Wednesday, November 7, 2018

URS Corp. v. Maryland-National Capital Park & Planning Commission (Ct. of Special Appeals, Unreported)

Filed: July 6, 2018

Opinion by: Judge Doug Nazarian

Holding: Separate indemnification provisions in multiple documents that form a single agreement between the parties are not in conflict with each other where one indemnification provision provides a duty to defend but the other is silent. 

Facts:  The Maryland-National Capital Park and Planning Commission (the "Commission"), as part of Montgomery County, and URS Corporation ("URS") entered into an agreement for URS to provide the Commission with engineering services for the construction of the Rock Creek Hiker-Biker Trail Bridge over Veirs Mill Road.  The agreement consisted of: (1) a basic ordering agreement between Montgomery County and URS for transportation and engineering services to facilitate the planning and design of various projects (the "BOA"); (2) a request for proposal, extending the basic ordering agreement to include the Commission as a party; (3) a task order issued by the Commission for the specific engineering services; (4) a proposal from URS in response to the task order; (5) a contract between the Commission and URS for the specific engineering services (the "Contract"); and (6) the Commission's procurement rules, regulations and laws.  The BOA contained an indemnification provision that, in addition to indemnification, obligated URS to defend Montgomery County (including the Commission) in any action or suit arising out of URS's "negligence, errors, acts or omissions" arising under the BOA.  The Contract contained an indemnification provision that did not expressly obligate URS to defend any such claims.  The Contract also provided that, in the event of a conflict among the documents comprising the agreement among the parties, the Contract had precedence over the BOA.

Fort Myer Construction Corporation (the "Subcontractor") was retained to assist in the construction of the bridge.  The Subcontractor filed suit against the Commission claiming damages and delays due to defects in URS's design.  The Commission sent a letter to URS invoking URS's duty-to-defend and indemnification obligations under the basic ordering agreement. URS denied the Commission's demand and refused to defend or indemnify the Commission.  The Commission filed suit against URS for breach of contract and sought indemnification and contribution and URS countersued the Commission for failure to pay URS for work performed under the Contract.

Analysis: After multiple hearings and procedural matters that are not relevant for purposes of this analysis, the Court of Special Appeals (in an unreported opinion) affirmed the lower court's finding that URS had a duty to defend the Commission in the lawsuit brought by the Subcontractor.  The court was not persuaded by URS's argument that the indemnification provisions of the BOA and the Contract were in conflict because "the duty to defend is distinct from, and broader than, the duty to indemnify"; therefore, the duty to defend in the BOA supplemented the indemnification obligations in the Contract.  The Contract's silence regarding any duty to defend did not negate the express language of the BOA.  

The court was also not persuaded by URS's argument that the BOA applied only to the pricing of goods and services because the Contract unambiguously and unqualifiedly stated that the BOA was incorporated into the Contract.  The court found URS breached its agreement with the Commission by refusing to defend the Commission in the lawsuit brought by the Subcontractor, even though the suit was ultimately dismissed for a procedural error committed by the Subcontractor, because the duty to defend was triggered by the Subcontractor filing suit against the Commission regardless of the validity of the Subcontractor's claim.

This is an unreported opinion.  See Md. Rule 1-104.

The full opinion is available in pdf.