Capital City Real Estate, LLC v. Certain Underwriters at Lloyd

Filing

PUBLISHED AUTHORED OPINION filed. Originating case number: 1:13-cv-01384-MJG. [999599406]. [14-1239]

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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 14-1239

CAPITAL CITY REAL ESTATE, LLC,
Plaintiff - Appellant,
v.
CERTAIN UNDERWRITERS AT LLOYD’S
Policy Number: ARTE018240,

LONDON,

Subscribing

to

Defendant - Appellee.

Appeal from the United States District Court for the District of
Maryland, at Baltimore.
Marvin J. Garbis, Senior District
Judge. (1:13-cv-01384-MJG)

Argued:

January 29, 2015

Decided:

June 10, 2015

Before WILKINSON, GREGORY, and SHEDD, Circuit Judges.

Vacated and remanded with instructions by published opinion.
Judge Gregory wrote the opinion, in which Judge Wilkinson and
Judge Shedd joined.

ARGUED: Robert Lawrence Ferguson, Jr., FERGUSON, SCHETELICH
& BALLEW, PA, Baltimore, Maryland, for Appellant.
Georgia S.
Foerstner, CLARK & FOX, Cherry Hill, New Jersey, for Appellee.
ON BRIEF: Ann D. Ware, FERGUSON, SCHETELICH & BALLEW, PA,
Baltimore, Maryland, for Appellant. John M. Clark, CLARK & FOX,
Cherry Hill, New Jersey, for Appellee.

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GREGORY, Circuit Judge:
Capital City Real Estate, LLC (“Capital City”) initiated
this declaratory judgment action in the District of Maryland,
seeking

a

declaration

that

Certain

Underwriters

at

Lloyd’s

London (“Underwriters”) were obligated to defend and indemnify
Capital City against a negligence lawsuit filed in the Superior
Court for the District of Columbia.

The district court granted

summary judgment in favor of the Underwriters, concluding that
it had no duty to defend or indemnify Capital City.
district

court

erred

in

granting

summary

Because the

judgment

to

the

Underwriters, we vacate and remand.

I.
Central to this dispute is the common wall shared by the
structures located at 55 Bryant Street, NW, Washington, DC (“55
Bryant Street”) and 57 Bryant Street, NW, Washington, DC (“57
Bryant

Street”).

55

Bryant

Street

was

owned

by

Leon

Yates

(“Yates”) and insured by The Standard Fire Insurance Company
(“Standard

Fire”).

Capital

City,

a

real

estate

development

company with its principal place of business in Washington, DC,
was operating as the general contractor for the renovation of 57
Bryant Street in 2008 and 2009.
Capital City subcontracted the foundation, structural, and
underpinning

work

for

the

57

Bryant
2

Street

renovations

to

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Marquez Brick Work, Inc. (“Marquez”), a “corporation engaged in
the business of concrete, bricks, blocks, and foundation work
with its principal place of business located in Maryland.”
268.

J.A.

“The subcontract between Capital City and Marquez Brick

required Marquez Brick to indemnify Capital City for damages
caused
Brick

by
to

its

[Marquez’s]

maintain

certain

work

and

general

further

liability

Capital City as an additional insured.”
on

November

17,

2008,

the

required
insurance

J.A. 269.

Underwriters

issued

Marquez
naming

Accordingly,
an

insurance

policy (the “Policy”) to Marquez, effective from November 17,
2008,

through

November

17,

2009.

In

December

2008,

the

Underwriters also issued an Endorsement (the “Endorsement”) to
the Policy listing Capital City as an additional insured party
on the Policy.

As relevant to this case, the Endorsement amends

the Policy to cover Capital City as an additional insured,
but only with respect to liability for . . . “property
damage” . . . caused in whole or in part by:
1. [Marquez’s] acts or omissions; or
2.

