Facts
- Metropolitan Dade County owned and operated Miami International Airport and contracted with CBM Industries of Minnesota, Inc. for janitorial and cleaning-maintenance services under a written Management Agreement.
- The Agreement required CBM to indemnify the County for claims “arising out of” CBM’s willful, negligent, or unlawful acts or omissions in performing the contract, and to “defend all suits” and pay costs and attorneys’ fees; it excluded indemnity for liability resulting from the County’s own willful, negligent, or unlawful acts or omissions.
- An airline employee sued the County for a slip-and-fall, alleging negligent maintenance of the premises.
- The plaintiff amended the complaint to add CBM, alleging CBM’s negligent performance of its maintenance duties and alleging the County’s liability both for its own negligence and vicariously for CBM’s negligence.
- The County tendered defense and indemnity to CBM under the Agreement; CBM refused, asserting no duty to defend the County against allegations of the County’s own negligence.
- CBM later settled the personal-injury action on behalf of both itself and the County; the remaining dispute concerned whether CBM owed (and breached) a duty to defend and reimburse the County’s attorneys’ fees incurred before settlement.
Issues
- Whether CBM’s contractual duty to defend the County was triggered by a complaint alleging both CBM’s negligent performance of contractual duties and the County’s direct negligence and vicarious liability.
- Whether the Agreement’s exclusion for liability resulting from the County’s own negligence eliminated CBM’s duty to defend when the complaint also alleged claims arising out of CBM’s operations.
- Whether the County could recover attorneys’ fees and defense costs incurred due to CBM’s refusal to defend before settlement.
Decision
- The appellate court reversed the final summary judgment for CBM and the denial of the County’s summary-judgment motion.
- The court held that the complaint’s allegations potentially brought the suit within the Agreement’s “arising out of” defense/indemnity language tied to CBM’s operations, triggering CBM’s duty to defend the County.
- The exclusion for the County’s own negligence limited indemnity for liability attributable solely to the County’s wrongful acts, but did not negate a defense obligation where the pleadings also alleged CBM’s negligence and the County’s vicarious liability for it.
- The case was remanded for further proceedings, including determination of the County’s recoverable reasonable attorneys’ fees and costs incurred in defending the underlying action up to settlement.
Legal Principles
- A contractual duty to defend is determined from the allegations of the underlying complaint; if the allegations fairly and potentially fall within the scope of the defense obligation, the duty to defend is triggered.
- “Arising out of” language in an indemnity/defense clause can obligate a contractor to defend an owner when the complaint alleges negligence in the contractor’s performance of contractual operations.
- When a complaint pleads both covered and noncovered theories (including an indemnitee’s own negligence), the existence of potentially covered allegations can require a defense, while any exclusion for the indemnitee’s own negligence may limit only ultimate indemnity for liability attributable solely to the indemnitee.
- If the duty to defend is triggered and the contract requires payment of defense costs and attorneys’ fees, the indemnitee may recover reasonable fees and costs incurred due to the indemnitor’s failure to provide a defense.
Conclusion
The court held that CBM’s defense obligation was triggered by pleadings alleging injuries arising out of CBM’s negligent contractual operations and the County’s vicarious liability for that negligence, even though the complaint also alleged the County’s direct negligence; the County could seek recovery of reasonable pre-settlement defense fees and costs on remand.