”
in this particular case requires a more stringent, direct link
between the cause of the injury and the resulting injury--that
is, proximate causation. We agree with Red Roof Inns, however,
that under Maryland law, a “but for” causal link--that is, a
loose cause and result relationship--is enough to satisfy the
Policy’s “arising out of” requirement.
The Maryland Court of Appeals has not construed the
“arising out of” language in a case which specifically involves
the endorsement clause of a general liability insurance policy.
The court has, however, interpreted this language with respect
to other insurance contract clauses. For example, in Northern
Assurance Co. of America v. EDP Floors, Inc., 533 A.2d 682 (Md.
1987), the court construed an exclusionary clause of a general
business liability policy which excluded from coverage any
bodily injury “arising out of the ownership, maintenance,
operation, use, loading or unloading of . . . any automobile.”
Id. at 686. An employee of an EDP Floors customer was injured
19
while assisting with the unloading of an EDP Floors truck, and
the employee filed suit against EDP Floors, alleging liability
for negligent supervision. Id. at 684.
The Maryland Court of Appeals explained that the words
“arising out of” must be afforded “their common understanding,
namely, to mean originating from, growing out of, flowing from,
or the like.” Id. at 688. “While these words plainly import a
causal relation of some kind, read in context, they do not
require that the unloading of the truck be the sole ‘arising out
of’ cause of the injury.”
Id. In other words, the court
“reasoned that an injury could arise from various sources, but
that the exclusion from coverage would apply as long as the
clause covered at least one of the sources.” Teletronics Int’l,
Inc. v. CNA Ins. Co.,
302 F. Supp. 2d 442 (D.Md. 2004), reversed
on other grounds, 120 F. App’x 440 (4th Cir. 2005) (interpreting
EDP Floors and other Maryland cases). EDP Floors rejected an
argument, much like the one Scottsdale makes here, that the
employer’s negligence broke the chain of causation. Instead it
adopted a more lenient, “but for” causation approach, finding
that “if [claimant’s] bodily injury arose out of EDP’s
employee’s unloading of the truck, then that injury is excluded
from coverage . . . regardless of whether the injury may also be
said to have arisen out of other causes further back in the
sequence of events.” EDP
Floors, 533 A.2d at 689.
20
Similarly instructive is the court’s decision in Mass
Transit Administration v. CSX Transportation, Inc., 708 A.2d 298
(Md. 1998). While the court in CSXT was called on to interpret
an indemnification provision and not a liability insurance
policy, it noted that, “[i]nasmuch as the indemnification was
intended . . . to serve as liability insurance for . . . CSXT’s
liability, it is appropriate to interpret and apply the
indemnification in the same manner as liability insurance
policies.”
Id. at 304. CSXT was under contract to the Mass
Transit Administration of Maryland (“MTA”) to provide commuter
rail service, and the MTA agreed to indemnify and defend CSXT
for liability “arising out of the Contract Service under this
Agreement.”
Id. at 300. CSXT hired a contractor to pave
several of its public road crossings. The contractor’s backhoe
was subsequently destroyed when a CSXT commuter train struck it.
The contractor brought suit against CSXT, who in turn
sought indemnification from the MTA, averring that the
contractor’s claim against it “arose out of” contract service
because the commuter train was the direct physical cause of the
damage to the backhoe. The MTA, much like Scottsdale here,
argued that CSXT’s negligence “further back in the chain of
causation, caused the accident.” Id. at 305. The court
rejected this more stringent proximate cause requirement and
interpreted the phrase “arising out of” in the CSXT-MTA
21
agreement to require only “but for” causation. It reasoned that
CSXT’s own negligence in failing to warn the contractor of an
approaching train “d[id] not diminish the fact that the damage
to the backhoe arose out of the collision with the [commuter]
train.” Id.
Scottsdale contends, however, that the Maryland Court of
Appeals’ decision in Phila. Indem. Ins. Co. v. Md. Yacht Club,
Inc.,
742 A.2d 79 (Md. Ct. Spec. App. 1999) demonstrates that a
stronger nexus between the injury and policy provision is
required. In that case, an insurance company unsuccessfully
attempted to avoid defense and indemnification for an employee’s
claim of wrongful discharge, which the employee contended was
motivated by his “having sought [workers compensation] benefits
for a leg injury.”
