Insurance Disputes; The Devil Is In The Details
John Davis was employed in 2009 as a general contractor working on the construction of a home. Prior to beginning the project he did what many general contractors do and hired a subcontractor; Tricon Construction, Inc. Davis entered into an a subcontractor agreement with Tricon Construction, Inc. and a provision of this contract provided that that Tricon would be insured for liabilities “arising out of” their performance.
As sometimes happens during construction projects, employees of another subcontractor were injured on the job. Their injuries were caused as a result of falling from a scaffold erected by Tricon. The employees filed a lawsuit against Davis, the general contractor and the subcontractor, Tricon.
In litigation, Davis attempted to rely on the insurance coverage Tricon assured him he had, however, the insurance carrier rejected such claims and informed Davis that they had no right to defend him in the lawsuit. Davis promptly sued the insurance company, Erie Exchange Insurance, in state court (John G. Davis Construction Corp. v. Erie Insurance Exchange, No. 802-. 2014 (Md. Ct. Spec. App. Oct. 28, 2015). The court dismissed the claim in favor of Erie saying that the contract was provided by Tricon and not by Erie. Thus, Erie was not a proper defendant.
On appeal the appellate panel found that the trial court erred in dismissing the case. After a round of wordplay interpreting exactly what “arising out of” meant, the court found that another term explained that Erie would provide insurance for “liability… caused in whole or in part, by…”; the court went on to explain that this would constitute applicable coverage in this situation. The court therefore ruled that Davis was in fact covered by Erie.
While this story is unlikely to serve as the basis for next season’s soap operas it does highlight several important points.
- 1. Whether you are an injured party or a contractor or subcontractor, disputes over insurance coverage may arise.
- 2. Ensuring no coverage goes unchecked can be complicated.
- 3. Occasionally, a lawsuit must be filed against an insurance carrier for breach of contract, when they fail to honor the terms of their coverage agreements.