The acts or omissions
[Marquez’s] behalf;

of

those

acting

on

in the performance of [Marquez’s] ongoing operations
for [Capital City in Washington, D.C.].
J.A. 109.
On June 9, 2009, during the course of Marquez’s work on the
underpinning of 57 Bryant Street, the common wall shared by 57
Bryant Street and 55 Bryant Street collapsed.
3

Capital City’s

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insurer sent a letter to the Underwriters notifying them of the
collapse, and tendering to the Underwriters “all claims that are
being or will be asserted by Mr. Yates and/or others” as a
result of the incident.
either

the

initial

J.A. 161.

letter,

or

No response was received to

to

several

letters

and

emails

subsequently sent by counsel for Capital City.
On June 7, 2012, Standard Fire, as subrogee, filed suit
against 57 Bryant Street, NW Limited Partnership, Bryant St.,
LLC, and Capital City in the Superior Court for the District of
Columbia.

Standard

“underlying
obtained

Fire

complaint”)

from

the

alleges

that

District

in

Capital

of

its

City

Columbia

perform renovations at 57 Bryant Street.

a

complaint
applied

building

(the

for

and

permit

to

Standard Fire further

alleges that “[t]he plan submitted to the District of Columbia
did not detail the excavation details or any plans for providing
any underpinning support or other support to the common walls
and other structures of the premises.”
complaint

does

not

mention

Marquez

J.A. 80.
or

damages for any of its acts or omissions.

The underlying

explicitly

seek

any

Rather, the complaint

attributes the June 9, 2009 collapse and resulting damage to 55
Bryant Street to negligence on the part of the named defendants.
J.A. 81 (“The failure of the Defendants to properly excavate and
support

the

structure

located

at

57

Bryant

Street

. . .

constitutes negligence in that they failed to comply with the
4

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applicable

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standard

renovations.”).

of

Standard

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care
Fire

while

paid

for

performing
the

repairs

said
per

its

insurance policy with Yates, and requested $600,000 in damages,
plus attorney’s fees, costs, and interest.
Capital

City

responded

in

part

by

filing

a

third

party

complaint against both Marquez and its owner, Feliciano Marquez.
Capital City alleges that its contract with Marquez requires
Marquez

“to

pay

for

against

all

claims

defending

for

and

liability

indemnify

that

were

[Capital
a

result

City]
of

or

partially resulting from Marquez’s breach of any term of the”
contract, and also requires “that if [Capital City] is sued and
the subject of the suit is [Marquez’s] work or the direct or
indirect result of it, [Marquez] shall indemnify [Capital City]
against all liabilities” and reimburse it for any damages or
fees.

J.A. 89.

Thereafter, counsel for the Underwriters responded by email
and indicated that the tender of claims was under review.

On

April 13, 2013, counsel for the Underwriters sent a letter to
counsel for Capital City denying coverage.
Capital City then filed this declaratory judgment action on
May

10,

Maryland,

2013

seeking

Underwriters
Policy.

against

have

a
a

the

Underwriters

declaration
duty

to

from

defend

in
the

Capital

the

District

of

court

that

the

City

under

the

The parties filed cross-motions for summary judgment,
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and

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the

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district

court

ruled

Pg: 6 of 20

in

favor

of

the

Underwriters.

Capital City timely filed this appeal.

II.
Our review of a district court’s grant of summary judgment
is de novo.

French v. Assurance Co. of Am., 448 F.3d 693, 700

(4th Cir. 2006).
no

genuine

“Summary judgment is appropriate when there is

issue

of

material

fact

and

the

entitled to judgment as a matter of law.”

moving

Id.

party

is

Here, we apply

Maryland law because the Policy was delivered in Maryland and
this diversity action was filed in the District of Maryland.
Klaxon

Co.

v.

Stentor

(1941)

(holding

that

Elec.
a

Mfg.

federal

Co.,

313

court

U.S.

