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State Farm Fire & Casualty Co. v. Huguely

United States District Court, D. Maryland

March 20, 2017

STATE FARM FIRE & CASUALTY CO.
v.
GEORGE W. HUGUELY, V, ET AL.

          MEMORANDUM OPINION

          DEBORAH K. CHASANOW United States District Judge

         Presently pending and ready for resolution in this declaratory judgment action is a motion for summary judgment filed by Plaintiff State Farm Fire and Casualty Company (“Plaintiff”). (ECF No. 23). The issues have been briefed and a hearing was held on January 10, 2017. For the following reasons, the motion for summary judgment will be denied.

         I. Background[1]

         This case involves the intersection of three actions in which George W. Huguely, V (“Defendant”) is the defendant: a criminal case, a civil case, and this insurance coverage case.

         A. Criminal Case

         Early on the morning of May 3, 2010, one of Yeardley Love's roommates found her dead in her bedroom. Huguely v. Commonwealth, 63 Va.App. 92, 99-100 (2014). Defendant, who had dated Yeardley Love “on and off” for years, had been drinking alcohol heavily on May 2 and went to her house late that night. Id. at 99, 101. He admitted to police that he kicked a hole in her bedroom door to gain access to her room, had a physical altercation with her during an argument, and left her bleeding on her bed. Id. at 102 n.4. In a 2012 trial, a jury in the Circuit Court for the City of Charlottesville, Virginia found Defendant responsible for her death and guilty of second degree murder. Id. at 105. Subsequently, the Court of Appeals affirmed Defendant's conviction, id. at 131, and the Supreme Court of Virginia and the Supreme Court of the United States each denied Defendant's petitions for review, see Huguely v. Virginia, 136 S.Ct. 119 (2015) (mem.); Petition for Writ of Certiorari at 3, Huguely v. Virginia, 136 S.Ct. 119 (2015) (No. 14-1474). Defendant has since filed a Petition for Writ of Habeas Corpus in the Charlottesville court where his trial was originally held. (ECF No. 25-2). The post-conviction proceedings are ongoing.

         B. Civil Case

         On April 26, 2012, interested party Sharon D. Love (“Ms. Love”), as administrator of the estate of Yeardley Love, brought a civil suit against Defendant in the Circuit Court for the City of Charlottesville. (ECF No. 1-1). Her amended complaint alleges that Defendant was the proximate cause of Yeardley Love's injuries and death. (ECF No. 1-2 ¶ 13). The alternative counts of the complaint include ordinary negligence, “gross negligence - indifference and acting with utter disregard of caution, ” “willful and wanton negligence - acting with conscious disregard and reckless indifference, ” “assault and/or battery, ” and punitive damages. (Id. at 4-9). Based on section 8.01-419 of the Virginia Code, the suit alleges Yeardley Love had a life expectancy of another 58.9 years and seeks nearly thirty million dollars in compensatory damages and an additional one million dollars in punitive damages. (Id. at 10-11). In November 2015, the circuit court stayed its proceedings to allow this court to act in the instant insurance coverage case, but some discovery between those parties has continued. (See Case No. DKC-13-1479, ECF No. 73-4, at 2-3). Trial is now set for July 2018. (ECF No. 25, at 6).

         C. Insurance Case

         The case in this court concerns whether Plaintiff, an insurance company, is contractually obligated to defend and to indemnify Defendant in the Civil Case. Interested party Andrew Murphy, III, Defendant's step-father (together with Defendant and interested party Marta Murphy, “Respondents”), purchased a homeowners' insurance policy (“the Policy”) from Plaintiff for Respondents' home in Maryland. (ECF No. 23-4). The Policy includes broad indemnification provisions stating that “[i]f a claim is made or a suit is brought against an insured for damages because of bodily injury . . . to which this coverage applies, caused by an occurrence, we will: 1. pay up to our limit of liability for the damages for which the insured is legally liable; and 2. provide a defense at our expense . . . .” (Id. at 20). After Ms. Love filed her complaint in the Civil Case, Defendant sought coverage from both Plaintiff (ECF No. 1 ¶ 22) and Chartis Property Casualty Company (“Chartis”), which insured Mr. and Mrs. Murphy under two other policies (See Case No. DKC-13-1479, ECF No. 1). Chartis has been providing a defense for Defendant under a reservation of rights (Id. ¶ 54), and it filed a declaratory judgment action in this court on May 23, 2013 (the “Chartis Case”).

         On June 28, 2013, Plaintiff acknowledged Defendant's claim for coverage in the Civil Case and told Defendant that it would be investigating his claims under the Policy. (ECF No. 1 ¶ 33). During its investigation, Plaintiff sought to examine Defendant under oath, but he has refused to submit to such an examination. (ECF Nos. 23-7; 23-8). Defendant's counsel in the Criminal Case told Plaintiff that Defendant would “decline to meet with you unless and until his criminal matters are fully concluded.” (ECF No. 23-8).

