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LLC v. United States Liability Insurance Co.

United States District Court, D. Maryland

March 27, 2017




         Plaintiff Dominant Investments 113, LLC (“Dominant” or “plaintiff”) has filed a two-count Amended Complaint (ECF No. 12) against United States Liability Insurance Company (“USLI” or “defendant”) alleging breach of contract and breach of the statutory duty of good faith under § 3-1701 of the Maryland Code, Courts and Judicial Proceedings Article, based on USLI's rescission of the commercial property insurance policy issued to plaintiff by USLI on December 4, 2014.[1]

         Now pending before this Court is defendant USLI's Motion for Summary Judgment (“Defendant's Motion”). (ECF No. 15.) The parties' submissions have been reviewed.[2] In addition, the Court conducted a hearing on Defendant's Motion on March 17, 2017. (ECF No. 29.) For the reasons stated below, Defendant's Motion is GRANTED, and Summary Judgment shall be ENTERED in favor of USLI on both counts of the Amended Complaint.


         In ruling on a Motion for Summary Judgment, this Court considers the facts and draws all reasonable inferences in the light most favorable to the nonmoving party. Scott v. Harris, 550 U.S. 372, 378 (2007).

         Plaintiff purchased an improved real estate property located at 5008 Cedar Avenue, Baltimore, Maryland 21227 (the “Property”) on or about December 10, 2014 for the stated purposes of renovating that Property. (ECF No. 12 at ¶ 14.) Public real property records indicate that plaintiff paid approximately $155, 000 for the property. (ECF No. 12-5.) Acting on behalf of plaintiff, Michael Gottlieb, an insurance broker-agent of Herman E. Wealcatch, Inc., accessed defendant's website to generate a quote for a Commercial Property Policy for the Property on December 1, 2014. (ECF No. 12 at ¶¶16-17.) The quoting software generated a partially completed application, which was then sent to Gottlieb for approval by the Dominant, the applicant. (Id. at ¶¶ 22-24.) On December 1, 2014, plaintiff or its agent completed the remainder of the application by hand. (ECF No. 12-2.) The application, which purports to be signed by Mr. Moshe Rubin on behalf of plaintiff, lists the year the Property was built as 1939.[3] (Id.)

         The insurance application repeatedly requires the applicant to affirm that all information contained in the application is true and correct. The first page of the Commercial Package application states:

“You or your agent provided the information used to complete the questions below. Please answer all remaining questions in the space provided. By signing this application you are warranting that all information on this application is true and correct.”

(ECF No. 12-2). The final page of the application, above the signature, contains an Applicant's Warranty Statement, which, in part, states:

“I warrant that the information provided in this Application, and any amendments or modifications to this Application are true and correct. I acknowledge that the information provided in this Application is material to acceptance of the risk and the issuance of the requested policy by Company.”

(ECF No. 12-2.) Finally, the Application includes an acknowledgement that, “a breach of this WARRANTY STATEMENT is grounds for Company to declare void any policy or policies issued in reliance thereon and/or deny any claim(s) for coverage thereunder.” (ECF No. 12-2.) In addition, the Application for the Policy specifically required plaintiff to warrant that no structural renovations will be on-going and that the property will remain locked and secured for the policy term. (ECF No. 12-1, 12-2.)

         On December 4, 2014, defendant issued a Commercial Property Insurance Policy covering the Property, Policy Number CP1603884 (“the Policy”). (ECF No. 12 at ¶ 30.) This Policy provided Commercial Property Coverage and Commercial Liability Coverage from December 2, 2014 to December 2, 2015. (Id.) Under the Commercial Property Coverage, the Policy's Insuring Agreement provides that USLI “will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.” The policy limits totaled $285, 000. (ECF No. 12 at ¶¶ 49-51.)

         On February 17, 2015, plaintiff submitted a claim, identified as Claim Number K088346 (“the Claim”), under the Policy, reporting that there was a fire at the Property on February 17, 2015 resulting in a total loss. (ECF No. 12 at ¶¶ 42-47.) Both parties undertook investigations of the fire through their respective claims adjusters. (Id. at ¶¶ 54-55.) On April 1, 2015, plaintiff provided to defendant's adjuster Mr. Hardy a damage estimate prepared by Atlantic Estimating, LLC, which totaled $510, 614.98, for a complete rebuild of the structure after renovation without separating costs for improvements from building value. (Id. at ¶ 42.)

         During its investigation of plaintiff's claim, defendant obtained photographs of the Property, which were taken on several different dates prior to the fire, that showed multiple unsecured windows, in the foundation and on the first and second floors, which suggested that the Property was not fully secured and locked as required by the Policy. (ECF No. 28-6.) Defendant also discovered evidence that plaintiff had performed structural work on load-bearing members, again in possible violation of the policy. (ECF No. 15-6 at ¶ 29.) For these reasons, defendant sent plaintiff a letter on August 14, 2015 denying coverage based on these violations of the policy. (ECF No. 12-8.)

         Subsequently, on September 17, 2015, defendant sent a letter to plaintiff stating that the Policy was rescinded based on a material misrepresentation in the Application regarding the date the Property was constructed. (ECF No. 15-8.) The letter stated that during the investigation of the claim, defendant determined that the Property was built in 1890. (Id.) The Application for insurance submitted on behalf of plaintiff, however, stated that the property was built in 1939. (Id.) The letter notified plaintiff that the Policy was rescinded- not cancelled-and enclosed a check to plaintiff in the amount of $961.00 as a full refund of premiums paid for the Policy. (Id.)

         As required under Maryland insurance law, plaintiff filed a statutorily-mandated complaint with the Maryland Insurance Administration (“MIA”) alleging that defendant improperly denied its claim and failed to act in good faith in its denial and rescission of the policy.[4] (ECF No. 12 at 2.) Following the MIA's decision, plaintiff filed a two count complaint in the Circuit Court for Baltimore County on July 13, 2016, alleging breach of contract and lack of good faith and seeking $411, 633.00 in damages. (ECF No. 2.) Defendant was served on August 4, 2016, and timely removed the case to this Court on the basis of diversity of citizenship jurisdiction on September 6, 2016. (ECF No. 1.)

         Defendant moved to dismiss plaintiff's Complaint on September 9, 2016. (ECF No. 8.) Plaintiff did not oppose defendant's motion, but instead filed an Amended Complaint (the now operative pleading) on September 26, 2016. (ECF No. 12.) On October 10, 2016, defendant filed the now-pending Motion for Summary Judgment. (ECF No. 15.)

         Prior to the hearing, defendant filed a Supplement to its Motion for Summary Judgment. (ECF No. 28.) Defendant's Supplement produced several exhibits which had been omitted from the Motion itself.

         Following the hearing of March 17, 2017, plaintiff submitted a Supplemental Filing (ECF No. 31) in contravention of this Court's Local Rule 105.2(a). Rather than reject the Supplemental Filing, which sets forth new legal arguments by plaintiff, ...

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