Court Opinion

ID: 175731
Source: CourtListenerOpinion
Date Created: 2010-09-22 17:47:40+00
Date Added: 2024-06-11T09:05:26.612257
License: Public Domain

UNPUBLISHED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Affirmed in part, vacated in part, and remanded by unpublished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Unpublished opinions are not binding precedent in this circuit.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