Id. at 83-84. Contrary to Scottsdale’s
insistence that Md. Yacht Club is relevant to our analysis here,
we believe a claim for wrongful discharge is analytically
distinct from a claim expressly for bodily injury, and do not
find the case instructive. 8 Instead, we believe the court’s
8
Apart from its citation to Md. Yacht Club, Scottsdale
relies almost exclusively on cases interpreting “arising out of”
in the context of the Maryland Uninsured Motorist Act. We do
not find these decisions relevant to our inquiry, given that
uninsured motorist claims implicate a distinctive type of
insurance coverage that is not at issue here.
Scottsdale also urges us to follow G.E. Tignall & Co. v.
Reliance National Insurance Co., 102 F. Supp. 2d 300 (D. Md.
2000), a federal district court case applying Maryland state law
(Continued)
22
rulings in EDP Floors and CSXT are more applicable to the
context, and Policy terms, found in the case at bar. There,
like here, the damage/injury would not have occurred but for the
claimant’s performance of its duties pursuant to the underlying
contract, and the existence of other reasons or sources of the
damage/injury did not diminish the “arising out of” causal link
that had been established. Accordingly, we conclude, just as
those cases did, that the Policy’s “arising out of” language in
this case requires no more than “but for” causation. The causal
requirement is met regardless of whether Mr. Keye’s injury may
also be said to have arisen out of Red Roof Inns’ negligent
failure to maintain the stairwell.
to a disputed endorsement clause that contains an “arising out
of” provision similar to the disputed language here. The court
found that the endorsement clause was unambiguous and that the
insurance policy did not cover Tignall for its own negligent
acts. Significantly, the district court did not discuss
Maryland case law finding the phrase “arising out of” ambiguous,
or those decisions requiring only “but for” causation. As a
result, we are not persuaded by its reasoning.
In short, Scottsdale fails to cite any Maryland case that
indicates we must adopt a proximate cause approach. It merely
contends that “[n]othing in the more recent cases precludes this
Court from applying a standard other than ‘but for’ causation to
the instant circumstances.” Appellees’ Br. at 40 (emphasis
added). We disagree and find that Maryland case law establishes
that “but for” causation satisfies the Policy’s “arising out of”
requirement here.
23
ii.
Having examined the terms of the Policy, we now turn to the
second step of the Aetna inquiry, which considers whether the
facts alleged in the complaint bring Mr. Keye’s tort claim
within the Policy’s coverage. The complaint alleges that Mr.
Keye was injured while “working at a motel as a security guard
for S&W Protective Services, Inc. a security company contracted
by [Red Roof Inns].” J.A. 17. It further claims that “[a]t
that time, while Plaintiff was ascending one of the stairways at
the motel, the metal rim on the edge of a concrete step on the
stairway collapsed when Plaintiff put his foot on said step” and
he fell, sustaining multiple injuries. J.A. 17-18. In other
words, S&W was employed to provide security services at Red Roof
Inns, and at the time he sustained his injury, Mr. Keye was an
S&W employee providing the sort of security service work that
S&W was contracted to perform.
As explained above, the Policy covers claims for “bodily
injury” caused by “occurrences” (or, accidents). Mr. Keye’s
allegations in the complaint not only indicate that he suffered
bodily injury as the result of an accident, just as the district
court found; they also establish that he would not have been
injured on the Red Roof stairway that day but for his presence
on the stairway as a result of his employment with S&W and his
carrying out of security services pursuant to his employer’s
24
contract with Red Roof Inns. This “but for” causal link is
sufficient under the terms of the Policy irrespective of any
negligence on Red Roof Inns’ part that could be characterized as
an additional reason for the injury. Mr. Keye’s injury--as
alleged in his complaint--“ar[ose] out of [S&W’s] ongoing
operations performed for [Red Roof Inns].” J.A. 95. Red Roof
Inns is entitled to both coverage and a defense from Scottsdale
as a matter of law. 9
III.
For the foregoing reasons, we reverse and vacate the
judgment of the district court granting summary judgment to S&W
and Scottsdale. On remand, the district court should enter
summary judgment in favor of Red Roof Inns.
REVERSED
9
Scottsdale’s argument that “there are no provisions in the
Policy permitting Red Roof to gain coverage for negligence that
predated the policy,” Appellee’s Br. at 44, is meritless. The
Policy’s coverage is triggered not by the date when Red Roof
Inns’ alleged negligence began, but by the date when “bodily
injury” occurred. J.A. 63.
25
