THE FUND FOR ANIMALS, INC.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA
from the Circuit Court for Montgomery County, Michael D.
BY Robert T. Shaffer (Conor B. O'Croinin, Zuckerman,
Spaeder LLP on the brief) all of Baltimore, MD FOR APPELLANT.
BY Joseph B. Wolf (Linda S. Woolf, Cheryl Zak Lardieri,
Goodell, DeVries, Leech & Dann, LLP on the brief) all of
Baltimore, MD FOR APPELLEE.
Eyler, Deborah S., Meredith, Wilner, Alan M. (Retired,
Specially Assigned), JJ.
Md.App. 647] Deborah S. Eyler, J.
Maryland, an insurer on a liability insurance policy may
disclaim coverage on the ground that the insured breached the
policy by giving late notice of a claim " only if the
insurer establishes by a preponderance of the evidence that
the . . . [late] notice has resulted in actual prejudice to
the insurer." Md. Code (1997, 2011 Repl. Vol.), §
19-110 of the Insurance Article (" Ins." ). In this
case, we hold that when an insured gives late notice and
during the period of delay in notification the insured's
defense becomes impaired, to the actual prejudice of the
insurer, the insurer may disclaim coverage only if there is a
causal link between the late notice and the prejudice.
Fund for Animals, Inc. (" the FFA" ), the
appellant, was an insured on a liability policy issued by
National Union Fire Insurance Company of Pittsburgh, Pa.
(" National Union" ), the appellee. National Union
disclaimed coverage on a claim against the FFA on the ground
that the FFA gave it late notice. In the Circuit Court for
Montgomery County, the FFA sued National Union for breach of
the insurance policy. At the close of all the evidence in a
jury trial, the circuit court granted National Union's
motion for judgment, ruling that the evidence established as
a matter of law that the FFA's late notice of the claim
had caused actual prejudice to National Union, and therefore
it properly disclaimed coverage. We shall reverse the
judgment and remand the case for further proceedings not
inconsistent with this opinion.
FFA, a national non-profit organization headquartered in
Gaithersburg, is dedicated to the protection of animals.
Since 2005, it has been an affiliate of the Humane Society of
the United States
(" HSUS" ). It operates animal sanctuaries and
wildlife centers around the country and engages in lobbying
and advocacy, including litigation, to advance its goals.
Union issued a " Not-For-Profit Individual and
Organization Insurance Policy" to HSUS that was in
effect [226 Md.App. 648] between January 1, 2007, and June 8,
2008 (" the 2007 Policy" ). The FFA is an "
Additional Insured" on the policy. As relevant, Coverage
This policy shall pay on behalf of the Organization [here,
the FFA] Loss arising from a Claim first made against the
Organization during the Policy Period . . . and reported to
the Insurer pursuant to the terms of this policy for any
actual or alleged Wrongful Act of the Organization. The
Insurer shall, in accordance with and subject to Clause 8,
advance Defense Costs of such Claim prior to its final
language establishes that the 2007 Policy is a
claims-made-and-reported-policy, which means that it will
cover a claim (otherwise covered by the policy) made against
the insured and reported to the insurer during the policy
period. The relevant policy language defines a "
Claim" to mean " a written demand for monetary
relief" or " a civil . . . proceeding for monetary
. . . relief which is commenced by . . . service of a
complaint or similar pleading." ¶ 2.(b)(1)&
(2). The " Notice/Claim Reporting Provisions"
section of the policy states that " the Insureds shall,
as a condition precedent to the obligations of the Insurer
under this policy, give written notice to the Insurer of any
Claim made against an Insured as soon as practicable [or at]
anytime during the Policy Year." ¶ 7.(a). " A
Claim shall be considered to have been first made against an
Insured when written notice of such Claim is received by any
insured . . . ." ¶ 7.