487,

exercising

496-97

diversity

jurisdiction applies the choice of law principles of the state
where

the

federal

court

is

located);

Perini/Tompkins

Joint

Venture v. Ace Am. Ins. Co., 738 F.3d 95, 100 (4th Cir. 2013)
(“In insurance contract disputes, Maryland follows the principle
of

lex

loci

contractus,

which

applies

jurisdiction where the contract was made.

the

law

of

the

For choice of law

purposes, a contract is made where ‘the last act is performed
which makes the agreement a binding contract.
is

where

the

policy

is

delivered

(citation omitted)).

6

and

the

Typically, this
premiums

paid.’”

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Capital City advances two arguments on appeal.

First, it

contends that the district court erred in concluding that the
Underwriters would have a duty to defend only if the underlying
complaint had alleged that Capital City was vicariously liable
for

the

actions

of

its

subcontractor.

Second,

Capital

City

argues that the district court should have made clear that, if
the Underwriters owe it a duty to defend, then Capital City is
entitled to recover expenses, including attorney’s fees.

III.
In determining whether an insurer has a duty to defend under
an insurance policy, Maryland courts apply the following test:
(1) what is the coverage and what are the defenses
under the terms and requirements of the insurance
policy?
(2) do the allegations in the tort action
potentially bring the tort claim within the policy’s
coverage?
The first question focuses upon the
language and requirements of the policy, and the
second question focuses on the allegations of the tort
suit.
At times these two questions involve separate
and distinct matters, and at other times they are
intertwined, perhaps involving an identical issue.
St. Paul Fire & Marine Ins. Co. v. Pryseski, 438 A.2d 282, 285
(Md. 1981).

We address the two steps of the test in turn.
A.

We first must determine the scope of coverage under the
Policy’s terms and conditions.

Pryseski, 438 A.2d at 285.

With

respect to interpretation of the Policy language and terms, we

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note that, “[u]nlike the majority of other states, Maryland does
not

follow

the

rule

that

insurance

policies

strongly construed against the insurer.”

are

to

be

most

Empire Fire & Marine

Ins. Co. v. Liberty Mut. Ins. Co., 699 A.2d 482, 494 (Md. 1997).
Rather,

Maryland

insurance

law

applies

contracts.

Id.

ordinary

contract

“Nevertheless,

principles

under

the

to

general

principles of contract construction, if an insurance policy is
ambiguous,

it

will

be

construed

liberally

in

favor

of

the

insured and against the insurer as drafter of the instrument.”
Id.
“If the policy’s language is clear and unambiguous, the
Court will assume the parties meant what they said.
contractual
provisions.”

dispute,

we

start

with

the

As with any

relevant

policy

Perini/Tompkins, 738 F.3d at 101 (quotation marks

and ellipsis omitted); see also Prince George’s Cnty. v. Local
Gov’t Ins. Trust, 879 A.2d 81, 88 (Md. 2005) (“In interpreting
an insurance policy, as with any contract, the primary task of
the circuit court is to apply the terms of the policy itself.”).
As with other contracts, “we analyze the plain language of [an
insurance] contract according words and phrases their ordinary
and accepted meanings as defined by what a reasonably prudent
lay

person

would

understand

them

to

mean.”

Nationwide Ins. Co., 702 A.2d 767, 771 (Md. 1997).

Kendall

v.

In so doing,

we read the Endorsement and the Policy together as a single
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Local Gov’t Ins. Trust, 879 A.2d at 88 (“In general,

the main insurance policy and an endorsement constitute a single
insurance contract, and an effort should be made to construe
them harmoniously.”).

However, “[i]f the endorsement conflicts

with the main policy, the endorsement controls.”

Id.

Here, the relevant portion of the Policy is the Endorsement
itself.

The Endorsement in this case is the form provided by

the Insurance Services Office, Inc. (“ISO”) which “is the almost
exclusive

source

of

support

services

in

this

[commercial general liability] insurance.”
Co.

v.

California,

509

U.S.

764,

772

country

for

Hartford Fire Ins.

(1993).

