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REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 1779 September Term, 1995 _______________________________

CSX TRANSPORTATION, INC.

V.

MASS TRANSIT ADMINISTRATION

_______________________________ Moylan, Hollander, Salmon, JJ. _______________________________ Opinion by Salmon, J. _______________________________ Filed: October 30, 1996

Appellant,

CSX

Transportation,

Inc.

(CSXT),

operates

Maryland Rail Commuter (MARC) service for the Mass Transit Administration (MTA) under a State procurement contract. The

contract requires the MTA (appellee) to indemnify CSXT for any and all claims arising out of "Contract Service," which

includes, inter alia, train operation.

This case arises out of

a claim, submitted to the MTA on October 25, 1993 by CSXT, for indemnification of property damage losses resulting from a December 1992 collision between a MARC train and a backhoe owned by a third party. 1994. The claim was denied by the MTA on May 27,

CSXT appealed the MTA's denial to the Maryland State On January 3, 1995,

Board of Contract Appeals (the "Board").

after hearing argument on cross motions for summary disposition, the Board affirmed the MTA's denial of the claim. CSXT filed a

Petition for Judicial Review with the Circuit Court for Howard County, and on September 11, 1995, the court affirmed the Board's decision. CSXT filed a timely appeal presenting the following issues, which we have rephrased: 1. Whether the indemnification claim arose out of contract service because the collision involved a MARC train operating pursuant to the contract. Whether MTA's promise to indemnify CSXT is rendered unenforceable by section 5-305 of the Maryland Courts and Judicial Proceedings article.

2.

FACTS In 1979, the Baltimore & Ohio Railroad Company, predecessor in interest to CSXT, and the State Railroad Administration, predecessor in interest to the MTA, entered into certain leasing and operating agreements which were later superseded by a

Commuter Rail Passenger Service Agreement (the "contract"). Pursuant to the contract, CSXT operates weekday commuter

passenger rail service known as MARC between Baltimore and Washington, D.C., and between Washington and Martinsburg, West Virginia, on tracks owned by CSXT and using station facilities owned by CSXT, CSXT and MTA rolling stock, CSXT maintenance facilities, and CSXT employees. CSXT's primary obligations under the contract are

summarized in Article I, section 1(a): SECTION 1. SERVICE OBLIGATION (a) CSXT will provide regularly scheduled daily commuter rail service on weekdays (Monday through Friday) on its Capitol Subdivision line between Baltimore, Maryland and Washington, DC, its Metropolitan and Cumberland Subdivision lines between Martinsburg, West Virginia, and Washington, DC, in accordance with Section 2 of this Agreement. This train operation, plus the maintenance of equipment, access of and use of facilities, ticket sales, and other activities required to support the operation of the train service as provided in this Article I, shall be called the "Contract Service." CSXT will make available its rail facilities on the above stated lines to provide the Contract Service. CSXT will operate the Contract Service in a safe and efficient manner with use of appropriate facilities and staff for management, train operations, and maintenance. . . .

2

(Emphasis added.) Under section 9(b) of the contract, the MTA agreed to indemnify CSXT from loss arising out of the Contract Service: RISK OF LIABILITY, INDEMNIFICATION AND INSURANCE (b) Indemnification by Administration (1) The Administration agrees to indemnify, save harmless, and defend CSXT from any and all casualty losses, claims, suits, damages or liability of every kind arising out of the Contract Service under this agreement . . . . (Emphasis added.) CSXT contracted with Melvin Benhoff Sons, Inc. (Benhoff) to remove and replace four public road crossings over CSXT's track. One of the crossings was at Hanover Street in Baltimore City. Benhoff's work was part of general track rehabilitation to benefit all traffic, both passenger and freight. The MTA was SECTION 9.

not notified of the work to be performed by Benhoff or asked to contribute to the cost of the work. Benhoff commenced work with a backhoe at the Hanover Street crossing on December 18, 1992. foreman was present, the Although a CSXT supervising train dispatcher was not

central

informed ) as required by CSXT's operating rules ) of Benhoff's work plans on the track. Due to this oversight, no train

engineer or dispatcher was notified of the obstruction on the track caused by Benhoff's work. On December 18, 1992, a MARC train en route to Baltimore rounded a bend and collided with one of Benhoff's backhoes, which blocked the tracks. It is undisputed that the collision 3

was not caused by negligence on the part of personnel on the MARC train. Benhoff made a claim for $40,420.25 against CSXT Without conceding liability, Relying on the indemnity

for the damage to the backhoe.

CSXT settled the claim for $23,350.

agreement in the contract, CSXT made an indemnification claim against the MTA for $23,350 plus attorney's fees. After the MTA denied CSXT's claim, CSXT appealed to the Board. The Board held that CSXT was not entitled to indemnity

because the claim did not arise "out of `Contract Service.'" The Board opined that "the mere fact that a MARC train was innocently and fortuitously involved in the incident does not bring the incident within the ambit of the definition of

`contract service' under the Contract."

Moreover, the Board

ruled that Benhoff's work ) repairing the grade crossing ) did not constitute Contract Service within the meaning of the

contract.

The circuit court, affirming the Board, held that 1)

the work being performed by Benhoff was not within the scope of the contract service and 2) the "fortuitous" involvement of the MARC train in the accident did not require indemnification by the MTA.

DISCUSSION I. Standard of Review

The Board is an "agency" within the ambit of the Maryland Administrative Procedure Act, which is codified in the Maryland Code, State Government article, 4

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