         Plaintiff then initiated this suit, on November 1, 2013, naming Respondents and Sharon Love as interested parties and seeking a declaratory judgment that it was not required to defend or to indemnify Defendant in the Civil Case under the Policy. (ECF No. 1). Plaintiff alleged that Defendant's refusal to cooperate with its investigation violated a provision of the Policy setting out the insured's duties after a loss. (Id. ¶ 45). With regard to liability coverage, the Policy requires an insured “shall perform the following duties” and “shall cooperate with [Plaintiff] in seeing that these duties are performed: . . . at our request, assist in: . . . securing and giving evidence and obtaining the attendance of witnesses.” (ECF No. 23-4, at 23). The complaint alleges that Defendant's refusal to submit to an examination constituted a material breach of the Policy and resulted in actual prejudice to Plaintiff's ability to evaluate the Civil Case and to identify defenses to its coverage obligations, which included issues over Defendant's residency and provisions in the Policy that exclude coverage for injuries that are “either expected or intended by the insured; or . . . the result of willful and malicious acts of the insured, ” (the “Exclusions”). (Id. ¶¶ 32, 55-63).

         At the time Plaintiff filed its complaint, the court had already stayed the Chartis Case, pending Defendant's direct appeal in the Criminal Case. (Case No. DKC-13-1479, ECF No. 36). Plaintiff consented to a similar stay in this case, which was entered on December 6, 2015. (ECF Nos. 7; 8). On January 5, 2016, after Defendant had exhausted all direct appeals in his criminal proceedings, the court reopened the Chartis Case. (Case No. DKC-13-1479, ECF No. 56). Plaintiff filed a motion to reopen this case on November 2, 2016, which was granted on November 22. (ECF Nos. 15; 21). Plaintiff then filed the instant motion for summary judgment, arguing that both the Exclusions and Defendant's failure to cooperate provide bases to deny coverage. (ECF No. 23). Respondents and Ms. Love responded in opposition. (ECF Nos. 25; 27). On January 10, 2017, the court held a joint hearing on the instant motion and a motion for summary judgment in the Chartis Case.

         II. Standard of Review

         A motion for summary judgment will be granted only if there exists no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008). To prevail on a motion for summary judgment, the moving party generally bears the burden of showing that there is no genuine dispute as to any material fact. Liberty Lobby, 477 U.S. at 248-50. A dispute about a material fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. at 249. In undertaking this inquiry, a court must view the facts and the reasonable inferences drawn therefrom “in the light most favorable to the party opposing the motion, ” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)); see also EEOC v. Navy Fed. Credit Union, 424 F.3d 397, 405 (4th Cir. 2005), but a “party cannot create a genuine dispute of material fact through mere speculation or compilation of inferences.” Shin v. Shalala, 166 F.Supp.2d 373, 375 (D.Md. 2001) (citation omitted).

         III. Applicable Law

         In diversity actions, a district court applies the substantive law and choice of law rules of the state in which the court sits. Padco Advisors, Inc. v. Omdahl, 179 F.Supp.2d 600, 605 (D.Md. 2002) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938)). In contract claims, Maryland applies the doctrine of lex loci contractus, meaning that the law of the place where the contract was made applies. Allstate Ins. Co. v. Hart, 327 Md. 526, 529 (1992). “The locus contractus is the place where the last act is performed which makes an agreement a binding contract.” Grain Dealers Mut. Ins. Co. v. Van Buskirk, 241 Md. 58, 65-66 (1965). In an insurance contract, the delivery of the policy and the payment of the premiums constitute these “last acts.” Id. (citing Sun Ins. Office v. Mallick, 160 Md. 71, 81 (1931)). Although it appears that the Policy was addressed to Mr. Murphy in California (ECF No. 23-4, at 2, 4), Plaintiff contends that it was delivered to the Murphys at their Maryland address (ECF No. 23-2, at 15). Plaintiff argues in the alternative that California law would apply Maryland law because the property insured was in Maryland. (ECF No. 23-2, at 16). Neither Respondents nor Ms. Love dispute that Maryland substantive law is applicable here. Maryland law does not, however, govern procedural rules in this court, even when jurisdiction is based on diversity.

         IV. Declaratory Judgment While State Action Is Pending

         Respondents argue that declaratory judgment is not appropriate at this time, given the ongoing nature of the Civil Case. “Federal standards guide the inquiry as to the propriety of declaratory relief in federal courts, even when the case is under the court's diversity jurisdiction.” White v. Nat'l Union Fire Ins. Co., 913 F.2d 165, 167 (4th Cir. 1990). Under federal law, district courts have “some measure of discretion [as to whether] to entertain a declaratory judgment action that is otherwise properly within its jurisdiction.” Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 375 (4th Cir. 1994). The United States Court of Appeals for the Fourth Circuit has held that district courts should not entertain a declaratory judgment action during the pendency of a related state proceeding “when the result would be to ‘try a controversy by piecemeal, or to try particular issues without settling the entire controversy.'” Mitcheson v. Harris, 955 F.2d 235, 239 (4th Cir. 1992) (quoting Aetna Cas. & Sur. Co. v. Quarles, 92 F.2d 321, 325 (4th Cir. 1937)). A court must consider four factors in deciding whether to make a declaratory judgment in such a case:

(i) the strength of the state's interest in having the issues raised in the federal declaratory action decided in the state courts; (ii) whether the issues raised in the federal action can more efficiently be resolved in the court in which the state action is pending; (iii) whether permitting the federal action to go forward would result in unnecessary “entanglement” between the federal and state court systems, because of the presence of “overlapping issues of fact or ...

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