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Estate of Adams v. Continental Insurance Co.

Court of Special Appeals of Maryland

June 1, 2017

ESTATE OF HAROLD L. ADAMS, et al.
v.
CONTINENTAL INSURANCE COMPANY, et al.

          Kehoe, Beachley, Kenney, James A., III (Senior Judge, Specially Assigned), JJ. [*]

          OPINION

          Beachley, J.

         In this opinion, we attempt to finally resolve asbestos-related litigation stemming from complaints filed in the Circuit Court for Baltimore City more than twenty years ago. Appellants consist of plaintiffs represented by three different groups of law firms: 1) the Law Offices of Peter Angelos ("LOPA plaintiffs" or "LOPA"); 2) Goodman, Meagher & Enoch, LLP and Clifford Cuniff; Ashcraft & Gerel ("GME/Cuniff/A&G Plaintiffs"); and 3) Skeen, Goldman, LLP ("Goldman Plaintiffs").[1]

         Appellants were plaintiffs in asbestos-related litigation against MCIC Inc. (formerly McCormick Asbestos Company, "MCIC"). In a lawsuit filed in the Circuit Court for Baltimore City on May 20, 2005, appellants sought, for the second time, additional insurance coverage and proceeds pursuant to a 1994 settlement agreement with appellees, MCIC and its insurers: United States Fidelity and Guaranty Company ("USF&G"); Royal Insurance Company ("Royal");[2] Liberty Mutual Insurance Company; Continental Insurance Company ("Continental");[3] and Hartford Accident and Indemnity Company ("Hartford"). Appellants brought claims against appellees for negligent misrepresentation, fraudulent misrepresentation, and fraud by concealment. Specifically, appellants claim that the appellees fraudulently obtained the settlement by intentionally misrepresenting the extent of MCIC's available insurance coverage, and that the appellees knew that their misrepresentations regarding the available coverage were false.

         In August 2012, appellees filed motions for summary judgment, arguing that appellants' claims were time-barred pursuant to the three-year statute of limitations in Maryland Code (1973, 2013 Repl. Vol.) § 5-101 of the Courts and Judicial Proceedings Article ("CJP").[4] Appellees argued, inter alia, that appellants were on inquiry notice of their claims as early as 1997 or 1998, shortly after this Court published its opinion in Commercial Union Ins. Co. v. Porter Hayden Co., 116 Md.App. 605 (1997), cert. denied, 348 Md. 205 (1997).

         On November 20, 2012, the circuit court dismissed appellants' claims on the basis that they were time-barred. Appellants present several questions for our review, [5] which we have rephrased as follows:

1. Did the circuit court err in finding that, as a matter of law, the appellants' claims were barred by the statute of limitations because appellants were on inquiry notice of the misrepresentations as early as 1997?
2. Did the circuit court err in granting summary judgment without permitting appellants to conduct additional discovery?

         We answer the first question in the negative, and need not decide the second. Accordingly, we affirm the judgment of the circuit court.

         FACTUAL AND PROCEDURAL BACKGROUND

         Appellants Litigate Abate I while MCIC and Its Insurers Pursue Settlement

         MCIC, which was founded in 1934, sold and installed asbestos insulation products. By the early 1970s, it was clear that asbestos was hazardous, and MCIC ceased selling and installing asbestos-containing products in approximately 1973.

         In the late 1980s, several law firms, including those representing appellants, collectively filed several thousand lawsuits against MCIC asserting personal injury claims resulting from exposure to asbestos-containing products. In April 1990, the cases of 8, 555 plaintiffs were consolidated for trial ("Abate I").

         While the Abate I lawsuit was pending, MCIC and its insurers pursued settlement of the lawsuits against MCIC. On February 14, 1992, MCIC's attorney, John Nagle III, Esq. ("Nagle"), wrote a letter to LOPA attorney Thomas Friedman, Esq. ("Friedman"), with an attached schedule of all available insurance policies sold to MCIC. The schedule contained a note claiming that the list was prepared by USF&G on behalf of MCIC, and the information provided was "based primarily on secondary evidence of coverage." The schedule also contained two columns under the heading "products coverage, " one listing "per person limit[s], " and the other listing "per occurrence limit[s]." Framing the settlement discussion in terms of available "products coverage" had, as we will explain, a significant impact on the amount of coverage appellants received in settlement, as well as on the eventual causes of action in this case.

