United States District Court, D. Maryland, Southern Division
MEMORANDUM OPINION AND ORDER
W. Grimm United States District Judge
James River Insurance Company ("James River")
provided insurance to Defendant Brick House Title, LLC
("Brick House") from July 1, 2014 to July 1, 2015
and July 1, 2015 to July 1, 2016, under two lawyers
professional liability insurance policies. It filed this
declaratory judgment action to clarify its obligations to
indemnify and/or defend under those policies with regard to
an August 13, 2016 claim against Brick House. James River now
seeks summary judgment, arguing that the undisputed facts
show that Brick House knew about the potential claim against
it during the first policy period but failed to notify James
River until the second policy period, such that coverage is
excluded under both policies. Pl.'s Mot. & Mem., ECF
Nos. 23, 23-1. I agree. Because neither the claim against
Brick House nor the notice to James River of the potential
claim occurred during the first policy period, the claim is
not covered by the first policy. And, because Brick House
knew about, but failed to disclose, the potential claim prior
to the commencement of the second policy period, it is
excluded from coverage under the second policy. Further,
because Brick House did not breach either policy, James River
does not need to show prejudice to prevail. Therefore, I will
grant James River's motion.
2014, Brick House handled a closing ("Closing") for
real property that the Estate of Virginia L. Mathis and
Mathis's great-grandson Delante Mouton (together, the
"Estate") owned. Jt. Stip. ¶¶ 5-6, ECF
No. 24. Brick House had been responsible for remitting
payment to the Estate's mortgage holder
("Nationstar") by an agreed-upon date (April 10,
2014) in an amount that the mortgage holder agreed to accept
for a short sale of the property, id. ¶¶
7-8, but Brick House's wire transfer did not go through
and it did not realize the error until April 2015,
id. ¶ 11. Brick House tried again to remit the
payment on May 6, 2015, this time by check. Id.
¶ 13. The next day, despite having received the check,
Nationstar informed Brick House of the payoff amount, and on
May 18, 2015, it sent back the check. Id.
¶¶ 14, 16. As a result, the Estate's loan was
past due and the lender initiated a foreclosure action. Third
Party Compl. ¶ 23 in Estate of Virginia L. Mathis,
et al. v. Old Republic National Title Insurance Co. &
Brick House Title, LLC, No. 2015 CA 4954 R(RP) (D.C.
Sup. Ct.) (the "Mathis Suit"), Ex. N, ECF
No. 24-14. In the foreclosure action, the Estate filed a
third party complaint against Brick House, as well as their
title insurance provider, Old Republic National Title
Insurance Company ("Old Republic"), on May 16,
2016, seeking damages from Brick House for negligence and
breach of contract, based on its failure to pay off the
Estate's mortgage. Id.; Jt. Stip. ¶¶
to the Mathis Suit, Old Republic received a letter
that "advis[ed] of a potential claim against [it]
relating to Nationstar's mortgage on the Estate's
property." Jt. Stip. ¶ 15. Old Republic forwarded
the letter to Brick House on May 12, 2015, id., and
wrote to Brick House again on May 18, 2015 with regard to the
claim, "seeking a response to the May 12, 2015
correspondence, " id. ¶ 17. Both of these
events occurred during the 2014 Policy Period. Brick House
acknowledged receipt on May 22, 2015. Id. ¶ 18.
On July 23, 2015 (during the 2015 Policy Period), Brick House
provided written notice of a potential claim to James River,
for coverage with regard to the Mathis Suit under
one of the two claims-made-and-reported insurance policies
that Brick House held with James River. Id. ¶
21; July 23, 2015 Ltr., Ex. M, ECF No. 24-13. The first
policy (the "2014 Policy") was effective July 1,
2014 to July 1, 2015 (the "2014 Policy Period"),
and the second policy (the "2015 Policy") was
effective July 1, 2015 to July 1, 2016 (the "2015 Policy
Period"). 2014 Policy, Ex. A, ECF No. 24-1; 2015 Policy,
Ex. B, ECF No. 24-2.
Estate served Brick House on August 13, 2016, and Brick House
reported the Mathis Suit to James River on August
16, 2016. Jt. Stip. ¶ 23. To date, James River has been
providing Brick House with a defense in the Mathis
Suit, subject to a reservation of rights. Id.
