NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
THE FUND FOR ANIMALS, INC.
Argued: October 13, 2016
Court for Montgomery County Case No. 376268
Barbera, C.J., Greene, Adkins,, McDonald, Watts, Hotten,
case, Petitioner, National Union Fire Insurance Company of
Pittsburgh, Pa. ("National Union"), challenges the
Court of Special Appeals' holding that Respondent, the
Fund for Animals, Inc. ("FFA"), did not cause
actual prejudice to National Union as a result of providing
late notice of a claim against FFA under a liability
insurance policy issued by National Union to FFA.
See Md. Code Ann., Ins. § 19-110 (1997, 2011
Repl. Vol., 2016 Supp.). This case relates to three actions:
(1) the Endangered Species Act case ("ESA Case"),
where FFA and other plaintiffs sued Ringling Brothers and its
owner, Feld Entertainment, Inc. ("Feld") for the
mistreatment of Asian elephants in the Ringling Brothers'
Circus; (2) the Racketeer Influenced and Corrupt
Organizations Act case ("RICO Case"), where Feld
sued FFA and the other plaintiffs named in the ESA Case for
improper conduct, including paying a witness to testify in
order to establish standing to sue Feld in the ESA Case and
concealing those payments during discovery; and (3) the
Coverage Case, where FFA sued National Union, its insurer,
for not providing coverage to FFA when it was sued by Feld in
the RICO Case.
appeal stems from the coverage dispute. The findings in the
ESA Case were adverse to FFA and could have been used against
it in the RICO case; thus, prejudicing FFA's insurer,
National Union. FFA argues that although notice of the RICO
claim was late under the policy, National Union, at best,
could have "monitored" the ESA Case and could not
have intervened in, impacted, or influenced the ESA Case.
Moreover, National Union was notified of the RICO Case before
settlement, mediation, or a trial had taken place in the RICO
action. Therefore, late notification of the RICO
was not prejudicial to National Union. Accordingly, as a
matter of law, National Union was not prejudiced in
investigating, settling, or defending the RICO claim as a
result of any delay in receiving notice of claims brought
against the insured. Therefore, we affirm the judgment of the
Court of Special Appeals.
AND PROCEDURAL BACKGROUND
relevant facts are taken from evidence and testimony
presented at trial. FFA, a nonprofit organization dedicated
to animal protection issues and an affiliate of the Humane
Society of the United States ("HSUS"), was insured
under a liability policy issued by National Union. The
insurance was purchased to protect HSUS and its affiliates
against the risks of lawsuits and claims made against them.
National Union issued a "Not-For- Profit Individual and
Organization Insurance Policy" to HSUS, which was in
effect from January 7, 2006 through June 8, 2008 ("the
2007 Policy"). This was a
"Claim" is defined in the policy to mean "(1)
a written demand for monetary relief or (2) a civil . . .
proceeding for monetary . . . relief which is commenced by:
(i) service of a complaint or similar pleading[.]"
¶ 2. (b)(1)-(2)(i).
"Notice/Claim Reporting Provisions" section under
Clause 7 of the insurance policy states "[t]he 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
and either: (1) anytime during the Policy Year . . . or (2)
within 30 days after the end of the Policy Year . . . as long
as such Claim is reported no later than 30 days after the
date such claim was first made against an insured."
¶ 7. (a)(1)-(2). "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.
pursuant to the policy, FFA was responsible for defending
itself, and National Union had a duty to advance defense
costs. The insured's right to tender its defense i.e.,
transferring the obligation of the defense, and all costs
associated with the insurer terminates if not exercised
within 30 days of the date the claim is first made pursuant
to Clause 7. ¶¶ 1 & 8. "Provided that the
Insureds [including FFA] have complied with the foregoing,
the Insurer [National Union] shall be obligated to assume the
defense of the Claim . . . [o]nce the defense has been so
tendered, the Insured [FFA] shall have the right effectively
to associate with the Insurer [National Union] in the defense
of such Claim, including, but not limited to negotiating a
settlement." ¶ 8.
the coverage dispute relates to both the ESA Case and the
RICO Case, we primarily address the Coverage Case in this
appeal. The other two cases are relevant because they form
the basis as to why National Union believes it was actually
prejudiced, enabling it to disclaim coverage under its
policy. The ESA Case is a case in which FFA was the plaintiff
and adverse factual findings and a judgment were entered
against FFA. Those adverse findings could have been raised
against FFA in the RICO Case on grounds of collateral
estoppel. National Union had no duty to defend FFA in the ESA
Case because National Union provided defense coverage and FFA
was acting as a plaintiff in the ESA Case. Therefore,
National Union could not have affected the outcome of the ESA
proceedings. In the RICO Case, FFA was sued by Feld, a
defendant in the ESA Case, for misconduct that allegedly
occurred during the prosecution of the ESA Case. In the
Coverage Case, FFA sued its insurer, National Union, for
failing to provide coverage to it. National Union disclaimed
coverage on the grounds that it received late notice of the
RICO Case. It further claimed that had National Union known
earlier it could have stepped in and "monitored" or
advised FFA in the ESA Case. Intervention, National Union
claims, would have prevented the adverse factual findings
which prejudiced FFA's defense in the RICO Case.