         On February 27, 1992, Friedman responded, submitting a total demand of $19, 527, 900. Mr. Friedman concluded his letter saying:

From the insurance information you supplied, it appears that your client may, in a best case scenario, not have sufficient insurance coverage to satisfy our demand. Under these circumstances, we are prepared to recommend in settlement of all our claims the total amount of your insurance coverage. It is imperative, therefore, that you determine as expeditiously as possible the exact amount of insurance coverage and that our tender is submitted to your principal.[6]

(Emphasis added). Notably, Friedman recommended seeking all available coverage, and not just "products coverage."

         On July 8, 1992, the jury found MCIC strictly liable for asbestos-related injuries suffered by foreseeable users and foreseeable bystanders.[7] Settlement discussions pertaining to damages ensued, with counsel for MCIC repeatedly stating that there were "limited assets available to MCIC, " and that bankruptcy proceedings or a settlement with another claimant could likely impact the amount appellants could recover.

         On December 7, 1992, Nagle sent a letter to Friedman enclosing a revised schedule of insurance (dated November 6, 1992) that was, in most respects, identical to the earlier version. The schedule identified the "per person" and "per occurrence" limits as "products coverage." Nagle indicated that he was providing the information "as it [was] related to [him] by USF&G, " noting that "no physical copies of policies of insurance exist with respect to coverage provided to MCIC by its various insurers over the decades, " and explaining that "the policies were disposed of prior to the time when MCIC was first named as a defendant, " and "[a]ll reasonable efforts have been made to locate such policies."

         The 1994 Settlement Agreement

         On September 14, 1993, Baltimore City Circuit Court Administrative Judge Joseph H.H. Kaplan held a conference to discuss settlement. Nagle had requested the conference so that MCIC could propose to pay approximately $13 million, all of MCIC's remaining insurance coverage, to settle all of the cases pending against MCIC. At the conference, appellants' attorneys requested all of the policies that the insurers had ever issued to MCIC, but counsel for the insurers claimed that the policies could not be produced for review. Nagle insisted that the approximately $13 million offer represented MCIC's remaining insurance assets. Appellants' counsel insisted on reviewing the policies before accepting any settlement, and Judge Kaplan instructed the insurers to provide whatever policy documents they possessed in anticipation of future settlement discussions.

         The Nagle Documents

         On October 15, 1993, Nagle sent a letter to appellants' counsel with "insurance coverage documents" attached, which he indicated were "recently provided to [him] by the respective carriers of MCIC, Inc."[8] We shall refer to these documents as the "Nagle Documents." The letter stated that Royal had not yet provided him with policy information, but that he would deliver those documents once he received them. The letter also included two tables which summarized the "limits of each carrier and MCIC (exclusive of Royal)." The letter concluded that the total amount of coverage available was $12, 300, 000.00 with $11, 877, 054.90 remaining.[9]

         Royal, unable to locate a copy of any insurance policy it sold to MCIC, wrote a letter to Nagle on October 21, 1993, conceding that, although it could not locate them, it had, in fact, issued insurance policies to MCIC. Royal provided a schedule that listed the policies it issued to MCIC and concluded that the total amount of coverage it provided to MCIC was $1, 200, 000 based on the "Bodily Injury Limits" of $25, 000/50, 000 for the first two years and $50, 000/100, 000 for the remaining 11 years.[10] Royal reiterated that it did not possess any copies of actual policies, and therefore it claimed that the information it provided was "extremely sketchy." Nagle forwarded Royal's letter to appellants' counsel on October 21, 1993.

         Contents of the Nagle Documents-Types of Coverage and Limits of Coverage

         The Nagle Documents included Declaration sheets[11] for the available policies, which were standard Comprehensive General Liability ("CGL") policies. The Declaration sheets themselves distinguished the available limits of liability. For example, the USF&G Declaration sheet provided maximum limits to the insured for bodily injury in the following ways: $300, 000 each occurrence; and $300, 000 in the aggregate. The section titled "Limits of Liability" provides, in pertinent part:

The total liability of the Company for all damages . . . because of bodily injury sustained by one or more persons as the result of any one occurrence shall not exceed the limit of bodily injury liability stated in the declarations as applicable to "each occurrence." Subject to the above provision respecting "each occurrence, " the total liability of the Company for all damages because of (1) all bodily injury included within the completed operations hazard and (2) all bodily injury included within the products hazard shall not exceed the limit of bodily injury liability stated in the declarations as "aggregate."