It

“develops

standard policy forms and files or lodges them with each State’s
insurance

regulators;

insurance
forms.”

written
Id.

in

most
the

[commercial

United

general

States

is

written

liability]
on

these

The Endorsement here, the CG 20 10 07 04 Form, was

copyrighted by the ISO in 2004.

J.A. 109.

It explicitly covers

Capital City as an additional insured for the 57 Bryant Street
renovation

project,

“but

only

with

respect

to

liability

for

. . . ‘property damage’ . . . caused in whole or in part by:
1. [Marquez’s] acts or omissions; or 2. The acts or omissions of
those acting on [Marquez’s] behalf.”
The

Maryland

Endorsement

Court

language

of

J.A. 109.

Appeals

presented

in

has

this

not

construed

the

case.

However,

the

language is quite clear that coverage is provided for Capital
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as

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the

additional

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insured,

for

“property

caused in whole or in part by” Marquez.

damage

. . .

The Fifth Circuit has

construed the exact Endorsement language at issue here to mean
that an insurer has a duty to defend an additional insured “only
if the underlying pleadings allege that” the named insured, “or
someone acting on its behalf, proximately caused” the injury or
damage.
598

Gilbane Bldg. Co. v. Admiral Ins. Co., 664 F.3d 589,

(5th

Cir.

2011).

Insurance

law

commentators

have

also

examined the language at issue and concluded that an additional
insured is covered where a named insured is at least partially
negligent.

See, e.g., Scott C. Turner, Insurance Coverage of

Construction Disputes § 42:4 (2015) (stating that when the “ISO
issued revised versions of its additional insured endorsements”
in

2004,

insureds”

it

“attempt[ed]

such

that

to

“for

narrow

there

to

coverage
be

for

additional

insurance

for

the

additional insured . . . the named insured must be negligent at
least in part”).

We thus conclude that the plain language of

the Endorsement provides for exactly what is says:

coverage to

Capital City for property damage caused by Marquez, either in
whole or in part.
The

Underwriters

argue

that

the

scope

of

coverage

is

limited to Capital City’s vicarious liability for Marquez’s acts
or omissions.

However, there is no mention of vicarious or

derivative liability in the Endorsement.
10

As the Tenth Circuit

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recognized in construing the language of the predecessor to the
CG 20 10 07 04 Form, “if the parties had intended coverage to be
limited to vicarious liability, language clearly embodying that
intention was available.”

McIntosh v. Scottsdale Ins. Co., 992

F.2d 251, 255 (10th Cir. 1993) (original alterations omitted);
see also Am. Empire Surplus Lines Ins. Co. v. Crum & Forster
Specialty Ins. Co., No. Civ. H-06-0004, 2006 WL 1441854, at *7
(S.D. Tex. May 23, 2006) (construing the 2004 CG 20 10 07 04
Form

and

sentence

remarking
of

the

that

“nothing

Endorsement

in

the

. . .

‘whole

expressly

or

in

limits

part’
. . .

additional insured coverage to derivative or vicarious claims.
. . .

The words ‘derivative’ and ‘vicarious’ are conspicuously

absent from the Endorsement”).
insurers
insured

maintain
is

liability

that

limited

for

the

the

to

acts

Turner has observed that “[m]any
coverage

the
or

provided

additional

omissions

of

to

additional

insured’s

vicarious

the

insured.”

named

Turner, Insurance Coverage of Construction Disputes § 42:4.

But

he rightly notes that “[w]hile it is true that the additional
insured is covered for its vicarious liability stemming from the
named

insured’s

operations,

the

insurer’s

attempt

to

limit

coverage to that alone ignores the language of the additional
insured endorsements.”

Id.

Ultimately, it is the language of the Endorsement that must
control.

See

Perini/Tompkins,
11

738

F.3d

at

101.

Here,

the

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of

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the

Endorsement

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plainly

lacks

the

vicarious

liability limitation that the Underwriters seek to impose.