ESA Case, FFA, an organizational plaintiff, along with other
organizational plaintiffs and an individual plaintiff, Thomas
Rider, sued Ringling Brothers and its owner, Feld. While the
ESA Case was pending, Feld brought the RICO Case against FFA
and the other organizational plaintiffs for allegedly bribing
the individual plaintiff to falsely testify and commit other
criminal acts, in order to establish standing to sue Feld.
Feld sought to recover damages in the form of attorneys'
fees and costs incurred in defending the ESA Case. FFA did
not notify National Union of the RICO claim until over two
years after the claim had been filed. By that time, the court
in the ESA Case had ruled in favor of the defendant, Feld, on
the ground that the ESA organizational plaintiffs, including
FFA, lacked standing. The court also made several factual
findings, including that the organizational plaintiffs had
paid the individual plaintiff for testimony that was false
and that those payments were concealed during discovery.
National Union denied coverage on the grounds that FFA failed
to provide timely notice. Subsequently, FFA brought the
Coverage Case against National Union, which in turn defended
on the grounds that it was prejudiced by the late notice.
National Union claimed actual prejudice because it believed
FFA was precluded, in the RICO Case, from contesting many of
the facts found by the court in the ESA Case as those facts
undermined any defense FFA might have raised.
ESA Case (Not Covered by the 2007 Policy)
Case was brought in 2000 in the United States District Court
for the District of Columbia before the Honorable Emmet G.
Sullivan. The ESA Case was not covered by the 2007 Policy
because the Policy provided coverage to FFA in defense of
claims made against it by another party, not in the case
where FFA was the plaintiff. FFA, the American Society for
the Prevention of Cruelty to Animals ("ASPCA"), the
Animal Welfare Institute ("AWI"), and Thomas Rider
sued Feld and Ringling Brothers for declaratory and
injunctive relief, alleging Ringling Brothers' mistreated
Asian elephants in its circus training techniques, violating
the Endangered Species Act, 16 U.S.C. § 1531 et
suit was brought under § 1540(g), the citizen-suit
provision of the ESA, which requires standing under the
"case or controversy" provision of Article III of
the United States Constitution, meaning at least one
plaintiff must make a showing:
(1) that the plaintiffs have 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 be
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 be likely, as opposed to merely speculative,
that the injury will be redressed by a favorable decision.
Bennett v. Spear, 520 U.S. 154, 167, 117 S.Ct. 1154,
1163, 137 L.Ed.2d 281, 298 (1997) (citing Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560-561, 112 S.Ct.
2130, 2136, 119 L.Ed.2d 351, 364 (1992)).
Rider alleged he was emotionally attached to the elephants
because he had worked for Ringling Brothers for two years,
tended the elephant barns, worked as a "handler",
and referred to them as his "girls." He claimed
that he had witnessed their mistreatment by the Ringling
Brothers' employees. Further, he explained that he wished
to visit the elephants again and work with them, but could
not because he feared he would experience aesthetic and
emotional injury from witnessing their scars and behavioral
filed a motion to dismiss for lack of Article III standing
asserting Mr. Rider did not suffer any cognizable and
redressable injury and thus the plaintiffs, including FFA,
could not establish standing. The district court granted the
motion to dismiss. That decision was appealed to the United
States Court of Appeals for the District of Columbia Circuit,
which reversed and held there was a cognizable and
redressable injury. ASPCA v. Ringling Bros. and Barnum
& Bailey Circus, 317 F.3d 334 (D.C. Cir. 2003).
August 2007, Feld filed the RICO Case (discussed previously)
as a separate action against FFA and the other organizational
plaintiffs. While the RICO Case was pending, the ESA Case was
tried as a bench trial and lasted for six weeks, from
February through March of 2009. In December of 2009, the
district court entered judgment in favor of Feld and held
that the plaintiffs failed to establish Article III standing.
Accordingly, the court determined that it lacked jurisdiction
and declined to reach the merits of whether Feld violated the
ESA. ASPCA v. Feld Entertainment, Inc., 677
F.Supp.2d 55, 91, 97-98 (D.D.C. 2009). The court made
findings of fact and rejected Mr. Rider's testimony,
concluding he was "essentially a paid plaintiff and fact
witness who is not credible." 677 F.Supp.2d at 67. The
court also found that since March of 2000, Mr. Rider's
sole source of income was coming from payments made by animal
rights advocates, including the organizational plaintiffs.
677 F.Supp.2d at 72. It was determined that payments were
made directly to him from the law firm representing the
plaintiffs, Meyer, Glitzenstein & Crystal
("MGC") and indirectly from grants from the
Wildlife Advocacy Project ("WAP"), a non-profit run
by two partners in MGC. 677 F.Supp.2d at 74. The court found:
[T]he primary purpose is to keep Mr. Rider involved with the
litigation, because he is the only plaintiff who alleges a
personal and emotional attachment to the elephants and an
aesthetic injury based on the alleged mistreatment he claims
to have witnessed while working for [Feld].
