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CX Reinsurance Company Ltd. v. Heggie

United States District Court, D. Maryland

October 14, 2016

CX REINSURANCE COMPANY LIMITED, Plaintiff,
v.
DANIEL MATHEW HEGGIE, JR., et al. Defendants.

          MEMORANDUM

          Ellen L. Hollander United States District Judge.

         Plaintiff CX Reinsurance Company Limited (“CX Re”), formerly known as CNA Reinsurance Company Limited, filed a declaratory judgment action against a host of defendants, including Arbor Inc. (“Arbor”) and Daniel Heggie, Jr. ECF 1.[1] CX Re seeks a determination that it “does not have an obligation to defend or indemnify” Arbor in a lead paint action filed in the Circuit Court for Baltimore City by Heggie, as plaintiff, against Arbor and the other parties named by CX Re as defendants in this case. Id.

         The lead paint case filed by Heggie in 2013, Case No. 24-C-13-6788 (the “Tort Suit”), alleges, inter alia, that Heggie, who was born in 1993, was injured by his exposure to lead-based paint at his mother's residence, which was owned by Arbor. ECF 1-2 at 94-100. Arbor is a named insured in two consecutive general liability insurance policies (ECF 1-3; ECF 1-4) (collectively, the “Policies”) issued by CX Re to B&R Management, Inc. and others. See ECF 1-3 at 4; ECF 1-4 at 5.

         CX Re explains that it sued Heggie, the plaintiff in the Tort Suit, and all of the defendants he named in the Tort Suit, “because they may have or claim an interest in the declarations sought by this action.” ECF 1 ¶ 5. However, Heggie and Arbor are the only remaining defendants in the suit, as the Court has previously granted CX Re's requests to dismiss all of the other defendants, pursuant to Fed.R.Civ.P. 41(a). ECF 35; ECF 36; ECF 46.[2]

         Now pending before the Court is “Plaintiff's Motion for Summary Judgment” (ECF 43), supported by a memorandum of law (ECF 43-1) (collectively, the “Motion”), and several exhibits. ECF 43-2 through ECF 43-6. In the Motion, CX Re asserts that it is not required to defend or indemnify Arbor in the Tort Suit because an exclusion to the Policies precludes coverage and Arbor has failed to prove that an exception to the exclusion applies. See ECF 1 ¶¶ 30-37. No defendant filed an opposition to the Motion.

         A hearing is unnecessary to resolve the Motion. See Local Rule 105.6. For the reasons that follow, I shall grant CX Re's Motion.

         I. Factual and Procedural Background

         CX Re filed its “Complaint for Declaratory Relief” in this Court on June 9, 2015. ECF 1. In particular, CX Re requests the Court, id. at ¶ 1, to:

declare that, due to the application of an exclusion of coverage contained in the policies, CX Re does not have an obligation to defend or indemnify Arbor in an action, brought by Mr. Heggie against all other parties to this case, in which Mr. Heggie claims he sustained injuries due to exposure to paint or dust containing lead or lead pigment.

         Under Maryland law, in declaratory judgment actions regarding an insurer's duty to defend, the principally relevant facts are the provisions of the insurance policy and the allegations of the underlying lawsuit, for which the insured seeks coverage and a defense.[3]Ordinarily, other facts are relevant, if at all, only for purposes of clarifying the meaning of the policy or establishing a basis for coverage that is not apparent from the factual allegations in the underlying complaint. See, e.g., Clendenin Bros., Inc. v. U.S. Fire Ins. Co., 390 Md. 449, 458- 60, 889 A.2d 387, 393-94 (2006) (stating that, in interpreting an insurance policy, Maryland law permits consideration of evidence showing the parties' intent to use policy terms in a special or technical sense; the circumstances of the parties at the time the policy was issued; and extrinsic evidence that may resolve ambiguities, if any, in the terms of the policy); Aetna Cas. & Sur. Co. v. Cochran, 337 Md. 98, 105-11, 651 A.2d 859, 863-66 (1995) (stating that an insured may present evidence beyond the underlying complaint to establish a potentiality of coverage).

         Here, CX Re has moved for summary judgment as to all remaining defendants. In considering a motion for summary judgment, a court must view the facts in the light most favorable to the non-moving party. See, e.g., Yates v. Terry, 817 F.3d 877, 881 (4th Cir. 2016). Because the defendants did not respond to or answer the Complaint, the factual allegations in the Complaint are deemed to be admitted. Fed.R.Civ.P. 8(b)(6) provides: “An allegation - other than one relating to the amount of damages - is admitted if a responsive pleading is required and the allegation is not denied. If a responsive pleading is not required, an allegation is considered denied or avoided.”

         A. The Policies

         CX Re's request for declaratory judgment arises out of two general liability policies for which Arbor was a named insured. See ECF 1 ¶ 3; ECF 1-3 at 4; ECF 1-4 at 5; ECF 44-1 through ECF 44-3.[4] The first policy, CNAGL1106-97, “covered the period from August 1, 1997 to August 1, 1998.” ECF 1 ¶ 16; see ECF 1-3 at 2. The second policy, CNAGL1240-98, “covered the period from August 1, 1998 to August 1, 1999.” ECF 1 ¶ 16; see ECF 1-4 at 2.

         The Policies provide that CX Re will “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury' . . . to which this insurance applies.” ECF 44-1 at 1; ECF 44-2 at 1. In the Policies, “bodily injury” is defined as “bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time.” ECF 44-1 at 10; ECF 44-2 at 9. However, the Policies only apply to bodily injuries if, inter alia, the “‘bodily injury' . . . occurs during the policy period.” ECF 44-1 at 1; ECF 44-2 at 1.

         The Policies include a specific endorsement titled “COVERAGE LIMITATION - LEAD CONTAMINATION” (the “Exclusion”). It provides, ECF 44-3 at 1: “This insurance does not apply to: . . . (3) ‘[b]odily injury' . . . arising out of the ingestion, inhalation, absorption of, or exposure to, lead, lead-paint or other lead-based products of any kind, form or nature whatsoever.” (Emphasis added). However, the Policies also include an exception to the Exclusion (the “Exception”). Id. It provides, in part:

         Section II - COVERAGE LIMITATION

(a.) Exclusion (3) above does not apply to and we will pay those sums that the Insured becomes legally obligated to pay as damages because of "bodily injury" . . . arising out of the Ingestion, Inhalation, absorption of, or exposure to lead, lead-paint or other lead-based products of any kind, form or nature whatsoever to which the insurance provided by this endorsement applies. We will have the right and duty to defend any "suit" seeking those damages. . . .

         The Exception to the Exclusion also contains a qualification. Id. at 2. It provides, in part, id.:

(b.) This insurance applies to "bodily injury" . . . only if: *** (4) For “bodily injury” a lead level in blood, bone or body tissue in excess of the “safe level” is first diagnosed by a State licensed physician or other State licensed health care provider during this policy period[.]

         The “safe level” is defined as “‘10 micrograms of lead per deciliter of blood as prescribed by the Centers For [sic] Disease Control.'” ECF ...


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