2 Cases: Duty to Defend and Indemnify for Preparing Workers' Compensation Insurance Applications and Board of Education Employe


Maryland Accounting Servs., Inc. v. Continental Cas. Co., (D. Md.) (Nov. 21, 2011)

Maryland Accounting Services, Inc. ("MAS") and Ivan A. Jaramillo ("Jaramillo") filed a Complaint against Continental Casualty Co. ("Continental") asserting that Continental had a duty to defend and indemnify them in an underlying suit. Jaramillo was an accountant employed by MAS, who had a business insurance policy from Continental. The policy required Continental to defend and indemnify MAS and its employees in suits relating to "professional services" they rendered.

"Professional services" was specifically defined in the policy and included preparing financial or accounting records, preparing, assembling or compiling financial statements, preparing payroll records and payroll checks and offering services as a life insurance agent, among other things. Further, the policy had a "Financial Products Exclusion" which noted that the policy did not apply to any claims arising from servicing or providing advice for products not considered "financial products." Financial products was a small group of items including U.S. Treasury Bonds, Mutual Funds and certain life insurance contracts. Workers' Compensation insurance policies are not included in this exclusive group.

MAS and Jaramillo were sued by the Injured Workers' Insurance Fund ("IWIF") on the grounds of fraud. IWIF alleged that MAS and Jaramillo had under reported the number of employees, payroll size and use of sub-contractors for a number of small Maryland businesses; all factors IWIF considers when calculating insurance premiums. IWIF further alleged that MAS and Jaramillo had negligently or intentionally provided advice and services that allowed other Defendants to defraud IWIF of over $1 million in insurance premiums. MAS and Jaramillo informed Continental of the suit and requested defense and indemnification. Continental refused to do either.

The main issue was whether the preparing of workers' compensation insurance applications, including the preparation of financial and payroll documents, qualified as "professional services" as defined in the Continental policy. The Court determined that although the services provided by MAS and Jaramillo may have ordinarily been considered "professional services," in this instance, they were performed for the specific purpose of obtaining workers' compensation insurance. Therefore, these services were specifically excluded by the policy. As a result, the Court held that Continental had no duty to defend and/or indemnify MAS and Jaramillo in the suit brought by IWIF.

Board of Ed. of Prince George's County v. Marks-Sloan, No. 1447 (Md. Ct. Spec. App. Oct. 28, 2011)

This case examined the extend of statutory immunity granted to county board of education employees pursuant to Md. Code Ann., Cts. & Jud. Proc. §5-518(e). This was a matter of first impression for the Court.

Norman Iglehart ("Iglehart") was a bus driver employed by the Board of Education of Prince George's County. He forced a motorcycle being driven by a fellow county board member, Stephanie Marks-Sloan ("Marks-Sloan") off the road, causing her to sustain injuries. Marks-Sloan filed a claim for workers' compensation benefits and was awarded medical expenses and temporary total disability benefits.

Marks-Sloan also filed suit in the Circuit Court for Prince George's County against Iglehart, the Board and Prince George's County. Iglehart and the Board filed a Motion for Summary Judgment, alleging that the workers' compensation award was Marks-Sloan's exclusive remedy, and that as a Board employee, Iglehart was immune from suit for simple negligence arising out of the scope of his employment. The Motion was denied as to Iglehart but was granted as to the Board. The Board, however, remained in the suit for indemnification purposes.

Md. Code Ann. Cts. & Jud. Proc. §5-518(e) provides that county board employees, acting within the scope of employment, are not personally liable for damages resulting from a tort absent malice or gross negligence. Iglehart and the Board read this part of the statute broadly and argued it provided complete immunity from suit and judgment in tort and that, accordingly, this suit should be dismissed. Marks-Sloan argued that employees of the Board were not immune from suit but were immune from the ultimate financial consequences and that it is the Board's responsibility to indemnify them for any judgment.

The Court agreed with Marks-Sloan and concluded that as she had already received a workers' compensation award, no suit could be brought directly against her employer, but there was no such bar regarding a suit against a co-employee. The statute was read as to provide for indemnification of an employee by the county board for execution on a judgment arising out of a tort.