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National Liability & Fire Insurance Co. v. Rooding

United States District Court, D. Maryland

September 21, 2016

NATIONAL LIABILITY & FIRE INSURANCE COMPANY, Plaintiff,
v.
RONALD ROODING, Defendant.

          MEMORANDUM

          Ellen L. Hollander United States District Judge

         This Memorandum resolves competing motions - one seeking to vacate an order of default and one seeking a default judgment.

         National Liability & Fire Insurance Company (“National”), plaintiff, filed suit against defendant Ronald Rooding on August 31, 2015, seeking a declaratory judgment as to its obligations under two marine insurance policies issued to Rooding. ECF 1. In particular, National seeks a declaration that the marine insurance policies do not provide coverage for a claim submitted by Rooding arising out of the loss of the vessel MARGARITAVILLE (the “Vessel”) (id. ¶ 2), and that the policies “are null and void ab initio. . .” Id.[1] Both policies preclude coverage if the insured “has omitted, concealed, misrepresented, sworn falsely, or attempted fraud in reference to any matter relating to this insurance before or after any loss.” ECF 1 ¶ 33; see also ECF 1-2.

         On February 4, 2016, after National effected service on Rooding by alternative means (ECF 20, ECF 21; see ECF 16), plaintiff filed its “Motion for Entry of Default of Defendant.” ECF 22. The Clerk entered an order of default on February 5, 2016. ECF 23. Several weeks later, on March 16, 2016, defendant filed his “Motion to Vacate Entry of Default.” ECF 25 (the “Motion to Vacate”). It does not include a memorandum or exhibits. The next day, on March 17, 2016, plaintiff filed “Motion for Entry of Default Judgment, ” (ECF 27), supported by a legal memorandum (ECF 27-1) (collectively, the “Motion for Default Judgment”), and lengthy exhibits. Plaintiff subsequently submitted an opposition to the Motion to Vacate (ECF 29, the “Opposition”), supported by numerous exhibits. Rooding did not respond to the Motion for Default Judgment. Nor did he reply to the opposition to the Motion to Vacate.

         No hearing is necessary to resolve the motions. See Local Rule 105.6. For the reasons that follow, I shall grant the Motion to Vacate and deny the Motion for Default Judgment.

         I. Factual and Procedural Background[2]

         On or about August 16, 2014, Rooding purchased the Vessel from Jack Franklin for the sum of $9, 515.00. ECF 1 ¶ 9. The Vessel was a 30-foot 1978 Trojan yacht. Id. ¶ 4. However, Rooding did not obtain a Certificate of Title to the vessel from the Maryland Department of Natural Resources until April 29, 2015. Id. ¶ 9. Rooding allegedly represented on his Application for Title that he had paid $3, 500 for the Vessel. Id. Rooding kept the Vessel in a slip located at River Watch Marina in Middle River, Maryland, on a tributary of the Chesapeake Bay. Id. ¶ 10.

         Rooding endeavored to procure insurance for the Vessel on or about August 15, 2014, and contacted National's underwriting agent. Id. ¶ 11. According to plaintiff, Rooding was told that the Vessel could be insured only for Rooding's “financial investment” in the Vessel. Id. However, Rooding allegedly sought coverage of $25, 000 on the hull. Id. On August 16, 2014, National issued Policy No. 3792430-14 (ECF 1-2, the “First Policy”), with the effective date of August 16, 2014 through August 16, 2015. Id. It provided hull liability coverage of $25, 000. Id.; see ECF 1-2.[3]

         National alleges, id. ¶ 12:

The cover letter enclosing the First Policy informed Rooding that to maintain the coverage, Rooding needed to provide: (1) an acceptable condition and value marine survey; (2) a copy of the “sales agreement” for the Vessel; and (3) a completed and signed Marine Insurance Application. The Marine Insurance Application provided to Rooding contained certain pre-filled information, including an entry of “$25, 000” as the “Boat Purchase Price.” Rooding never signed or returned the Application or the Bill of Sale. He also did not send a survey to the underwriter until many months later.

         National further submits that a marine survey of the Vessel was conducted, which indicated that a valve leading to the intake hoses for the head and “wash down system” was “missing a required dedicated handle to open and close the valve.” Id. ¶ 13. And, the “hull valve (or seacock) with the missing handle was later determined to have been stuck in the open position” when the First Policy was issued, “unknown and unreported” to National. Id. ¶ 14. As a result, the Vessel was “defective and unseaworthy” when the First Policy was issued on August 16, 2014. Id.

         On December 4, 2014, the First Policy was terminated for non-payment of the premium. Id. ¶ 16. Rooding requested another insurance policy from National on January 22, 2015. Id. ¶ 18. On January 26, 2015, National “determined that the Vessel could be insured under a no navigation (‘port risk') policy, so long as Rooding removed a 110 volt electrical outlet from the aft cockpit compartment. . . .”, because that was considered “a safety hazard . . . .” Id. On January 23, 2015, National sent Rooding an insurance application, which reflected a “Boat Purchase Price of $25, 000.” Id. ¶ 19. Rooding signed and submitted the application. Id.