Even

if we were to view the Endorsement language as ambiguous, we
would

be

obligated

to

construe

that

ambiguity

against

the

Underwriters, see Empire Fire, 699 A.2d at 494, and to find that
the scope of the Endorsement extends to property damage caused
by Marquez, either in whole or in part, regardless of whether
the underlying complaint seeks to hold Capital City vicariously
liable for Marquez’s acts or omissions.
B.
Having determined the scope of the Endorsement, the Court
turns to the second question presented by the Pryseski test,
namely whether the “allegations in the tort action potentially
bring the tort claim within the policy’s coverage.”
438 A.3d at 285.

Pryseski,

As the Maryland Court of Appeals has stated,

“to give effect to the duty to defend where the allegations,
even if groundless, present claims both within and without the
policy coverage the rule in Maryland is that ‘the insurer still
must defend if there is a potentiality that the claim could be
covered by the policy.’”

Continental Cas. Co. v. Bd. Of Educ.,

489 A.2d 536, 542 (Md. 1985) (quoting Brohawn v. Transamerica
Ins. Co., 347 A.2d 842, 850 (Md. 1975)); see also Baltimore Gas
& Elec. Co. v. Commercial Union Ins. Co., 688 A.2d 496, 505-06
(Md. Ct. Spec. App. 1997) (observing that the Maryland Court of
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Appeals has held that “the duty to defend arises as long as the
plaintiff in a tort case alleges an ‘action that is potentially
covered by the policy, no matter how attenuated, frivolous, or
illogical that allegation may be.’” (quoting Sheets v. Brethren
Mut. Ins. Co., 679 A.2d 540, 543 (Md. 1996)).
Maryland

courts

generally

look

to

the

pleadings

in

the

underlying lawsuit to determine whether there is a potentiality
of coverage.

Aetna Cas. & Sur. Co. v. Cochran, 651 A.2d 859,

863 (Md. 1995).
that

an

insurer

While the Maryland Court of Appeals has “held
may

not

use

extrinsic

evidence

to

contest

coverage if the tort suit complaint establishes a potentiality
of coverage,” it has set forth a different rule for an insured.
Id. at 863-64.

Specifically, “where a potentiality of coverage

is uncertain from the allegations of a complaint, any doubt must
be

resolved

insured

may

in

favor

establish

of
a

the

insured.”

potentiality

Id.
of

Moreover,

coverage

under

insurance policy through the use of extrinsic evidence.”

“an
an

Id. at

866; see also Litz v. State Farm Fire & Cas. Co., 695 A.2d 566,
570

(Md.

1997)

established
complaint.

by

(“A

potentiality

of

coverage

the

allegations

in

the

is

tort

typically
plaintiff’s

Sometimes, however, extrinsic evidence may also be

used to establish a potentiality of coverage.

When extrinsic

evidence, but not the allegations of the complaint, establish a
potentiality

of

coverage,

the

insured

13

may

rely

on

evidence

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outside

of

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complaint.”

(emphasis

omitted)).

the

added)

(citations

The Maryland Court of Appeals has noted that its

policy ensures that an insured “is not foreclosed from receiving
the

defense

complaint

to

which

[it]

to

plead

fails

potentiality

of

coverage

Cochran, 651 A.2d at 866.

is

entitled

merely
that

allegations
under

the

because
establish

insurance

the
a

policies.”

However, “an insured cannot assert a

frivolous defense merely to establish a duty to defend on the
part of [its] insurer.”
Here,

the

Id.

underlying

involvement of Marquez.

complaint

is

silent

as

to

the

Indeed, Marquez is not named anywhere

in the complaint.

However, Capital City has filed a third party

complaint

Marquez

against

and

its

owner,

and

has

introduced

extrinsic evidence that the collapse of the common wall between
55 Bryant Street and 57 Bryant Street was caused by Marquez.
Given

that

“[t]he

Standard

failure

of

Fire’s
the

underlying

Defendants

to

complaint

alleges

that

properly

excavate

and

support the structure located at 57 Bryant Street” constituted
negligence “in that they failed to comply with the applicable
standard

of

care

while

performing”

the

57

Bryant

Street

renovations, J.A. 81, and given also that Marquez’s involvement
in those renovations is undisputed, it cannot be said that the
complaint does not seek to hold the named defendants liable for
property

damage

“caused

in

whole
14

or

in

part”

by

Marquez.

