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Indemnification in Maryland

Frequently, when a party asserts a cross- or third-party claim, at least one count will assert that the cross- or third-party plaintiff is entitled to indemnification.  It is almost boilerplate.  However, Maryland law is fairly restrictive on the concept of indemnification, and frequently claims for indemnification are vulnerable to dispositive motions. 

Maryland recognizes that a right to indemnification may arise under three circumstances (or three “modalities,” the term used by the Court of Appeals).  First, indemnification is appropriate where there is express contractual indemnity, which arises where “an indemnitor, by express contract, agrees to reimburse the indemnitee for a liability, loss, or damage that the indemnitee may occur that is within the scope of the indemnity.”  Pulte Home Corp. v. Parex, 403 Md. 367, 381 (2007).  This is relatively straightforward; Maryland recognizes the viability of a contractual provision requiring indemnification.

The second “modality” is indemnification by fact or law, whereby there are “unique special factors demonstrating that the parties intended that the would-be indemnitor bear the ultimate responsibility . . . or where there is a generally recognized special relationship between the parties.”  Pulte Home Corp., 403 Md. at 382.  However, the circumstances under which an implied right of indemnification have been recognized are restrictive.  Unfortunately, there are no Maryland state or federal decisions addressing what specifically constitutes a “generally recognized special relationship.”  The Court of Appeals in Pulte Home Corp. cited to a First Circuit Court of Appeals decision, which in turn cited to § 51 of Prosser on Torts for examples of what might constitute such a “generally recognized special relationship,” which included: where an employer is vicariously liable for the tort of a servant or independent contractor; where an innocent partner is held liable for the acts of another partner; or the owner of an automobile for the conduct of the driver. 

Third, Maryland recognizes equitable, also known as tort-based, indemnification.  However, for equitable indemnification to apply, both the indemnitor and indemnitee must be liable in tort to the original plaintiff.  If the party from whom indemnitee is sought could not be directly liable to the original plaintiff, then this modality is inapplicable.  This equitable indemnification is a recognition of differing levels of fault by multiple tortfeasors, whereby the less culpable tortfeasor may be entitled to indemnification from the “more culpable co-defendant, who is primarily or actively negligent.”  Max v. Camden Yards, LLC v. A.C. Bev., Inc., 172 Md. App. 139, 148 (2006). 

Of course, there are frequently occasions where a cross-claim or third-party claim will contain multiple causes of action.  But where the claim seeks only indemnification, it is worth keeping in mind that the law of indemnification in Maryland is far more restrictive than many would believe, and the cross- or third-party claim may be susceptible to summary judgment, if not a motion to dismiss.  Additionally, keep in mind that Maryland does not allow for indemnification for one’s own sole negligence in construction contracts.  See Md. Code Ann. Cts. & Jud. Proc. § 5-401 (2014); Heat & Power Corp. v. Air Products & Chemicals, Inc., 320 Md. 584, 593 (1990).

Posted by Padraic K. Keane on 08/04/2015 at 05:59 PM