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CX Reinsurance Company Ltd. v. Leader Realty Co.

United States District Court, D. Maryland

May 12, 2017

CX REINSURANCE COMPANY LTD., Plaintiff
v.
LEADER REALTY COMPANY et al., Defendants

          MEMORANDUM AND ORDER

          James K. Bredar United States District Judge

         Pending before the Court is Defendants' motion for reconsideration (ECF No. 66) of the Court's order (ECF No. 61) denying Defendants' motion to dismiss or, alternatively, for summary judgment (ECF No. 18). The motion has been briefed (ECF Nos. 78, 83), and no hearing is required, Local Rule 105.6 (D. Md. 2016). The motion is granted in that reconsideration has been undertaken; upon that reconsideration, though, the Court concludes that its early ruling was correct, and that ruling is now reaffirmed. Neither the statute of limitations nor laches bar Plaintiffs suit, which was filed October 7, 2015 (Compl., ECF No. 1). Because the Court considered evidentiary materials outside of the complaint, the Court properly treated the motion as one for summary judgment; the standard for summary judgment was previously stated in the memorandum opinion of November 22, 2016 (ECF No. 60), and need not be repeated here. But this memorandum and order provides a fuller statement of undisputed facts and analysis of cases relevant to the question of notice to CX Re within the context of the “discovery rule.”

         I. Undisputed Evidence

         Defendants Charles Piccinini and Leader, Inc., lease various residential properties to tenants in Baltimore City. On July 11, 1997, they submitted an application for liability insurance to CX Re or its predecessor. (Defs.' Mot. Dismiss or Summ. J. Supp. Mem. 2, ECF No. 19; Pl.'s Opp'n 1, ECF No. 28.) On the application, the insurer asked the following question: “Has the Insured ever had any lead paint violations in the building(s)?” (Compl., Ex. 3, CNA International Reinsurance Co., Ltd., Supp. App'n Habitational Risks, ECF No. 1-3.) The box for “No” was checked. (Id.) The application was signed by Defendants Charles A. Piccinini and A.M. Slattery, and the “name of insured” was listed as Leader Realty et al. (Id.) The policy was issued, effective August 1, 1997, and covered a list of insureds, including Piccinini and Leader, Inc. (“Leader”), the original Defendants in this case. (Compl., Ex. 1, Policy, ECF No. 1-1.)

         The policy also included a list of properties to which the liability insurance applied. (Id.) One of those properties was rented to a family and became the subject of a lead-paint liability suit against Leader and Piccinini. Jenson v. Piccinini et al., Case No. 24C11007195, Circuit Court for Baltimore City, filed Nov. 15, 2011. (Defs.' Mot. Dismiss or Summ. J., Ex. 1, Stefani M. Andrews Certification ¶ 3, ECF No. 18-1.) The law firm of Parler & Wobber, LLP, in Towson, Maryland, represented Leader and Piccinini in defending the lawsuit. (Id. ¶ 7.) Parler & Wobber was engaged in late 2011 or early 2012 for this representation by third-party claims administrators. (Id. Ex. 2, Email P. Poholsky to W. Parler, ECF No. 21-2; Notice of Appearance, Case No. 24C11007195.)

         According to Stephen McFeely, claims supervisor in York, Pennsylvania, at PRO IS, Inc. (“Pro US”), which is a Delaware corporation, Pro U.S. employees and Lincoln General Insurance Company (“LGIC”) employees acted as third-party claims administrators for CX Re; LGIC lent some of its in-house claims adjustors to Pro U.S. for the purpose of adjusting claims under policies issued by CX Re and other companies. (Pl.'s Opp'n, Ex. 1, McFeely Aff. ¶¶ 2, 3, May 13, 2016, ECF No. 28-1.) McFeely also stated,

4. The third-party claims administrators' duties were limited to the handling and adjustment of claims under innumerable insurance policies, including, but not limited to, Leader Realty Company's (“Leader”) policies at issue in this litigation. These duties included, among others, retaining defense counsel, communicating with defense counsel about the insured's potential liability and exposure, setting reserves and, where the anticipated losses exceeded delegated authority, making reserve recommendations, processing claim payments, assessing whether tendered claims fell, or potentially fell, within the terms, limitations and conditions of the applicable policy or policies, and considering whether the insured's losses might be shared with or allocated to another insurer or the insured itself.
5. The third-party claims administrators had no involvement with underwriting, and they did not generate or maintain in the ordinary course of their duties applications or other underwriting materials. Their duties did not include identifying or analyzing possible rescission claims based on misrepresentations made on insurance applications.
6. On February 10, 2014, Pro U.S. sent CX Re's London-based business manager, PRO Insurance Solutions Limited (“Pro UK”), a report on the Jenson lead exposure claim for the purpose of requesting settlement authority and the establishment of a commensurate loss reserve. Within that report was a mention of a lead violation notice issued in June 1997 to Leader's property at 2637 E. Madison Street.
7. Before February 10, 2014, the third-party claims administrators in Pennsylvania had no need for any authority from Pro UK and, thus, had no reason to act upon or communicate to Pro UK the information about that lead violation notice which they had received in the course of their claims handling.
8. Consequently, the third party claims administrators did not inform CX Re of Leader's June 1997 lead violation notice until February 10, 2014.

(Id.)

         Marvin Mohn, who is a director, company secretary, and general counsel of CX Re, “a private limited company formed under the laws of England and Wales and with its principal office in London, England, ” provided additional information about the relationship between Pro U.S. and CX Re:

3. CX Re is a party to a Run-Off Management Agreement (“Agreement”) with Tawa Management Limited (“Tawa Management”), a private limited company formed under the laws of England and Wales with its principal office in London, England. That Agreement appoints Tawa Management as the Manager of CX Re for all purposes, subject to the authority of CX Re's board of directors. Tawa delegated most-but not all-of its responsibilities to Pro Insurance Solutions Limited (“Pro UK”), a private limited company organized under the laws of England and Wales and headquartered and operating out of London, England. Pro UK, in turn, delegated some-but not all-of ...

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