United States District Court, D. Maryland
Lipton Hollander United States District Judge
CX Reinsurance Company Limited (“CX Re”),
formerly known as CNA Reinsurance Company Limited, filed suit
against B&R Management, Inc. (“B&R”) with
respect to two commercial general liability insurance
policies issued to B&R. ECF 1. In its First Amended
Complaint (ECF 25), CX Re added as additional defendants
named insureds Jessica-Carl, Inc.; Arbor, Inc.; and Burton
King, as well as Alfred Slattery, who assisted B&R in
procuring the insurance policies. Id. CX Re alleges
that, in B&R's application for insurance, B&R and
Slattery misrepresented that B&R had never had any lead
paint violations in the rental buildings covered under the
policies. ECF 1. CX Re has asserted claims of fraud against
B&R and Slattery. It also seeks rescission of both
policies, which were cumulatively in effect from August 1,
1997 to August 1, 1999. ECF 25 ¶¶ 11, 56, 65. And,
it seeks damages resulting from the alleged fraud.
Nicholson, a plaintiff in a lead paint suit filed in the
Circuit Court for Baltimore City against, inter
alia, B&R, King, and Jessica-Carl, Inc., has moved
to intervene as a defendant in this case. ECF 33. Along with
seven other proposed intervenors in other cases filed by CX
Re in this District, Nicholson filed a joint memorandum of
law. ECF 33-1 (collectively, “Motion”). In sum,
Nicholson argues that he has an interest in opposing CX
Re's request for rescission, because this would deprive
him of a source of funds if he prevails in his lead paint
suit. Nicholson has appended to his Motion a proposed answer,
counterclaim, and crossclaim. ECF 33-2.
opposes the Motion (ECF 42, “Opposition”).
Nicholson has replied. ECF 53
(“Reply”). Notably, defendants have not filed an
opposition. See docket.
Motion is fully briefed and no hearing is necessary to
resolve it. See Local Rule 105.6. For the reasons
that follow, I shall grant the Motion.
Factual Background and Procedural
is an insurer organized under the laws of the United Kingdom,
with its principal place of business in London. ECF 25 ¶
3. B&R is a Maryland corporation in the business of
owning and managing rental housing in the Baltimore area.
Id. ¶ 4.
1997, Slattery, B&R's agent, submitted a
“Commercial General Liability Application” to CX
Re on behalf of B&R, as well as “Supplemental
(“Application”). Id. ¶¶ 17-18;
see ECF 1-4. The Application identified
Jessica-Carl, Inc; Jessica Carl; Arbor Inc.; Arbor Inc. KSS
LLC; and B&R as named insureds. See ECF 1-4.
16 of the Application asked: “Has the insured received
any complaints from any tenant in the building of a possible
lead paint condition in the building.” See Id.
On the Application, the line next to the word
“No” was checked. See id.; see
also ECF 25 ¶ 20. In addition, the Application
stated: “By signing this Supplemental Application the
insured acknowledges that the insured understands that [CX
Re] is relying on the information provided, and the answers
to the questions asked, in deciding whether to issue a policy
of insurance to the insured.” See ECF 1-4
(capital letters in original). On July 3, 1997, Slattery
signed the Application as the “Producer” and on
July 18, 1997, King signed the Application as the
“Insured.” See id.; see also
ECF 25 ¶¶ 21, 22.
issued Policy No. CNAGL1106-97 to B&R for the period
August 1, 1997 to August 1, 1998, “in reliance on the
representations made in the Application . . . .” ECF 25
¶¶ 11, 24; see ECF 1-2 (Policy No.
CNAGL1106-97). That policy was subsequently renewed for the
period from August 1, 1998 to August 1, 1999, as Policy No.
CNAGL1240-98. Id. ¶ 11; see ECF 1-3
(Policy No. CNAGL1240-98) (collectively,
“Policies”). The Policies “provide
commercial general liability coverage to B&R Management
” and “insure B&R Management for certain
risks in connection with specified residential buildings at
numerous locations in Baltimore, Maryland.” ECF 25
¶¶ 12, 13. The Policies also contain an endorsement
entitled “Schedule of Named Insureds”, naming,
inter alia, Jessica-Carl, Inc.; Arbor, Inc.; and
Burton King. Id. ¶ 14. And, the Policies
contain an endorsement entitled “Schedule of
Locations.” Id. ¶ 15.
contends that “B&R Management's answer to
Question 16 [on the Application] was false and misleading
because, prior to July 1997, the Baltimore City Department of
Health had cited B&R Management for a lead paint
violation in a building included on the Policies'
Schedule of Locations.” ECF 25 ¶ 25. In
particular, CX Re points to the “Emergency Violation
Notice and Order to Remove Lead Nuisance” issued by the
Baltimore City Health Department on July 26, 1996, concerning
the property at 3215 Baker Street. Id.; see
ECF 25-2 (Violation # 3653, “Violation”). That
property was included on the endorsement titled
“Schedule of Locations.” ECF 25 ¶ 15.
Violation stated, ECF 25-2 at 3:
It has been determined from elevated blood lead and an
investigation by the Baltimore City Health Department that a
child who frequents the above dwelling has an abnormal blood
lead level. An inspection of this dwelling shows it contains
lead based paint.
Such condition has been deemed by the Commissioner of Health
to be hazardous to life and health and a public health
asserts, ECF 25 ¶ 26: “The existence of this
undisclosed, pre-Application Violation renders the
‘No' answer to Question 16 false.” According
to CX Re, it did not learn of the Violation until August
2015. Id. ¶ 27.
who was born in August 1995, alleges that he “resided
in a rental property owned and operated by one of the B&R
Defendants while he was a young child, ” where he
“was exposed to lead paint during . . . and sustained
injuries as a result.” ECF 33-1 at 9. On July 15, 2016,
he “sued certain B&R Defendants in the Circuit
Court for Baltimore City . . . Case No. 24C16004070.”
Id. at 9-10. Nicholson asserts: “One or more
of the B&R Policies was in force when Mr. Nicholson
sustained his injuries.” Id. at 10. Therefore,
Nicholson argues that he should be permitted to intervene in
this case because, if CX Re prevails in its rescission
action, the judgment “would eliminate CXRe's
obligation to cover damages awards against its insureds and
in favor of the Lead Paint Victims.” Id. at
Standards of Review
is governed by Rule 24 of the Federal Rules of Civil
Procedure. It provides, in relevant part:
(a) Intervention of Right. On timely motion, the court must
permit anyone to intervene who:
(1) is given an unconditional right to intervene by a federal
(2) claims an interest relating to the property or
transaction that is the subject of the action, and is so
situated that disposing of the action may as a practical
matter impair or impede the movant's ability to protect
its interest, ...