United States District Court, D. Maryland, Northern Division
November 19, 2014
CARVET CARLYLE, Plaintiff,
THE TRAVELERS HOME AND MARINE INSURANCE COMPANY, Defendant.
WILLIAM D. QUARLES, Jr., District Judge.
Carvet Carlyle sued The Travelers Home and Marine Insurance Company ("Travelers") in the Circuit Court for Baltimore City for breach of contract. ECF No. 2. Travelers removed to this Court. ECF No. 1. Pending is Travelers's motion for reconsideration of the Court's June 5, 2014 Order denying its motion to dismiss Count II of Carlyle's Second Amended Complaint as moot, and granting Carlyle's motion for leave to file a third amended complaint. ECF No. 38. No hearing is necessary. Local Rule 105.6 (D. Md. 2014). For the following reasons, Travelers's motion for reconsideration will be denied.
Since August 11, 1999, Carlyle has owned a home at 4124 Marx Avenue in Baltimore, Maryland (the "Baltimore home"). ECF No. 36 ¶ 4. Beginning in 2005, Carlyle rented her home to a tenant. Id. ¶ 7. On September 25, 2009, Carlyle purchased a homeowner's insurance policy from Travelers for the period of September 25, 2009 through September 25, 2011 (the "Policy"). Id. ¶ 5. Carlyle paid all the premiums due under the Policy. Id. ¶ 6.
In February 2010, Baltimore "experienced a massive, and largely unprecedented, winter snowstorm that deposited between 2 and 3 feet of snow." Id. ¶ 8. During and after the storm, the Baltimore home sustained damage to the "roof, siding, water pipes, ceilings, walls, floors, fixtures, and personal items" because of the "extreme weather conditions." Id. ¶¶ 9-10. Also in February 2010, someone broke into the Baltimore home, stole Carlyle's personal property, and caused more damage to the home. Id. ¶ 11.
On March 1, 2010, Carlyle reported the property damage and theft to Travelers. Id. ¶ 13. Travelers assigned three claim numbers to Carlyle's report - one to the damaged water pipes; one to the damaged roof and siding; and one to the burglary. Id. ¶¶ 14-16. Each claim had a $1, 000 deductible. See id. ¶¶ 36, 42. Because the snowstorm damage claims "arose out of the same occurrence" - and should have been considered one claim - Travelers improperly obtained two deductibles from Carlyle for snowstorm-related loss. See id. ¶ 36.
Travelers inspected the Baltimore home and initially concluded that the pipe leaks were unrelated to the snowstorm. Id. ¶ 17. However, Travelers later paid Carlyle $2, 365.89 for replacing the pipes; this amount is far less than Carlyle's multiple third-party estimates of the actual cost of replacing the pipes. Id. ¶¶ 18-20. "Travelers knew or should have known that no contractor would undertake the repairs for the estimated cost of repair." Id. ¶ 21.
Because Travelers and Carlyle continued to dispute whether other water damage caused by the damaged pipes resulted from the snowstorm, Carlyle "was forced to obtain an independent plumber." Id. ¶¶ 22-23. The plumber concluded that water damage to the basement and other parts of the Baltimore home was attributable to the snowstorm. Id. ¶ 23. This new information prompted Travelers to re-inspect the home. Id. ¶ 24. Although Travelers then recognized that the additional water damage was caused by the snowstorm, it did not increase its payment to Carlyle. Id. ¶¶ 24-25. Instead, Travelers assigned its Special Investigations Unit ("SIU") to extensively investigate Carlyle's "personal affairs to determine whether any exclusion under the terms of the Policy might apply." Id. ¶ 25. The SIU investigation requested "extensive and unreasonable amounts of documentation" from Carlyle, including, inter alia, her income tax returns, proof of her income, and disclosure of her bank accounts and creditors. Id. ¶ 51. During the investigation, Travelers also made "offensive and unsubstantiated... accusations" about Carlyle, including that she "neglected her property and allowed squatters to reside in her home." Id. ¶ 52.
As a result of the delayed repairs to the water damage caused by Travelers's "continued reluctance to provide adequate compensation, " mold developed in the Baltimore home. Id. ¶ 32. Although Carlyle reported the "resultant mold growth" - which was covered by the Policy - to Travelers, it did not increase payment to Carlyle and instead assigned the SIU to determine if an exclusion applied. Id. ¶¶ 33-35. Since March 2010, because of the mold growth, the Baltimore home has been uninhabitable, forcing Carlyle to lose rental income from her tenant and to move elsewhere and pay monthly rent. See id. ¶¶ 58-59.
