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Zepp Realty, P.A. v. Sentinel Insurance Co. Ltd.

United States District Court, D. Maryland

February 20, 2018

ZEPP REALTY, P.A. and CHARLES ZEPP
v.
SENTINEL INSURANCE COMPANY LTD.

          MEMORANDUM

          Richard D. Bennett United States District Judge.

         Plaintiffs Zepp Realty, P.A. ("Zepp Realty") and Charles Zepp bring this lawsuit against defendant Sentinel Insurance Company Ltd. ("Sentinel") seeking damages for alleged breach of contract. Now pending are defendant Sentinel's motion for summary judgment (ECF No. 15) and plaintiffs Zepp Realty's and Charles Zepp's motion to amend the complaint (ECF No. 14). The parties have fully briefed the motions, and no oral argument is necessary. See Local R. 105.6. For the reasons set forth below, defendant's motion for summary judgment is granted. Plaintiffs' motion to amend the complaint is denied as moot.

         BACKGROUND

         This dispute arises out of Sentinel's allegedly wrongful refusal to defend and indemnify plaintiffs Zepp Realty and Charles Zepp under their insurance policy with Sentinel in a real-estate related lawsuit filed against Zepp. (ECF No. 2). Plaintiff Zepp Realty is a Maryland real estate sales and development professional services corporation. (ECF No. 2, & 2). Plaintiff Charles Zepp is the sole director, officer, and employee of Zepp Realty. (ECF No. 2, & 4). Defendant Sentinel is an insurance company doing business in Maryland. (ECF No. 2, & 1). On May 20, 2014, Sentinel issued a business liability insurance policy (the "Policy") to Zepp Realty and Charles Zepp (jointly referred to as "Zepp"). (ECF No. 15, Ex. 2, p. 4).

         In October 2014, Robert and Kimberly Rullan (the "Rullans") sued Zepp in the Circuit Court for Howard County, Maryland (the "Underlying Action"), setting forth allegations against Zepp in Zepp's capacity as both a real estate developer and real estate agent. See Rullan v. Sill, Adcock, & Associates LLC, et al, Case No. 13-C-14-100892. (ECF No. 2, Ex. D). In the Underlying Action, the Rullans allege they purchased property in a subdivision developed and marketed by Zepp, on which they experienced periodic flooding during rain events. (ECF No. 2, Ex. D, & 35, 44). Describing the flooding, the Rullans allege abnormally large quantities of storm water run-off from nearby properties were diverted onto their property, "resulting in a continuous rapid moving, river-like condition with a depth of one to two feet and a width of up to forty feet flowing onto and through the [Rullans'] property." (ECF No. 2, Ex. D, & 44).

         The Rullans first experienced the flooding in the fall of 2011, at which time they notified Zepp of the problem via email. (ECF No. 2, Ex. D, & 45; ECF No. 22, Ex. 5). The Rullans wrote in their email, "there is and has been a large amount of water that collects to the right of our house." (ECF No. 22, Ex. 5). They described the flooding in the email as a "wet pond area" and informed Zepp the flooding was "not just a little bit of a wet area, " but was instead "a large area of standing water." (ECF No. 22, Ex. 5). According to the Rullans, Zepp and the homebuilder "acknowledged their responsibility...and undertook efforts to correct such defects." (ECF No. 2, Ex. D, & 45).

         After receiving the email, Zepp went to the property and observed "grass was not growing where it was puddling, the grass was dying there, and... [the Rullans] had sandbags on the patio." (ECF No. 22, Ex. 2, Charles Zepp Tr. 90:13). Zepp informed the Rullans they should call the homebuilder to have the problem fixed. (ECF No. 22, Ex. 2, Charles Zepp Tr. 92:11-15). Repair efforts by the homebuilder were unsuccessful. (ECF No. 2, Ex. D, & 46-50).

         The Rullans again reached out to Zepp via email on May 1, 2014 to discuss the flooding problem. (ECF No. 22, Ex. 4). This time, they described the flooding with terms such as "a flood plain, " "a swamp, " and "a 40' wide by 1 V* deep river." (ECF No. 22, Ex. 4). They informed Zepp the river had caused them to lose all use of their backyard after rain and lamented "no one should have to live like this." (ECF No. 22, Ex. 4). After receiving this email, the Rullans claim Zepp again visited the property and undertook repair efforts, which were ultimately unsuccessful. (ECF No. 2, Ex. D, & 51-57).

         In October 2014, the Rullans filed suit against Zepp and other defendants over the property defects. (ECF No. 2, Ex. D). Specifically, the Rullans alleged negligence, negligent misrepresentation, intentional misrepresentation, and unfair and deceptive trade practices against Zepp. (ECF No. 2, Ex. D). The allegations against Zepp were all based on the river-like condition on the property. (ECF No. 2, Ex. D).

         Zepp informed Sentinel of the Underlying Action and requested Sentinel defend and indemnify Zepp. (ECF No. 2, & 8). Sentinel denied coverage in a letter dated June 5, 2015, explaining the Underlying Action fell within the Policy's exclusion for real estate development and management activities because the Underlying Action's allegations were based on Zepp's activities as a real estate developer. (ECF No. 2, Ex. B). The letter also reserved Sentinel's right to add new coverage defenses. (ECF No. 2, Ex. B., p. 4). Zepp, through counsel, renewed its request for defense and indemnification by letter dated November 1, 2016. (ECF No. 2, Ex. G). Sentinel again denied the request. (ECF No. 2, Ex. C).

         Zepp ultimately settled the Underlying Action with the Rullans for $25, 000. (ECF No. 2, & 18). In defending the Underlying Action, Zepp paid $108, 577.50 in attorneys' fees and $5, 825 in mediation and arbitration fees. (ECF No. 2, & 19).

         Plaintiffs filed a complaint in the Circuit Court for Howard County on April 26, 2017, alleging Sentinel breached their contract in refusing to defend and indemnify Zepp in the Underlying Action. (ECF No. 1; ECF No. 2). Defendant removed the case to the District of Maryland on June 27, 2017. (ECF No. 1). Now pending are two motions. First, plaintiffs filed a motion to amend the complaint on September 25, 2017. (ECF No. 14).[1] Second, defendant moved for summary judgment on October 2, 2017. (ECF No. 15). On October 11, 2017, the parties jointly requested the court rule on defendant's motion for summary judgment (ECF No. 15) before ruling on plaintiffs' motion to amend the complaint (ECF No. 14). (ECF No. 18).

         STANDARD

         Under Federal Rule of Civil Procedure 56(c), a court must grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). A genuine issue of material fact exists where, "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248. The party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine dispute of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When reviewing a motion for summary judgment, the court must take all facts and inferences in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378 (2007).

         The party opposing summary judgment must, however, "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,475 U.S. 574, 586 (1986); see also In re Apex Express Corp.,190 F.3d 624, 633 (4th Cir. 1999). The non-movant '"may not rest upon the mere allegations or denials of [his] pleadings, ' but rather must 'set forth specific facts showing that there is a genuine issue for trial.'" Bouchat v. Bait. Ravens Football Club, Inc.,346 F.3d 514, 522 (4th Cir. 2003) (alteration in original) (quoting Fed.R.Civ.P. 56(e)); see also Adickes v. S. H. Kress & Co., 398 U.S. 144, 160 (1970). A court should enter summary judgment when a party fails to make ...


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