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Resource Real Estate Services, LLC v. Evanston Insurance Co.

United States District Court, D. Maryland

February 17, 2017

RESOURCE REAL ESTATE SERVICES, LLC Plaintiff,
v.
EVANSTON INSURANCE COMPANY, Defendant.

          MEMORANDUM OPINION

          George L. Russell, III United States District Judge

         THIS MATTER arises out of an insurance-coverage dispute between Plaintiff Resource Real Estate Services, LLC (“Resource”) and Defendant Evanston Insurance Company (“Evanston”). Pending before the Court are the parties' Cross-Motions for Summary Judgment. (ECF Nos. 12, 18). Principally at issue is whether the parties' insurance contract requires Evanston to defend and indemnify Resource in a lawsuit related to settlement services that Resource provided. The Motions are ripe for disposition, and no hearing is necessary. See Local Rule 105.6 (D.Md. 2016). For the reasons outlined below, the Court will deny Resource's Motion and grant Evanston's Motion.

         I. BACKGROUND

         A. The Policy

         In November 2014, Evanston issued Resource a Professional Liability Insurance Policy (the “Policy”). (Compl. ¶ 10, ECF No. 1). The Policy provides that, subject to conditions not relevant to this case, Evanston is obligated to pay Resource for claims related to “Wrongful Act[s]” that Resource commits in the performance of “Professional Services.” (Compl. Ex. A [“Policy”], at 15, ECF No. 1-1). A Wrongful Act is “any negligent act, error or omission in Professional Services, ” (id. at 17), and Professional Services include “settlement services” and “title insurance, ” (id. at 27).

         The Policy excludes from coverage any claim “arising out of any actual or alleged conversion, misappropriation, commingling, defalcation, theft, disappearance, [or] insufficiency in the amount of escrow funds, monies, monetary proceeds, funds or property, or any other assets, securities, negotiable instruments or any other thing of value.” (Id. at 4). These exclusions apply “irrespective of which individual, party, or organization actually or allegedly committed or caused in whole or part the conversion, misappropriation, commingling, defalcation, theft, disappearance, [or] insufficiency in amount.” (Id.). The Policy also provides that Evanston “shall have the right and duty to defend and investigate” any claim covered under the Policy. (Id. at 20).

         B. The Settlement and the Proceeds

         On September 30, 2015, Resource performed settlement services for the sale of Richard Deem's home in Dundalk, Maryland (the “Settlement”). (Compl. ¶ 17). Resource issued Deem a check for $223, 213.16 (the “Check”), representing the net proceeds from the sale (the “Proceeds”). (Id.). Shortly after the Settlement, Resource received numerous e-mails from someone claiming to be Deem (the “Alleged Imposter”). (Id. ¶¶ 18-21). The email address associated with all the messages was RichardDeem@mail.com (the “EMail Account”). (Id. ¶ 18).

         Just two days after the Settlement, the Alleged Imposter emailed Resource to request that Resource wire the Proceeds to his account. (Id.). Resource responded that Deem already had the Check for the Proceeds and Resource would not stop payment on the Check until it received evidence that Deem voided the Check. (Id.). The Alleged Imposter then wrote that the Check “was trashed and payment should be stopped immediately.” (Id.).

         On October 5, 2015, Resource received another email from the Alleged Imposter. (ECF No. 19). This time, the Alleged Imposter requested that Resource deposit the Proceeds in a TD Bank account (the “TD Bank Account”). (Id.). Because it did not appear that Deem's name was on the TD Bank Account, Resource advised that it would not stop payment on the Check or wire the Proceeds to the TD Bank Account unless it received confirmation that the Check was voided or that Deem owned the TD Bank Account. (Id.). Resource then received a voided check corresponding to the TD Bank Account, but advised that it would not wire the Proceeds to the TD Bank Account until it received signed authorization. (Id.). Resource later received such authorization and observed that the signature appeared to match Deem's signature on the settlement documents. (Id.). Resource then placed a stop-payment on the Check and informed the Alleged Imposter that Resource would not wire the Proceeds until it finalized the stop-payment -- a process which could take forty-eight hours. (Id.).

         On October 7 and 8, 2015, the Alleged Imposter emailed Resource to check on the status of the wire transfer. (Id. ¶¶ 20, 21). On October 8, 2015, Resource confirmed that it had executed the wire transfer. (Id. ¶ 21). Just five days later, Resource “received an e-mail from the E-Mail Account alleging that the E-Mail Account was hacked by an unknown individual” and requesting that Resource disregard all previous e-mails from the E-Mail Account. (Id. ¶ 22). That same day, Resource received a call from a representative of SunTrust Bank in Florida, who advised that Deem did not receive the Proceeds from the Check. (Id. ¶ 23). Deem allegedly deposited the Check on October 1, 2015. (Id.). The SunTrust representative also explained that on October 6, 2015, it received notice of the stop-payment on the Check and advised Deem of the same. (Id.).

         C. Deem's Suit and Evanston's Denial of Coverage

         In early December 2015, Deem sued Resource in the Circuit Court for Baltimore County, Maryland, alleging that Resource was negligent in handling the Proceeds (the “Deem Suit”). (Id. ¶ 24). Deem alleges that at the conclusion of the Settlement, Resource issued him the Check for $223, 123.16 in Proceeds. (Pl.'s Mot. Partial Summ. J. Ex. F. [“Deem's Am. Compl.”], ¶ 11, ECF No. 12-8). The next day, Deem negotiated the Check by deposit into his SunTrust account. (Id. ¶ 12). Deem then traveled to Florida and entered into a contract to purchase a new home. (Id. ¶ 13). Deem intended to use the Proceeds in his SunTrust account to purchase the new home. (Id. ¶ 14). About a week after depositing the Proceeds, however, Deem learned that funds were not in his SunTrust account. (Id. ¶ 15). Resource advised that it had stopped payment on the check and wired the Proceeds to the TD Bank Account in West Palm Beach, Florida. (Id. ¶¶ 16, 21). Deem, however, did not authorize Resource to stop payment on the check or wire the funds to the TD Bank Account. (Id. ¶¶ 17, 23). Deem does not maintain an account with TD Bank. (Id. ¶ 24). Resource failed to return the Proceeds, leaving Deem without money from the sale of his home and unable to purchase a new home. (Id. ¶¶ 26, 27).

         Shortly after Deem filed his suit, Resource sent a letter to Evanston proclaiming that Evanston had a duty to defend and indemnify Resource. (Compl. ¶ 28). Less than two weeks later, Evanston denied coverage for the Deem Suit, explaining that Resource's claim was excluded because it “is wholly based upon or arises out of a theft, disappearance, or insufficiency of the monetary proceeds of the sale of the property.” (Id. ¶ 29).

         D. ...


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