         After Rooding advised that the outlet had been removed on April 3, 2015, National issued Policy No. 3842216-15 (ECF 1-3, the “Second Policy”), to run on a “‘no navigation' basis” from March 31, 2015 to March 31, 2016. ECF 1 ¶ 21.

         Rooding executed another version of the Marine Insurance Application form for the Second Policy, dated April 8, 2015. ECF 1 ¶ 22. “On this version of the form, Rooding removed the $25, 000 figure placed on the ‘Boat Purchase Price' subject line, and left the line blank.” Id. According to National, it subsequently increased Rooding's Hull insurance to $26, 500, based on representations by Rooding as to the installation of equipment on the Vessel. Id. ¶ 23. It also provided coverage of $6, 200 for Rooding's personal effects. Id.

         On May 1, 2015, in Claim No. 1502226, Rooding notified plaintiff that the Vessel had sustained “significant water damage due to a sinking incident of an unknown cause that occurred on an unknown date.” Id. ¶ 24. However, Rooding was unable to offer plaintiff an explanation of how or when the Vessel sank. Id. ¶ 25.

         National's investigation revealed defects in the Vessel that, in its view, rendered the Vessel defective and unseaworthy before one or both policies were issued. Id. ¶¶ 28-31. It also alleges, id. ¶ 31: “Had the boat been properly winterized, the failure would not have occurred.” National asserts, id. at ¶ 34:

After performing the investigation referred to above, National Liability determined that there was no coverage available to Rooding under the Policies for the reasons set forth in the claim denial letter dated August 5, 2015, which is attached hereto as Exhibit C [ECF 1-4] and incorporated herein by reference. In sum, coverage was not extended for Rooding's claim because Rooding could not establish that the reported sinking occurred during the periods that the Policies were in force, or on or between August 16, 2014 and December 4, 2014 or on or between March 31, 2015 and the date the loss was reported, May 1, 2015.

         Further, National states, id. at ¶ 35:

Following further investigation of Rooding's claim, by letter dated August 27, 2015, incorporated herein by reference and attached hereto as Exhibit D [ECF 1-5], National Liability notified Rooding that the Policies were void ab initio, for the reasons stated in its letter (which is incorporated herein by reference), including, but not limited to, breach of the doctrine of uberrimae fidei, unseaworthiness at the inception of coverage, and concealment/misrepresentation in violation of the Fraud and Concealment clauses contained in the Policies.

         National contends that Rooding “violated his duty to National Liability by misrepresenting material facts and by omitting material facts.” Id. ¶ 45. In particular, plaintiff contends that defendant misrepresented the purchase price of the vessel as $25, 000 when the actual purchase price “was $9, 515.00 or $3, 500.” Id. ¶¶ 45a, 45b. Plaintiff also asserts that defendant failed “to disclose unseaworthy conditions aboard the Vessel prior to the inception of coverage on August 17, 2014 and again prior to the inception of coverage on March 31, 2015.” Id. ¶ 45g. According to plaintiff, there is no coverage under the policies because “the Insured [] failed to indicate or rely upon any cause for the sinking and cannot demonstrate that the claimed loss occurred during the effective policy dates.” Id. ¶ 49.

         On September 1, 2015, the Clerk issued a summons for service on the defendant. ECF 5. On November 10, 2015, plaintiff filed an amended complaint correcting the zip code for defendant. ECF 11. Thereafter, on November 11, 2015, the Clerk issued a new summons using the corrected zip code. ECF 14.

         National maintains that two attempts were made to serve Rooding by mail under Fed.R.Civ.P. 4(d), and both were unsuccessful. ECF 15 ¶ 4; ECF 15-1 at 14-15. According to National, one letter was returned to National on November 9, 2016 [sic], with the word “Unknown” handwritten on the envelope, and the envelope had been opened. ECF 29 at 3. See ECF 15-1 at 14. Plaintiff asserts that “[t]he handwriting appeared to be Mr. Rooding's.” ECF 29 at 3. The other envelope was returned on November 17, 2015, with handwriting on the envelope that said: “Unkown [sic] return to sender.” ECF 15-1 at 15; see ECF 29 at 4.

         On December 11, 2015, plaintiff filed a “Motion for Order Extending Time for Service of Process and to Permit Alternative/Substituted Service of Process as to Defendant Ronald Rooding.” ECF 15 (the “Motion for Alternative Service”). In the Motion for Alternative Service, plaintiff requested a 120-day extension for service and permission to use alternative methods of service, including “posting the Summons and Complaint upon the door of Defendant's residence” and “sending the Summons and Complaint by both certified mail, return receipt requested, and by first class mail, to Defendant . . . .” Id. ¶¶ 5a, 5b. In support of the Motion for Alternative Service, plaintiff stated, id. at ¶ 2:

Plaintiff's counsel initially attempted to serve the Defendant at 6705 German Hill Road, Dundalk, Maryland on September 9, 2015 and continued to make multiple attempts to serve the Defendant at this location as well as the location of the Defendant's boat the “Margaritaville” ...

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