United States District Court, D. Maryland
Lipton Hollander United States District Judge
Memorandum Opinion resolves the “Motion For Leave to
File Second Amended Complaint” (ECF 189,
“Motion”) filed by plaintiff CX Reinsurance
Company Limited (“CX Re”). In the Motion,
plaintiff seeks to add multiple defendants and new grounds to
rescind certain insurance policies. ECF 189, ¶¶
20-33. In addition, the Memorandum Opinion resolves a motion
for preliminary injunction (ECF 88) filed by defendant
Jessica-Carl, Inc. (“Jessica-Carl”).
was initiated by CX Re in November 2015 against B&R
Management, Inc. (“B&R”), seeking to rescind
two commercial general liability insurance policies that were
in effect from August 1, 1997 to August 1, 1999. ECF 1
(Complaint). According to CX Re, defendant made
misrepresentations concerning lead paint violations with
respect to certain rental housing covered by the insurance
policies. ECF 1; ECF 1-2 and ECF 189-3 (Policy No.
CNAGL1106-97); ECF 1-3 and ECF 189-4 (Policy No.
outset of the litigation, Jessica-Carl moved to intervene as
a defendant. ECF 4. That motion was granted. ECF 7.
First Amended Complaint filed in June 2016 (ECF 25),
plaintiff added defendants Jessica-Carl; Arbor, Inc.
(“Arbor”); Burton King (“Mr. King”);
and Alfred Slattery. In August 2016, Sean Nicholson, a
plaintiff in lead paint litigation in the Circuit Court for
Baltimore City, sought to intervene as a defendant. ECF 33.
That motion was also granted. ECF 76.
Motion was filed in June 2017. Along with the Motion, CX Re
submitted its proposed Second Amended Complaint (ECF 189-1)
and numerous exhibits. See ECF 189-2 through ECF
189-8. Jessica-Carl opposes the Motion (ECF 198), supported
by multiple exhibits. See ECF 198-1 through ECF
198-13. B&R also opposes the Motion (ECF 209) and adopts
the reasoning in the oppositions filed by its codefendants.
(ECF 198 and ECF 209 shall be referred to collectively as
“Opposition”). CX Re has replied. ECF 223
April 4, 2017, Jessica-Carl filed a “Motion for
Temporary Restraining Order, and Preliminary
Injunction.” ECF 88. It is supported by a memorandum
(ECF 88-1) (collectively, “P.I. Motion”), and
many exhibits. See ECF 88-3 through ECF 88-13. CX Re
opposed Jessica-Carl's P.I. Motion (ECF 114) and
Jessica-Carl replied. ECF 130.
Motion is fully briefed and no hearing is necessary to
resolve it. See Local Rule 105.6. For the reasons
that follow, I shall deny plaintiff's Motion with respect
to new claims and new defendants. But, I shall permit
amendment on a limited basis, to correct minor factual errors
and to remove Mr. King and Slattery as defendants. And, I
shall deny, as moot, Jessica-Carl's P.I. Motion.
Factual and Procedural Background
formerly CNA Reinsurance Company Limited, is an insurer
organized under the laws of the United Kingdom, with its
principal place of business in London. ECF 25, ¶ 3.
B&R is a Maryland corporation in the business of owning
and managing rental housing in the Baltimore area.
Id. ¶ 4.
1997, B&R submitted a “Commercial General Liability
Application” to CNA on behalf of B&R, as well as a
“Supplemental Application-Habitational Risks”
(collectively, the “Application”). Id.
¶¶ 17, 18; see ECF 1-4; ECF 189-5. The
Application identified Jessica-Carl, Inc.; Arbor, Inc.; KSS
LLC; and B&R as named insureds. ECF 1-4 at 2 and ECF
189-5 at 2 (Application Questions); ECF 25, ¶ 19.
Additionally, the Application pertained to multiple
addresses, including 3215 Baker Street, 54 North Gorman
Avenue, and 2308 E. North Avenue. ECF 189-5 at
16 of the Application asked: “Has the insured ever had
any lead paint violations in the building(s)?” ECF 25,
¶ 20; see also ECF 1-4 at 2; ECF 189-5 at 2. On
the Application, the box labeled “No” was
checked. ECF 1-4 at 2; ECF 189-5 at 2; see also ECF
25, ¶ 20. In addition, the Application stated, in
capital letters: “BY SIGNING THIS SUPPLEMENTAL
APPLICATION THE INSURED ACKNOWLEDGES THAT THE INSURED
UNDERSTANDS THAT [CX Re] IS RELYING ON THE INFORMATION
PROVIDED, AND THE ANSWERS TO THE QUESTIONS ASKED, IN DECIDING
WHETHER TO ISSUE A POLICY OF INSURANCE TO THE INSURED.”
