United States District Court, D. Maryland, Southern Division
J. HAZEL, UNITED STATES DISTRICT JUDGE
Steak in a Sack, Inc., a Maryland restaurant, has sued its
former insurer, Defendant Covington Specialty Insurance
Company, for Breach of Contract and Lack of Good Faith. ECF
No. 2. This case was removed from the Circuit Court for
Prince George's County pursuant to the Court's
diversity jurisdiction, 28 U.S.C. § 1332, as Plaintiff
is a Maryland resident, Defendant is a New Hampshire
corporation and the amount in controversy is more than $75,
000.00. The parties have filed cross-Motions for Summary
Judgment. ECF Nos. 30, 31, 34.No hearing is necessary. See Loc.
R. 105.6 (D. Md. 2016). For the following reasons, both
motions for summary judgment are denied.
Covington Specialty Insurance Company
(“Covington”) is a New Hampshire corporation and
operates as a Surplus Lines Insurance Carrier in Maryland. ECF No.
2 at 2; ECF No. 11 at 1. Tapco Underwriters, Inc.
(“Tapco”) was the managing general agent for
Covington. ECF No. 31-3 at 3. Plaintiff Steak in a Sack, Inc.
is the entity that runs a restaurant by the same name located
in Temple Hills, Maryland. ECF No. 2 ¶ 4. Covington was
Plaintiff's insurance provider and on June 19, 2015,
Plaintiff applied for a renewal of its insurance contract
with Covington, using a form provided by Tapco. ECF No. 31-2
¶ 4. An Insurance Policy was subsequently entered into
for the period of June 19, 2015 to June 19, 2016 (the
“Policy”). ECF No. 2-1 at 5. On July 21, 2015, at
Tapco's request, York Risk Control (“York”)
performed an inspection of Plaintiff's restaurant.
Id. ¶ 5. York noted that Plaintiff did not have
a “K-class fire extinguisher located within 30 feet of
the kitchen, ” and recommended that such an
extinguisher be “mounted in a readily accessible area
of the kitchen by a licensed fire protection
contractor.” Id. ¶ 6. On August 3, 2015,
Tapco sent a letter to Plaintiff's insurance broker,
Walterry, Inc., and requested that York's recommendations
be implemented. Id. ¶ 7. Tapco further
explained that “[i]f no response is received within 20
days, the carrier will require us to issue an additional
premium endorsement and/or a notice of cancellation.”
Id. On September 2, 2015, having received no
response, Tapco issued a Notice of Cancellation to the
Plaintiff, reflecting that the Insurance Contract would be
cancelled on October 18, 2015. Id. ¶ 8. On
October 16, 2015, Ashleigh Kalid, one of Plaintiff's
employees, called Stacey Shanklin, a Policy Issuance
Supervisor for Tapco, to inform Tapco that Kalid had
implemented the recommendations; Shanklin sought additional
documentation. Id. ¶ 9. At approximately 1:28
pm, Kalid subsequently emailed Shanklin a photograph of a
fire extinguisher sitting on a counter and three photographs
of documents. ECF No. 31-2 at 6-10.
point, the parties' versions of events diverge. According
to Tapco and Shanklin, these photographs were insufficient
proof that Kalid had implemented the recommendations, as it
was “not evident from the photograph . . . that the
fire extinguisher was a K-rated wet chemical type fire
extinguisher or that it had been mounted in a readily
accessible area of the kitchen . . .” Id.
¶ 11 (internal quotations omitted). Shanklin claims that
at 1:59 pm, a half hour after receiving the email from Kalid,
Shanklin responded and asked for further information
regarding the fire extinguisher. Id. ¶ 12. At
4:36 pm, two and a half hours later, she sent a follow-up
email requesting “a photo of the extinguisher, once
it's installed” as well as “a photo of the
label or ‘bill of sale' indicating that this is a
‘K' Type fire extinguisher.” Id.
¶ 13. In order to give Steak in a Sack an
opportunity to provide the requested information, Shanklin
explains that the Insurance Contract was reinstated on
October 20, 2015, “to provide Plaintiff with additional
time to provide the documentation requested . . . .”
Id. ¶ 14. On November 6, 2015, having not
received the requested information, Shanklin emailed Kalid
and stated that “I don't show that we've
[received] the required information. I'll have to request
cancellation . . . .” Id. ¶ 15. That same
day, Shanklin ordered the cancellation of Plaintiff's
insurance coverage. Id. ¶ 16.
disputes this recitation of events. In her Affirmation, ECF
No. 34-9, Ashleigh Kalid explains that the fire extinguisher
they purchased was in fact a “K” rated wet
chemical type fire extinguisher, but that it was not possible
to mount the extinguisher in the kitchen “given the
location of the stoves, hood and stainless steel
backing.” Id. ¶ 12. Kalid alleges that
she called Shanklin and explained the difficulty in mounting
the extinguisher, and that Shanklin told her that the
extinguisher could be placed on a shelf in a readily
accessible area of the kitchen. Id. ¶ 13.