(Emphasis added). This language explains that a standard CGL policy provides an aggregate limit for bodily injury claims that fall under the "products hazard" or "completed operations hazard." Both of these hazards fall within the "products coverage" umbrella. By only imposing aggregate limits for the specifically mentioned bodily injury claims, the policies implicitly permitted non-aggregated limits for "non-products coverage" claims. The distinction between "products coverage" and "non-products coverage" is at the heart of appellants' claims.

         Reaching the Agreement

         On November 2, 1993, Judge Kaplan convened a second settlement conference. At that conference, Nagle stated that, having provided the Nagle Documents, he had now offered all insurance coverage, primary as well as excess, in exchange for full settlement and relief from further defense obligation. Nagle admitted that the Nagle Documents were incomplete, but insisted that the total amount of unused and available coverage for MCIC was $13, 077, 054.90, based on the insurers taking a worst case scenario in calculating that sum.[12]

         Appellants' counsel insisted on substantiating that the Nagle Documents included all available policy documents, arguing that they needed to verify the limits of MCIC's coverage or the total remaining coverage before agreeing to settle. To address these concerns, the parties agreed that the insurers would provide affidavits that stated that MCIC's total remaining coverage was approximately $13 million, that the appellees were tendering the limits of remaining unpaid funds, and that the appellees were not aware of any other applicable or available coverage. Judge Kaplan directed the parties to begin drafting a settlement agreement that would include these affidavits.

         On August 10, 1994, Judge Kaplan approved the settlement agreement for $12, 351, 000 which both the appellants and appellees signed.[13] Section 2.2 of the settlement agreement provided, at a minimum, a contractual cause of action if more insurance coverage was found.

The Defendant agrees that if in addition to the insurance coverage disclosed by Insurers and confirmed by their affidavits . . . other insurance is discovered which would be applicable to claims made, the Defendant will promptly notify Participating Plaintiffs' Counsel and arrange for a pro rata distribution to them for payment to the Plaintiffs . . . .[14]

         Attached to the settlement agreement were affidavits from each of the appellees, stating: (1) "a diligent and thorough search" had been made for MCIC's insurance policies; (2) those searches produced information leading each insurer to report the amounts of coverage listed in the settlement agreement; (3) there was no indication that there were any other policies or coverages available other than what was represented; and (4) there was no indication that the stated limits and unpaid funds were other than what was represented. An additional affidavit, provided by Robert I. McCormick, Treasurer of MCIC, stated that, as of April 30, 1994, the assets of MCIC had a total value of $299.89.

         Porter Hayden and an Alternative Theory of Claim Classification

         On August 29, 1997, this Court issued its decision in Porter Hayden, 116 Md.App. 605 (1997). There, Commercial Union provided liability insurance to Porter Hayden, a company that installed insulation containing asbestos. Id. at 617. Commercial Union's policies for Porter Hayden only provided "premises-operations" coverage, or coverage for bodily injury that occurred during the installation or operations process-not to be confused with "Products Hazard" or "products coverage"-coverage for injuries resulting from exposure to completed, hazardous products. Id. at 687-88. Noting the narrow scope of coverage in its policy, Commercial Union argued that it had no duty to defend Porter Hayden in asbestos litigation. Id. at 688.

         We disagreed. The complaints and allegations against Porter Hayden showed that some plaintiffs alleged they had been exposed to asbestos during installation. Id. at 691-92. We held that, "it is evident that Porter Hayden could be held liable for the manner in which it conducted its operations in installing the asbestos-containing products. In that light, it is not solely covered by the 'Products Hazard' insurance it declined to purchase." Id. 692. We concluded that,

The "Products Hazard" insurance is concerned with injury occurring after possession of the goods or the product has been relinquished or the operation has been completed or abandoned. The nature of some of the allegations in the Master Complaint, however, concern exposure and injury occurring during the operation, such as the emission of asbestos dust during the installation process.
We affirm the ruling . . . that, as a matter of law, there is a potentiality that the asbestos-related claims are covered and that there is, therefore, a duty on Commercial Union to defend and, depending on the ultimate findings on the merits, potentially to indemnify.

Id. at 692-93.

         The ramifications of our decision in Porter Hayden were immense to asbestos litigants, and appellants took notice. As explained above, a standard CGL policy provides for aggregate limits-but only as applied to "products coverage" claims. By recognizing a new theory of recovery, and one without aggregate limits, plaintiffs in Maryland could claim that CGL policies provided much greater coverage than previously thought.