See ECF 1-4 at 2. On July 3, 1997, Slattery signed
the Application as the “Producer, ” and on July
18, 1997, Mr. King signed the Application as the
“Insured.” See id.; see also
ECF 25, ¶¶ 21-22.
issued Policy No. CNAGL1106-97 to B&R for the period of
August 1, 1997 to August 1, 1998, “in reliance on the
representations made in the Application . . . .” ECF
25, ¶¶ 11, 24; see ECF 1-2. The policy was
subsequently renewed for the period from August 1, 1998 to
August 1, 1999, as Policy No. CNAGL1240-98. ECF 25, ¶
11; see ECF 1-3 (collectively, the
“Policies”). The Policies “provide
commercial general liability coverage to B&R
Management” and “insure B&R Management for
certain risks in connection with specified residential
buildings at numerous locations in Baltimore,
Maryland.” ECF 25, ¶¶ 12, 13. The Policies
also contain an endorsement entitled “Schedule of Named
Insureds”, naming, inter alia, Jessica-Carl;
B&R; Arbor; KSS Associates, LLC; Renee King; Mr. King;
Eileen Silberg; Nancy Cohen; Mark Libowitz; Nancy Oring;
Alvin Lapidus; Mark Lapidus; and Lois Lapidus. ECF 189-3 at
4; ECF 189-4 at 5; ECF 25, ¶ 14. The Policies also
contain an endorsement entitled “Schedule of
Locations” that includes the Baker Street, North Gorman
Avenue, and E. North Avenue properties. ECF 189-4 at 6-7;
see also ECF 25, ¶ 15.
noted, CX Re filed suit against B&R in November 2015. ECF
1. The Court's Scheduling Order of March 23, 2016 (ECF
18) set a deadline of May 23, 2016, for joinder of additional
parties and amendment of pleadings. Id. at 1. The
Scheduling Order was subsequently amended three times, at the
joint request of the parties (ECF 38, ECF 64, ECF 79), in
order to extend discovery deadlines. See ECF 39; ECF
65; ECF 80. Notably, the deadline for motions to join parties
and to amend the pleadings was never extended. See
2016, CX Re timely moved to file the First Amended Complaint.
ECF 22. I granted that motion by Order of June 13, 2016. ECF
24. As indicated, the First Amended Complaint (ECF 25) added
additional insureds as defendants: Jessica-Carl; Arbor; Mr.
King; and Slattery.
First Amended Complaint, CX Re contends that “B&R
Management's answer to Question 16 [on the Application]
was false and misleading because, prior to July 1997, ”
the Baltimore City Health Department (“BCHD”)
“had cited B&R Management for a lead paint
violation in a building included on the Policies'
Schedule of Locations.” ECF 25, ¶ 25. In
particular, CX Re points to the “Emergency Violation
Notice and Order to Remove Lead Nuisance” issued by the
BCHD on July 26, 1996, concerning the property at 3215 Baker
Street. Id.; see ECF 25-2 (Violation #
3653, “Baker Violation”). The Baker Street
property was included on the endorsement titled
“Schedule of Locations.” ECF 25, ¶ 15.
Baker Violation stated, ECF 25-2 at 3:
It has been determined from elevated blood lead and an
investigation by the Baltimore City Health Department that a
child who frequents the above dwelling has an abnormal blood
lead level. An inspection of this dwelling shows it contains
lead based paint.
Such condition has been deemed by the Commissioner of Health
to be hazardous to life and health and a public health
CX Re alleges that it did not learn of the Baker Violation
until August 2015. ECF 25, ¶ 27. CX Re also asserts,
id. ¶ 26: “The existence of this
undisclosed, pre-Application Violation renders the
‘No' answer to Question 16 false.”
January 4, 2017, CX Re dismissed its suit as to Mr. King. ECF
66. And, on March 10, 2017, CX Re and B&R reached a
“settlement in principle.” ECF 189, ¶ 14.
Thereafter, on April 4, 2017, Jessica-Carl filed its P.I.
Motion (ECF 88), seeking to enjoin CX Re, B&R, and Mr.
King from entering into a settlement agreement. Jessica-Carl
argued, inter alia, that a settlement agreement with
B&R and Mr. King would “modify the Policies in
order to eviscerate coverage for the remaining
insureds.” ECF 88-1 at 2. B&R then “withdrew
from discussions to finalize the settlement” (ECF 189,
¶ 15), claiming “efforts to negotiate a settlement
of this action proved fruitless.” Id. ¶
39. By Order of April 6, 2017 (ECF 94), I determined that CX
Re may continue to negotiate with B&R, pending resolution
of the P.I. Motion, but could not enter into a final
agreement until the Court had an opportunity to address the
Court held a hearing on the P.I. Motion on June 9, 2017. ECF
181; ECF 183; ECF 194 (Hearing Transcript). On the same date,
CX Re dismissed its suit as to Slattery. ECF 180.
hearing, CX Re informed the Court that “[t]here are no
settlement discussions” with B&R, as the settlement
discussions “fell apart[.]” ECF 194 at 20, 21.
The Court was also advised that CX Re intended to assert two
additional grounds for rescission of the Policies. ECF 194 at
3-5. These included alleged false responses to Application
Question 12 and Application Question 14, concerning the
presence of lead paint on interior and exterior surfaces, as
well as chipping or flaking lead paint on those surfaces.
Id. at 4-5, 12, 14. CX Re explained that it had
recently acquired documents pertaining to questions 12 and
14, which “show material misrepresentations” as
to “the properties Jessica-Carl owned or managed at . .
. 54 Gorman Street.” Id. at 32.
explained that it had just had an opportunity to depose
Slattery on June 8, 2017, at which it obtained “clear
and convincing evidence, which [it] will use to amend [its]
complaint.” Id. at 16. Further, CX Re stated
that it “went to the courthouse and . . . got the
pleadings [and] . . . depositions” to establish
material misrepresentations by Jessica-Carl. Id. at
21. Plaintiff's counsel insisted that CX Re had
“worked around the clock to get this evidence, ”
after the settlement “fell apart in April, ” and
asserted: “So this is no ambush.” Id. In
light of plaintiff's request to file a motion to amend
its First Amended Complaint, the Court determined to postpone
the hearing on the P.I. Motion. ECF 183.
hearing, CX Re did not raise the prospect of joinder of
additional defendants. See ECF 194. That request was
presented for ...