Furthermore, Kalid alleges that after she sent the
photographs of the extinguisher to Shanklin, she spoke with
Shanklin who told her that “the recommendations had
been met and that nothing further was needed.”
Id. ¶ 14. Kalid further alleges that she was
told that the Insurance Policy “was reinstated due to
the Plaintiff's compliance with the inspection
recommendations.” Id. ¶ 18. Regarding the
emails that Shanklin claimed to have sent on October 16, 2015
at 1:59 pm and 4:36 pm, and on November 6, 2015, Kalid
alleges that she never received those emails. Id.
¶ 20. Kalid further alleges that neither she nor Steak
in a Sack ever received a subsequent cancellation notice, and
that they continued to check their online account until
February 2016, and “was informed that the account was
‘Active' and that all premiums had been ‘PAID
OFF.'” Id. ¶ 24.
February 19, 2016, a fire occurred at Plaintiff's
restaurant, resulting in property damage. Id. ¶
27. Defendant refused to pay for the loss, and Plaintiff
filed suit in the Circuit Court for Prince George's
County, Maryland on March 22, 2017. ECF No. 2. In its
Complaint, Plaintiff alleges one count of Breach of Contract
(Count I) and one count of Lack of Good Faith (Count II).
Id. On May 18, 2017, Defendant removed the case to
this Court, ECF No. 1, pursuant to the Court's diversity
jurisdiction, ECF No. 11. Defendant filed an Answer to the
Complaint on May 22, 2017. ECF No. 9. On January 29, 2018,
Plaintiff filed a Partial Motion for Summary Judgment, ECF
No. 30, and Defendant filed a Motion for Summary Judgment,
ECF No. 31. Plaintiff subsequently filed a Motion for Summary
Judgment, ECF No. 34, and moved to strike an exhibit from
Defendant's Motion for Summary Judgment, ECF No. 35. All
motions have been fully briefed.
STANDARD OF REVIEW
may move for summary judgment under Fed.R.Civ.P. 56(a).
“The court shall grant summary judgment if 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). The movant has the “initial responsibility of
informing the district court of the basis for its motion, and
identifying those portions of the pleadings . . . together
with the affidavits, if any, which it believes demonstrate
the absence of a genuine issue of material fact.”
Celotex Corp. v. Catrett, 466 U.S. 317, 323 (1986)
(internal citation omitted). In considering the motion,
“the judge's function is not . . . to weigh the
evidence and determine the truth of the matter, but to
determine whether there is a genuine issue for trial.”
Anderson v. Liberty Lobby, 477 U.S. 242, 249 (1986).
To withstand a motion for summary judgment, the nonmoving
party must do more than present a mere scintilla of evidence.
Phillips v. CSX Transport, Inc., 190 F.3d 285, 287
(4th Cir. 1999). Rather, “the adverse party must set
forth specific facts showing that there is a genuine issue
for trial.” Anderson, 477 U.S. at 250. No.
genuine issue of material fact exists if the non-moving party
fails to make a sufficient showing on an essential element of
his case as to which he would have the burden of proof.
See Celotex, 477 U.S. at 322-23. Although the Court
should draw all justifiable inferences in the nonmoving
party's favor, the nonmoving party cannot create a
genuine issue of material fact “through mere
speculation or the building of one inference upon
another.” Beale v. Hardy, 769 F.2d 213, 214
(4th Cir. 1985).
for summary judgment require that the Court consider
“each motion separately on its own merits to determine
whether either of the parties deserves judgment as a matter
of law.” Rossignol v. Voorhaar, 316 F.3d 516,
523 (4th Cir. 2003). “The Court must deny both motions
if it finds there is a genuine issue of material fact, but if
there is no genuine issue and one or the other party is
entitled to prevail as a matter of law, the court will render
judgment.” Wallace v. Poulos, No. DKC
2008-0251, 2009 WL 3216622, at *4 (D. Md. Sept. 29, 2009)
(internal citation omitted).
Motions for Summary Judgment, Plaintiff alleges that there is
no dispute that Defendant did not comply with certain notice
provisions of the Maryland Insurance Code, and that the
cancellation notice was sent from and to the wrong parties
pursuant to the Policy. ECF No. 30-1; ECF No. 34. In its
Motion for Summary Judgment, Covington alleges that the
notice provisions of the Maryland Insurance Code do not apply
to it, and that it cancelled the Policy prior to the fire in
good faith. ECF No. 31-1. The Court first examines whether
the notice provisions of the Maryland Insurance Code cited by
Plaintiff apply to Defendant, before examining whether
Defendant complied with the terms of the Policy when it
cancelled Plaintiff's coverage.
Application of Maryland Insurance Code
Court first considers whether certain provisions of the
Maryland Insurance Code apply to Defendant's cancellation
of Plaintiff's insurance policy. Md. Code, Ins. §
27-603 provides that for cancellation of a “commercial
insurance” policy, “at least 45 days before the
date of the proposed cancellation or expiration of the
policy, the insurer shall send to the insured, by a
first-class mail tracking method or by commercial mail
delivery service, written notice of ...