Travelers also paid Carlyle $3, 122.02 for the damage to the siding and roof. Id. ¶ 26. Carlyle contested Travelers's valuation of the damage, and Travelers issued an additional payment of $1, 107.74. Id. ¶ 27. Even with this second payment, Travelers's repair estimate was far less than Carlyle's multiple third-party estimates of the cost of repairing the damage to the home. See id. ¶¶ 28-29. "Travelers knew or should have known" that Carlyle would not be able to obtain the needed repairs for Travelers's estimated cost of repair. Id. ¶ 30.
On March 5, 2010, Carlyle filed a police report about the stolen property. Id. ¶ 39. Although Carlyle provided Travelers "numerous photos, lists and receipts to substantiate the loss, " Travelers claimed that she had not sufficiently documented her loss. See id. ¶¶ 40-41. Travelers eventually paid Carlyle $2, 236.67 for the missing items and $1, 397.20 for damage caused by the break-in. Id. ¶ 42. These payments were far less than the amount of actual damage and loss, and Carlyle was unable to find a contractor willing to fix the property damage for Travelers's estimated cost of repair. See id. ¶¶ 43-45. Travelers "knew or should have known" that these payments were insufficient. Id. ¶¶ 46-47.
On May 21, 2012, Travelers issued a final determination letter for Carlyle's snowstorm-related damage claims, which "refused to indemnify [Carlyle] to the full extent of her damages." Id. ¶ 54. On November 14, 2012, Carlyle submitted a complaint to the Maryland Insurance Administration ("MIA"), asserting that Travelers had improperly denied coverage. ECF No. 33-2 at 1. On December 4, 2012, Travelers issued a second final determination letter, which "denied full coverage for the February burglary." ECF No. 36 ¶ 55.
B. Procedural History
On February 5, 2013, Carlyle, pro se, sued Travelers and others in the Circuit Court for Baltimore City. ECF No. 2. On April 26, 2013, in response to Travelers's motion for a more definite statement, Carlyle filed an amended complaint. ECF Nos. 6, 7. On August 7, 2013, the MIA issued a final determination letter ("MIA Letter") concluding that "Travelers has not violated Maryland insurance law in its handling of [Carlyle's] claims." ECF No. 33-2 at 1. The MIA had "focused its review" on § 4-113 ("denials, refusals to renew, suspensions, and revocations") and § 27-303 ("unfair claim settlement practices") of the Maryland Insurance Article. Id. at 9.
On September 19, 2013, Carlyle - through counsel - filed a second amended complaint alleging breach of contract (Count I) and torts arising from breach of contract (Count II). ECF No. 18. On October 8, 2013, Travelers removed to this Court on the basis of diversity jurisdiction and answered the complaint. ECF Nos. 1, 21.
On November 13, 2013, Carlyle moved for leave to file a third amended complaint. ECF No. 30. The proposed amended complaint deletes Count II and supplements Count I with a claim for attorneys' fees for Travelers's alleged failure to act in good faith in denying insurance coverage under Md. Code Ann., Cts. & Jud. Proc. § 3-1701(e)(2) (West 2007). See ECF No. 30-2 ¶¶ 66-79. On November 18, 2013, Travelers opposed the motion. ECF No. 31. On December 3, 2013, Carlyle replied. ECF No. 32. On December 11, 2013, Travelers moved unopposed for leave to file a surreply. ECF No. 33. On June 5, 2014, the Court granted Carlyle's motion for leave to file a third amended complaint, denied as moot Travelers's motion to dismiss, and granted Travelers's motion for leave to file a surreply. ECF No. 35.
On June 17, 2014, Travelers moved for reconsideration of the Court's June 5, 2014 Order granting Carlyle's motion for leave to file a third amended complaint and denying Travelers's motion to dismiss Count II. ECF No. 38. On June 27, 2014, Carlyle opposed Travelers's motion. ECF No. 39.
A. Legal Standard for Motion for Reconsideration
Motions for reconsideration of an interlocutory order are governed by Fed.R.Civ.P. 54 (b), under which "any order... may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities." Fed.R.Civ.P. 54 (b). Thus, when warranted, a district court retains the power to reconsider and modify its interlocutory judgments at any time before final judgment. Am. Canoe Ass'n v. Murphy Farms, Inc., 326 F.3d 505, 514-15 (4th Cir. 2003). Resolution of the motion is "committed to the discretion of the district court, " id. at 515, and "the goal is to reach the correct judgment under law." Netscape Commc'n Corp. v. ValueClick, Inc., 704 F.Supp.2d 544, 547 (E.D. Va. 2010) (internal citations omitted).