2007 Policy, National Union assumes a duty to pay defense
costs for any covered claim, but does not assume a duty to
defend unless the insured tenders a Claim to it within thirty
days of the claim being made. ¶ ¶ 1 & 8. Even
if a claim is not tendered, National Union maintains the
right to " effectively associate with the Insureds in
the defense of any Claim that appears reasonably likely to
involve [National Union], including but not limited to
negotiating a settlement." ¶ 8.
lawsuits are in play in this coverage dispute: the Endangered
Species Act case (" ESA Case" ); the Racketeer
Influence and Corrupt Organizations Act case (" RICO
Case" ); [226 Md.App. 649] and the " Coverage
Case." The FFA was a plaintiff in the ESA Case. It,
other organizational plaintiffs, and one individual
plaintiff sued Feld Entertainment, Inc. ("
Feld" ), the owner of Ringling Brothers and Barnum &
Bailey Circus (" Ringling Brothers" ), and Ringling
Brothers. While the ESA Case was pending, Feld
brought the RICO Case against the FFA and the other
organizational plaintiffs in the ESA Case, alleging that they
were bribing the individual plaintiff to testify falsely and
were committing other criminal acts in prosecuting the ESA
Case, for the purpose of establishing standing to sue. In the
RICO Case, Feld sought to recover as damages the
attorneys' fees and costs it was incurring in defending
the ESA Case.
undisputed that the FFA did not give National Union notice of
the RICO Case for more than two years after it was
filed. By then, the court in the ESA Case had granted
judgment in favor of Feld, on the ground that the ESA
plaintiffs lacked standing. That ruling was based on numerous
detailed factual findings, including that the FFA and the
organizational plaintiffs had paid the individual plaintiff
for testimony that was false. National Union denied coverage
to the FFA based on late notice. In the Coverage Case brought
against it by the FFA, National Union took the position that
it suffered actual prejudice due to the late notice because,
as a defendant in the RICO Case, the FFA would be precluded
from contesting many of the essential facts found by the
court in the ESA Case, and those facts undermined any defense
the FFA would have.
The ESA Case
2000, in the United States District Court for the District of
Columbia, the FFA, the American Society for the Prevention
[226 Md.App. 650] of Animal Cruelty (" ASPCA" ),
the Animal Welfare Institute (" AWI" ), and Thomas
Rider sued Feld for declaratory and injunctive relief, upon
allegations that Ringling Brothers' mistreatment of Asian
elephants in its circus violated the Endangered Species Act,
16 U.S.C. § 1531, et seq.
Case was brought under the citizen-suit provision of the ESA,
which eliminates judicially imposed limits on the exercise of
federal jurisdiction, known as " prudential
standing." See Bennett v. Spear, 520
U.S. 154, 164, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997). There
still must be standing under the " case or
controversy" provision of Article III of the United
States Constitution, however. Id. Thus, at least one
plaintiff must show that he or she
(1) . . . suffered an " injury in fact" --an
invasion of a judicially cognizable interest which is (a)
concrete and particularized and (b) actual or imminent, not
conjectural or hypothetical; (2) that there [is] a causal
connection between the injury and the conduct complained
of--the injury must be fairly traceable to the challenged
action of the defendant, and not the result of the
independent action of some third party not before the court;
and (3) that it [is] likely, as opposed to merely
speculative, that the injury will be redressed by a favorable
Id. (citing Lujan v. Defenders of Wildlife,
504 U.S. 555, 560-561, 112 S.Ct. 2130, 119 L.Ed.2d
operative complaint in the ESA Case, Rider alleged that he
had worked for Ringling Brothers for two years as a barn man,
cleaning up after the elephants; that, during that time, he
had grown emotionally attached to some of the elephants, who
he called " his girls" ; that he had witnessed
their mistreatment with bull hooks at the hands of other
Ringling Brothers' employees; and that he wished to
" visit" the elephants again and " enjoy
observing them," but he could not do so because he
feared he would witness their scars and behavioral tics,
which are manifestations of abuse, and would experience
Md.App. 651] The ESA Case was assigned to Judge Emmet G.
Sullivan. In 2001, Judge Sullivan granted a motion to dismiss
for lack of Article III standing. In particular, Judge
Sullivan ruled that the facts alleged in the operative
complaint were legally insufficient to support a finding that
Rider had suffered a cognizable and redressable injury; and,
with the exception of one organizational plaintiff (not the
FFA), the organizational plaintiffs only could demonstrate
standing through Rider.