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Because

the

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underlying

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complaint

does

not

make

clear

that

Marquez conducted the foundation, structural, and underpinning
work that led to the collapse of the common wall, Capital City
is entitled to rely on its extrinsic evidence to establish those
facts and to thereby establish a potentiality of coverage.

It

was error for the district court to conclude otherwise.
The Underwriters urge us to follow the rule set forth in
the Maryland Court of Special Appeals case, Baltimore Gas, which
held that an insurer had no duty to defend where the plaintiffs
in the underlying tort lawsuit dismissed their claims against
all of the defendants except for the general contractor.
A.2d at 511.
our

holding

688

But nothing in the Baltimore Gas case contradicts
here.

In

that

case,

the

plaintiffs

in

the

underlying lawsuit sued a general contractor, a subcontractor,
and others for injuries suffered after the plaintiffs’ car fell
into an excavation pit.

The court observed that the plaintiffs

in the underlying lawsuit “[u]ltimately . . . chose to pursue
their claim only against BGE[, the general contractor], on the
theory that BGE was solely responsible for the occurrence” at
issue in the case “because of its own negligence.”

Id. at 507.

The tort plaintiffs thus “expressly redefined their theory of
BGE’s

liability.”

Id.

The

court

stated

that

“the

tort

plaintiff’s [sic] allegations are central to the determination
of coverage.”

Id. at 510 (original emphasis).
15

It concluded:

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BGE cannot compel [the insurer] to provide it with a
defense based on claims which, although at one time
asserted
by
the
[plaintiffs
in
the
underlying
lawsuit], were no longer asserted, because such claims
‘will not be generated at trial.’
The fact that the
plaintiffs never formally amended their complaint to
restate the allegations so as to reflect their revised
theory of BGE’s liability is of no moment.
Id.

at

511.

discovery

But

showed

crucial

that

the

to

the

general

court’s

holding

contractor

–

was

and

not

that
its

subcontractor – had the duty to fill the excavation pit into
which the plaintiffs’ car fell.

While it was undisputed that

the subcontractor had been engaged to dig the pit, the evidence
also showed that BGE was responsible for filling the pit.
A.2d at 507-09.

688

The plaintiffs chose to pursue their claims

only against BGE for its negligent failure to fulfill its duty,
leading the Baltimore Gas court to conclude that the insurer no
longer had a duty to defend.
By contrast, there is not such a clean delineation of which
actor

owes

which

duty

in

this

case,

in

part

because

underlying complaint fails to even mention Marquez.

the

But the

underlying complaint in this case does not affirmatively present
a claim that falls outside the scope of the Policy. *

*

Rather, it

It is for this reason that the Underwriters’ and the
district court’s reliance on G.E. Tignall & Co., Inc. v.
Reliance Nat’l Ins. Co., 102 F. Supp. 2d 300 (D. Md. 2000) is
misplaced. As an initial matter, to the extent that the Tignall
decision suggests that there is no potentiality of coverage
merely because the underlying lawsuit does not mention the named
(Continued)
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clearly seeks recovery for property damage that was “caused in
whole or in part” by the failure to use the appropriate standard
of care in performing the renovations.
mentioned

as

performing

the

Although Marquez is not

renovation

work

that

led

to

the

collapse of the wall, Capital City, as the additional insured,
is

entitled

extrinsic

to

introduce

evidence.

