Maryland Court Holds No Right of Contribution Where A Waiver of Subrogation Precludes Common Legal Responsibility

Troutman Pepper

Pepper Hamilton LLP

Gables Construction, Inc. v. Red Coats, Inc., No. 23, 2020 BL 193791, 2020 MD LEXIS 264 (Md. May 26, 2020)

Upper Rock II, LLC (“Upper Rock”) contracted Gables Construction, Inc. (“GCI”) to construct a multi-building apartment complex in Rockville, Maryland (the “Project”) per the terms of the American Institute of Architects (“AIA”) A102TM-2007, Standard Form Agreement Between Owner and Contractor and AIA A201TM – 2007, General Conditions of the Contract for Construction.  The General Conditions required Upper Rock to purchase and maintain a property insurance policy.  It also contained a waiver of subrogation provision under which Upper Rock waived all rights against GCI and other Project participants for damages caused by fire to the extent covered by insurance.

GCI’s parent company contracted Red Coats, Inc. (“Red Coats”) to provide security and fire watch at the Project. On March 31, 2014, neither GCI nor Red Coats performed a sweep of the Project for fire hazards.  A fire broke out, causing over $19 million in damage. 

Upper Rock filed a complaint against Red Coats, advancing a negligence claim, among others.  Red Coats joined GCI as a third-party defendant pursuant to Maryland’s Uniform Contribution Among Tortfeasors Act (“UCATA”), under which one “joint tortfeasor” can be held liable to another for contribution.  GCI filed a motion for summary judgment arguing that it was not a “joint tortfeasor” because it could not be liable to Upper Rock per the waiver of subrogation provision in the General Conditions.  The trial court denied the motion, and the appellate court affirmed.

The Maryland Supreme Court reversed.  The Court noted that for decades, Maryland courts have interpreted “joint tortfeasor” to mean one who is “liable in tort” to the injured party.  “Liability in tort,” in turn, means legal responsibility to the injured party, as opposed to mere culpability for the injury.  The right to contribution is one that arises out of common legal responsibility to the injured party; it is not an independent cause of action.  Absent that common legal responsibility, there is no right to contribution.

The Court reviewed several cases in which it had held that that there is no right of contribution where the third party defendant had no legal responsibility to the injured party, including cases involving immunities and contributory negligence. It concluded that there was no reason to treat the contractual defense of waiver of subrogation differently from these defenses.  Since GCI had contracted away its potential for legal responsibility to Upper Rock via the waiver of subrogation provision, it did not have common legal responsibility with Red Coats.  Red Coats therefore had no right of contribution against GCI.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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