¶¶ 24, 26. It initiated this action, seeking a
declaration of rights that it does not have a duty to defend
or indemnify Brick House under either the 2014 Policy or the
2015 Policy. Compl., ECF No. 1. Now, it seeks summary
judgment, arguing that the undisputed facts show that it
"does not owe coverage to Brick House for the
[Mathis Suit] under the 2014 Policy because no
'Claim' . . . relating to the Closing was made
against Brick House during the 2014 Policy Period, " and
Brick House did not "report a potential claim to James
River" during the 2014 Policy Period. Pl.'s Mem.
2-3. It also contends that it is undisputed that Brick House
knew of the claim before it entered into the 2015 Policy,
such that the claim is excluded from coverage under the 2015
Policy pursuant to the "Prior Knowledge Exclusion"
clause,  and therefore it is entitled to summary
judgment with regard to the 2015 Policy as well. Id.
House counters that, because "[t]here are material facts
in dispute as to whether Defendant had prior awareness of a
potential claim, " summary judgment is not appropriate
with regard to the 2015 Policy, and because James River has
not shown prejudice, as required by the Maryland statute
governing disclaiming insurance coverage in case of breach,
the motion should be denied as to both policies. Def's
Opp'n 1; Def's Mem. 1-2. In its reply, James River
contends that Brick House misunderstands and mischaracterizes
its claims, as it "has not argued or asserted that Brick
House breached the Policies in any respect, " such that
the "arguments as to prejudice miss the mark."
Pl.'s Reply 1-2. It maintains:
[T]he undisputed facts before the Court clearly demonstrate
that. . . Brick House knew or reasonably should have known
prior to the 2015 Policy that Brick House's professional
services rendered during the Closing could form the basis of
a claim and, therefore, the Prior Knowledge Exclusion
operates to bar coverage under the 2015 Policy.
judgment is proper when the moving party demonstrates,
through "particular parts of materials in the record,
including depositions, documents, electronically stored
information, affidavits or declarations, stipulations . . .,
admissions, interrogatory answers, or other materials, "
that "there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of
law." Fed.R.Civ.P. 56(a), (c)(1)(A); see Baldwin v.
City of Greensboro, 714 F.3d 828, 833 (4th Cir.
2013). If the party seeking summary judgment demonstrates
that there is no evidence to support the nonmoving
party's case, the burden shifts to the nonmoving party to
identify evidence that shows that a genuine dispute exists as
to material facts. See Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 585-87 & n.10
(1986). The existence of only a "scintilla of
evidence" is not enough to defeat a motion for summary
judgment. Anderson v. Liberty Lobby, Inc., Ml U.S.
242, 251-52 (1986). Instead, the evidentiary materials
submitted must show facts from which the finder of fact
reasonably could find for the party opposing summary
the 2014 Policy and the 2015 Policy provide:
THIS POLICY PROVIDES CLAIMS-MADE COVERAGE. CLAIMS MUST FIRST
BE MADE AGAINST THE INSURED DURING THE POLICY PERIOD AND MUST
BE REPORTED IN WRITING TO THE COMPANY DURING THE POLICY
PERIOD OR THE EXTENDED REPORTED PERIOD, IF EXERCISED. . . .
THIS POLICY IS WRITTEN ON A "CLAIMS-MADE AND REPORTED
BASIS" AND PROVIDES PROFESSIONAL LIABILITY COVERAGE FOR
THOSE CLAFMS THAT OCCUR SUBSEQUENT TO THE RETROACTIVE DATE
STATED IN THE DECLARATIONS AND WHICH ARE FIRST MADE AGAINST
[THE INSURED] AND REPORTED TO [THE INSURER] WHILE THIS POLICY
IS IN FORCE. NO COVERAGE EXISTS FOR CLAFMS FIRST MADE AGAINST
[THE INSURED] AND REPORTED TO [THE INSURER] AFTER THE END OF
THE POLICY TERM UNLESS, AND TO THE EXTENT, AN EXTENDED
REPORTING PERIOD APPLIES.
2014 Policy 2, 4; 2015 Policy 2, 4. They define
"Claim" as "a written demand for monetary
damages arising out of or resulting from the performing or
failure to perform 'Professional Services, '"
which, in turn, is defined as "services performed by the
'Insured' for others ... as a lawyer, notary public
or title agent" or in other capacities not relevant
here. 2014 Policy 5, 6; 2015 Policy 5, 6. As noted, the 2014
Policy Period ran from July 1, 2014 to July 1, 2015, and the
2015 Policy ran from ...