         On October 3, 1997, a mere thirty-five days after we published Porter Hayden, Angelos sent a letter to MCIC's treasurer inquiring about the possibility of additional insurance available, stating:

As you will recall, there is a Settlement Agreement dated August 10, 1994[, ] between MCIC, Inc., several insurance companies, and various plaintiffs' law firms. One of the representations made by MCIC, Inc. and its insurers was that there was a limited amount of insurance available to pay to victims of asbestos-related disease. In fact, each of the insurers signed affidavits set[ting] forth the limited amount of money available to MCIC, Inc. for asbestos-related claims. This representation was the major reason we entered into this agreement and recommended to our clients settlements for such small amounts. Also, this was the primary reason we stopped naming MCIC as a defendant.
It has recently come to my attention that information provided by the insurers may be inaccurate, and additional insurance funds may be available under the terms of the policies. Under Section 2.2 of the Settlement Agreement, any additional insurance funds are to be distributed to the plaintiffs.
In light of the above, I think it appropriate that my office review the policies of insurance as quickly as possible so that I can determine what, if any, additional funds may be available to the plaintiffs.

(Emphasis added).

         On October 7, 1997, MCIC attorney Bruce R. Chapper responded to Angelos, stating that, on "August 10, 1994, MCIC tendered what it believed to be the total aggregate of insurance coverage available." Chapper assured Angelos that, "in response to [Angelos's] request, there [were] no insurance policies for [his] office to review, " but he was "happy to discuss" with Angelos whatever information had "recently come to [his] attention."

         On February 11, 1998, Angelos replied by letter that it was "absolutely necessary that [his firm] independently verify whether or not additional coverage exists for MCIC, Inc." He asked that MCIC "cooperate fully in providing [him] copies of the insurance policies." On February 20, 1998, Chapper responded, stating that there were "not now and never have been in the course of [the Abate I litigation] any insurance policies for review."

         Clifford Cuniff, an attorney for GME, called Nagle on April 1, 1998, to learn the status of MCIC with reference to his case. Nagle explained to Cuniff that MCIC no longer had counsel for that litigation, that MCIC would not respond to service of process, and that MCIC no longer had any assets.

         Three weeks later, on April 22, 1998, Chapper met with LOPA attorneys. His notes indicated that at the meeting, the LOPA attorneys

explained that recent court decisions had interpreted old policies containing provisions for contractors general liability so as not to have any total limit on the policies. Thus they contended that the insurance carriers may be liable for considerably more than the insurance carriers had certified in the affidavits which accompanied the settlement agreement.
After preliminarily reviewing certain of the evidences of insurance coverage which were in our file, namely, insurance certificates, bills, etc., they made arrangements to have those documents copied . . . ."

         Neither party took any significant action in reference to this case until January 4, 2001, when Chapper met with LOPA attorneys to discuss the 1994 settlement and MCIC's insurance coverage. In a follow-up letter, dated February 2, 2001, Chapper stated that

The offer was made to you, however, to assign the plaintiffs whatever rights you believe exist under various insurance policies, the limits of which were believed to have been tendered as part of the settlement. In conjunction with the settlement, MCIC informed plaintiffs of all of its past insurance carriers and all applicable policy numbers.

         He stated his impression that LOPA was "going to investigate the possibility of such an assignment and would forward such documentation as may be required to effect the same." On May 25, 2001, Chapper again met with LOPA to discuss their "desire to make claims under various insurance policies which may have insured" MCIC.

         The Wallace & Gale Case Adopts the Holding in Porter Hayden

         In February 2002, a federal court in the District of Maryland decided the case In re Wallace & Gale Co., 275 B.R. 223 (D. Md. 2002).[15] There, plaintiffs sought recovery from insurance companies for asbestos-related bodily injuries. Id. at 227. The court acknowledged that Porter Hayden created a new theory in which plaintiffs insured by a CGL policy could pursue installation or operations claims in addition to "products coverage" claims. Id. at 239. The court crystalized the significance of that holding with reference to standard CGL policies, stating: "If a claimant's initial exposure occurred while Wallace & Gale was still conducting operations, policies in effect at that time will not be subject to any aggregate limit." Id. at 241.

         Notably, LOPA was involved in the Wallace & Gale case as early as 1995, providing representation to a group of intervening plaintiffs. For Wallace & Gale, LOPA hired Scott D. Gilbert, Esq., an expert in insurance law, to prepare a report (the "Gilbert Report") evaluating the application of the insurance policies. LOPA filed the Gilbert ...


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