Litz,

Marquez’s
695

involvement

A.2d

at

570.

by

way

Indeed,

of
the

Maryland Court of Appeals has stated that

insured, 102 F. Supp. 2d at 307, it incorrectly interprets
Maryland law.
See, e.g., Cochran, 651 A.2d at 866; Litz, 695
A.2d at 570.
Indeed, the Tignall court explicitly recognized
that “[e]xtrinsic evidence may be used by the insured to
establish the potentiality of coverage.” Tignall, 102 F. Supp.
2d at 307.
Second, we note that in holding that an underlying
tort plaintiff must plead a case of vicarious liability, id.,
the Tignall court was interpreting the predecessor to the CG 20
10 07 04 Form at issue in this case.
As we held above, the
plain language of the Endorsement presented here does not
contemplate a restriction of coverage to claims of vicarious
liability.
Finally, we note that the underlying complaint in
Tignall, unlike the underlying complaint in this case, stated
that the plaintiff “avers that all of these damages were and are
due solely to the wrongful and negligent acts and omissions of
the Defendants.” Tignall, 102 F. Supp. 2d at 307. It is worth
noting that the allegations here are not framed to affirmatively
exclude the negligent acts or omissions of parties other than
the named defendants.
Even so, such allegations would not
necessarily resolve the question of potentiality of coverage
because, again, Maryland has refused to foreclose an insured
“from receiving the defense to which [it] is entitled merely
because the complaint fails to plead allegations that establish
a potentiality of coverage under the insurance policy.”
Cochran, 651 A.2d at 866; see also Litz, 695 A.2d at 570
(permitting an insured to introduce extrinsic evidence where a
complaint
lacks
allegations
to
establish
potentiality
of
coverage).
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[t]here is an important difference between the duty to
defend a lawsuit that affirmatively makes a claim that
falls outside of the coverage of the policy, and the
duty to defend a lawsuit that fails to allege the
elements of a cause of action that if properly alleged
and proven would be within the coverage of policy.
Sheets, 679 A.2d at 544-45.

And as noted above, Maryland law

rejects the notion that an insured would be “foreclosed from
receiving the defense to which [it] is entitled merely because
the

complaint

potentiality

fails
of

to

plead

coverage

allegations

under

the

that

insurance

establish

a

polic[y].”

Cochran, 651 A.2d at 866.
The Underwriters contend that Standard Fire seeks in the
underlying complaint to recover damages only on the theory that
Capital City failed to submit appropriate construction plans to
the District of Columbia.

If the Underwriters were correct,

perhaps this would be a different case.

However, the underlying

complaint faults the named defendants for improperly excavating
and supporting 57 Bryant Street and for failing “to comply with
the

applicable

renovations.”
that

such

standard

of

care

while

J.A. 81 (emphasis added).

allegations

rest

solely

performing

said

It is absurd to think

on

the

submission

of

construction plans rather than additionally seeking damages for
negligence

in

renovation work.

actually

conducting

the

construction

and

And again, it is undisputed that Marquez did

the foundation work during the course of the renovations.

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therefore find that there is a potentiality of coverage.

The

Underwriters

the

have

a

duty

to

defend

Capital

City

in

underlying tort lawsuit.

IV.
Capital City argues that the district court should have
made clear that, if the Underwriters owe it a duty to defend,
then Capital City is entitled to recover expenses, including
attorney’s fees.

The district court did not address this issue

below, and the Underwriters did not respond to Capital City’s
expenses and fees arguments here.

We decline to address the

question on appeal, and instead will give the district court the
opportunity to resolve the issue in the first instance.

V.
For the foregoing reasons, we conclude that the scope of
coverage under the Endorsement extends beyond acts or omissions
of Marquez for which Capital City was vicariously liable.
plain

language

of

the

Endorsement

creates

a

duty

to

The

defend

Capital City where Capital City is being held liable for the
acts

or

omissions

of

Marquez.

Moreover,

we

find

that

the

allegations in the underlying complaint create a potentiality of
coverage.

Accordingly, we vacate the district court’s order

granting summary judgment to the Underwriters and remand this
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case for entry of summary judgment in favor of Capital City and
a determination of whether Capital City is entitled to expenses
and attorney’s fees.
VACATED AND REMANDED WITH INSTRUCTIONS

20