B. Travelers's Motion
Travelers argues that the Court committed clear error when it granted Carlyle's motion for leave to file a third amended complaint, permitting her to add a claim for attorney's fees under Md. Code Ann., Cts. & Jud. Proc. ("CJP") § 3-1701, because "she has not exhausted her administrative remedies." ECF No. 38 ¶¶ 1-2. Specifically, Travelers argues that Carlyle cannot file a complaint alleging failure to act in good faith under CJP § 3-1701 because she has not obtained a final decision from the MIA under § 27-1001 of the Insurance Article. Id. at 4-6. According to Travelers, because Carlyle filed a complaint with the MIA under Ins. § 27-303 - and not under Ins. § 27-1001 - she has failed to exhaust her administrative remedies. Id.
Section 3-1701 authorizes recovery from insurers for actual damages and "[e]xpenses and litigation costs... including reasonable attorney's fees" if an insured prevails on a claim of improper denial of coverage, and the "insurer failed to act in good faith" in declining payment. See § 3-1701 (a) (4), (e); Thompson v. State Farm Mut. Auto. Ins. Co., 9 A.3d 112, 114 (2010). To bring an action under this statute, the insured must comply with the exhaustion provisions of Ins. § 27-1001. Section 27-1001 (d) (1) states that a "complaint stating a cause of action under § 3-1701 of the Courts Article shall first be filed with the MIA." The complaint must "specify the applicable insurance coverage[, ] the amount of the claim under the applicable coverage[, ] the amount of actual damages, and the claim[ed] expenses and litigation costs." Ins. § 27-1001 (d) (2).
A court's discretion to review an interlocutory order is "not subject to the strict standards applicable to motions for reconsideration of a final judgment, " but is "within the plenary power of the Court... to afford such relief... as justice requires." Although Rules 59(e) and 60 (b) do not govern reconsideration of an interlocutory order, the Fourth Circuit has suggested that at least parts of those rules may guide a court's analysis. In considering whether to revise interlocutory decisions, district courts in this Circuit have looked to whether movants presented new arguments or evidence,  or whether the court has "obviously misapprehended a party's position or the facts or applicable law."
The Court's June 5, 2014 Memorandum Opinion concluded that Carlyle had exhausted her administrative remedies because "the MIA expressly considered whether Travelers acted in good faith - as defined in § 27-1001 - in denying Carlyle's claim." ECF No. 34 at 12. In reviewing Carlyle's claims for unfair settlement practices under Ins. § 27-303, the MIA concluded that "Travelers' actions have not been shown to be arbitrary and capricious, to be lacking in good faith or to otherwise be in violation of the Insurance Article." ECF No. 33-2 at 9 (emphasis added). Sub-section nine of § 27-303 defines an "unfair claim settlement practice" as a "fail[ure] to act in good faith, as defined under § 27-1001 of this title, in settling a first-party claim under a policy of property and casualty insurance." Ins. § 27-303(9). Section 27-1001 defines "good faith" as "an informed judgment based on honesty and diligence supported by evidence the insurer knew or should have known at the time the insurer made a decision on a claim." Ins. § 27-1001 (a) (emphasis added).
Though Travelers contends that Carlyle's MIA complaint never asserted that it had failed to act in good faith, ECF No. 38-1 at 7, Carlyle's MIA complaint contended that Travelers was "untruthful with [her] during the claim investigations and settlements, " ECF No. 33-2 at 1. Section 27-1001 requires the insured to file a complaint before the MIA that describes the insurance coverage and the amounts of the claim and damages; "it requires nothing more." Fakhoury v. Great N. Ins. Co., No. CIV. WDQ-12-0268, 2012 WL 1554487, at *3-*4 (D. Md. Apr. 30, 2012) ( citing Ins. § 27-1001(d)(2)). Carlyle's assertion of bad faith - by way of reference to Travelers's alleged dishonesty - and the MIA's explicit consideration of whether Travelers failed to act in good faith, are sufficient to find that Carlyle has adequately exhausted her administrative remedies. Accordingly, the Court did not "obviously misapprehend... the... applicable law" when it concluded that Carlyle had exhausted her administrative remedies.
For the reasons stated above, Travelers's motion for reconsideration will be denied.