677 F.Supp.2d at 79. Further, the court determined that the
plaintiffs used the United States mail system to make
payments. 677 F.Supp.2d at 77. Moreover, those payments
"were not disclosed initially in discovery, by both
omissions and affirmatively false statements." 677
F.Supp.2d at 83. (As discussed below, these findings are all
relevant to the RICO Case because they form the basis for a
violation of the RICO statute, and mail and wire fraud.). On
appeal, the Court of Appeals for the District of Columbia
Circuit affirmed the district court's findings. See
ASPCA v. Feld, 659 F.3d 13 (D.C. Cir. 2011).
March of 2013, Judge Sullivan granted Feld's motion as a
prevailing party for attorneys' fees (filed in April
2012), under a fee-shifting provision of the ESA. 16 U.S.C.
§ 1540(g)(4). He further found that the ESA Case was
"meritless, frivolous, and vexatious" and directed
the parties to submit recommendations for further proceedings
to determine the amount of attorneys' fees Feld had
RICO Case (Covered by the 2007 Policy)
mentioned in the above discussion, during the ESA case, Feld
filed the RICO Case in the United States District Court for
the District of Columbia in August of 2007 as a separate
action naming the organizational plaintiffs from the ESA
Case, including FFA, as defendants. Feld alleged that the
RICO defendants engaged in illegal acts in the ESA Case,
including paying Mr. Rider over $100, 000 to falsely testify
to establish emotional injury from the alleged mistreatment
of elephants and attempting to conceal payments that were in
the form of bribes, illegal gratuities, mail fraud, wire
fraud, money laundering, and obstruction of justice. Feld
sought damages in attorneys' fees and costs incurred in
defending the ESA Case.
complaint and summons in the RICO Case were served on FFA in
September 2007. However, National Union was not notified by
FFA of the RICO Case when the complaint was served, nor at
any time during the 2007 Policy period (before June 8, 2008).
In November 2007, Judge Sullivan, in the RICO Case, granted
the defendants' "Motion to Temporarily Stay All
Proceedings" pending the resolution of the ESA Case and
[g]iven that the ESA Action is still ongoing, and because
[Feld] has no choice but to continue to defend the ESA suit
regardless of the outcome of its RICO claim, [Feld's]
damages [in the form of attorneys' fees and costs
incurred in defending the ESA Case] are unascertainable at
Feld Entertainment, Inc. v. ASPCA, 523 F.Supp.2d 1,
4 (D.D.C. 2007). It was not until January 15, 2010 that the
court lifted the stay in the RICO Case. This was
approximately one month after Feld had prevailed in the ESA
March 1, 2010, Roger Kindler, general counsel for HSUS and
its affiliates (including FFA) gave their insurance broker
notice of Feld's amended complaint in the RICO Case. The
letter stated HSUS and its affiliates demand coverage under
the National Union Policy for the 2010 term year ("the
2010 Policy"), which was substantially similar to the
2007 Policy (FFA was an "Additional Insured" on the
2010 Policy as well as the 2007 Policy). The insurance broker
forwarded the notice and copy of the amended complaint to
National Union. National Union's claims administrator,
Chartis, requested the original complaint in the RICO Case.
Mr. Kindler forwarded a copy of the original complaint to
Chartis and also notified it that the RICO Case had been
stayed by the district court pending the outcome of the ESA
Case and that the district court had scheduled mediation for
both cases in June.
26, 2010, Chartis sent a letter to HSUS and FFA disclaiming
coverage both under the 2010 and 2007 Policies because the
RICO claim was made against FFA in 2007 and notice was not
given during the 2007 Policy term (from January 7, 2006
through June 8, 2008). Mr. Kindler responded, on June 16,
2010, and contested the disclaimer. He explained that there
was "on-going, formal mediation in the District of
Columbia involving all parties, that ha[d] the potential of
resolving the nest of claims between Feld  and the
charities and individuals named in the Amended RICO
Complaint" and "[i]f the mediation fails, the
parties and their insurance carriers [were] looking forward
to, it is safe to say, years of intense litigation and the
associated costs. Chartis should not be sitting on the
sidelines." National Union did not respond and chose not
to get involved in the RICO Case. FFA hired attorneys,
engaged in mediation, filed a motion to dismiss the amended
RICO complaint, pursued (unsuccessfully) an interlocutory
appeal from the denial of the motion to dismiss, and was
involved in discovery for over six months.
March of 2013, Judge Sullivan granted Feld's motion for
attorneys' fees in the ESA Case and directed the parties
to submit recommendations for the appropriate amount of fees
and to determine whether further proceedings were necessary.
In early 2014, FFA and the other organizational defendants in
the RICO Case and Feld engaged in settlement negotiations. In
May 2014, Feld settled its claim for $15.75 million. In
addition, Feld agreed to dismiss, with prejudice, the RICO
Case as well as ...