FFA, the other organizational plaintiffs, and Rider appealed,
and on February 4, 2003, the United States Court of Appeals
for the District of Columbia reversed. ASPCA v. Ringling
Bros. and Barnum & Bailey Circus,
317 F.3d 334, 354 U.S.App.D.C. 432 (D.C. Cir. 2003). The
court held that the operative complaint alleged facts
sufficient to show that, because of Rider's personal,
emotional attachment to the elephants, the alleged ESA
violations had caused him to suffer a cognizable injury that
differed in kind from any injury experienced by members of
the public at large and that amounted to more than a
generalized interest in the enforcement of the law; and
Rider's injury was redressable because, were Ringling
Brothers to be enjoined from using the elephant training
techniques the organizational plaintiffs were alleging to be
abusive, Rider could visit the elephants he once tended to
without suffering emotionally, or fearing that he would.
remand to the district court, the FFA and the other
plaintiffs filed a new lawsuit making the same allegations
against Feld and Ringling Brothers and dismissed their
original action without prejudice. (We continue to refer to
this litigation as the ESA Case.) The Animal Protection
Institute (" API" ) later joined as a plaintiff.
February of 2007, Feld filed a motion for leave to amend its
answer and to file a counterclaim against the ESA plaintiffs
based on violations of the Racketeer Influenced and Corrupt
Organizations Act (" RICO" ), 18 U.S.C. § 1961
et seq., and the Virginia Conspiracy Act, Va. Code
Ann. § 18.2-499. Judge [226 Md.App. 652] Sullivan denied
the motion on the ground that it was filed for dilatory
purposes and would prejudice the plaintiffs. ASPCA v.
Ringling Bros. and Barnum & Bailey Circus, 244
F.R.D. 49, 52 (D.D.C. 2007). As we shall discuss, a few
months later, on August 28, 2007, Feld filed the RICO Case as
a separate action against the FFA and the other ESA
protracted discovery, the ESA Case was tried non-jury for six
weeks in February and March of 2009. Rider testified about
the mistreatment of the elephants and the emotional trauma he
suffered as a consequence.
December of 2009, the court issued a lengthy memorandum
opinion and order and entered judgment in favor of Feld. The
court concluded that neither Rider nor any of the
organizational plaintiffs had established Article III
standing. Am. Society for the Prevention of Cruelty to
Animals v. Feld Entertainment, Inc., 677 F.Supp.2d 55,
91, 97-98 (D.D.C. 2009). The court made 85 findings of fact
relative to standing. It rejected Rider's testimony in
its entirety, concluding that he was " essentially a
paid plaintiff and fact witness who is not credible."
Id. at 67.
following are among the findings pertinent to the court's
standing decision. From March of 2000 forward, Rider's
sole source of income was money paid to him by the
organizational plaintiffs, including the FFA, and by animal
rights organizations sympathetic to them. These payments were
made directly to him by Meyer, Glitzenstein & Crystal
(" MGC" ), the law firm representing the plaintiffs
in the ESA Case, and indirectly to him by " grants"
from the Wildlife Advocacy Project (" WAP" ), a
non-profit organization run by two of the named partners in
MGC. The FFA paid Rider $4,400 through MGC and $1,000
directly; and, in addition, the FFA and HSUS together paid
Rider $11,500 through WAP. Although these payments supposedly
were compensation for media outreach by Rider in connection
with the litigation, in reality, they were used to cover
Rider's basic living expenses. Moreover, the "
primary purpose" of the
payments was " to [226 Md.App. 653] keep Rider
involved with the litigation because he [was] the only
plaintiff who allege[d] a personal and emotional attachment
to the elephants and an aesthetic injury based on the alleged
mistreatment he claims to have witnessed." Id.
at 79. The FFA and the other organizational plaintiffs had to
have known that the payments were improper; and they were
" less than forthcoming about the extent of the
payments" made to Rider, even when specifically asked
about those payments in discovery. Id. at 82.
found that none of the plaintiffs in the ESA Case had
standing, the court ruled that it lacked jurisdiction and
declined to reach the merits of whether Feld had violated the
ESA in its treatment of the Asian elephants. On appeal from
the judgment entered in favor of Feld, the D.C. Circuit
affirmed, holding, as relevant here, that the district
court's findings that Rider did not have a personal
attachment to the elephants he handled during his employment
with Feld were not clearly erroneous and that the district
court correctly ruled that, absent such a personal
attachment, Rider did not suffer an emotional injury
sufficient to give rise to Article III standing. See
Am. Society for Prevention of Cruelty to Animals v.
Feld, 659 F.3d 13, 398 U.S.App.D.C. 79 (D.C. Cir.
April 10, 2012, Feld filed a motion for prevailing party
attorneys' fees, under a fee-shifting provision of the
ESA. See 16 U.S.C. § 1540(g)(4). On March 29,
2013, Judge Sullivan granted the motion, finding that the ESA
Case was meritless, frivolous, and vexatious. He directed the
parties to submit recommendations ...