United States District Court, D. Maryland
MT. HAWLEY INS. CO., Plaintiff,
ADELL PLASTICS, INC., Defendant.
K. BREDAR CHIEF JUDGE.
case arises from a fire that demolished several buildings at
the Baltimore facility of Adell Plastics, Inc.
("Adell"). Mt. Hawley Insurance Co. ("Mt.
Hawley") sued Adell, seeking a declaration that, under
their commercial property insurance contract, Mt. Hawley owed
no coverage and seeking a recoupment of its $1 million
advance payment. Adell filed a counterclaim, claiming that
Mt. Hawley breached the insurance contract and acted with a
lack of good faith. Adell moved for summary judgment on its
breach of contract and lack of good faith claims. Mt. Hawley
opposed Adell's motion and moved for summary judgment, in
its own right, arguing that it was entitled to a declaratory
judgment and restitution as a matter of law. Both sides have
also moved to strike certain exhibits relied on by the
opposing party. No. hearing is required. See Local
Rule 105.6 (D. Md. 2016). For the reasons set forth below,
the Court will deny both motions to strike. The Court will
further deny Adell's motion for summary judgment in full
and Mt. Hawley's motion for summary judgment in part.
Factual and Procedural Background
October 4, 2016, Adell's Baltimore facility caught fire.
The fire began at approximately 1:00 p.m. and lasted for
several days, eventually destroying two buildings and causing
over $12.7 million of damage. (Adell Mem. M.S.J, at 6, ECF
No. 95; Adell Mem. M.S.J. Ex. 1 at 29, ECF No. 95-2; Ex. 13,
ECF No. 95-14; Mt. Hawley Mem. M.S.J. Ex. 11 at 10, ECF No.
time of the fire, Adell had a commercial property insurance
policy in effect through Mt. Hawley. (Mt. Hawley Mem. M.S.J.
Ex. 20(A), ECF No. 110-22.) The insurance contract included
coverage in the event of a fire and contained a Protective
Safeguard Endorsement ("the Endorsement"), which
As a condition of this insurance, it is understood and agreed
that the protective devices or services set forth in the
Schedule below will be maintained in complete working
order.... We will not pay for loss or damage if the
protective safeguard or service in the above Schedule was not
maintained in complete working order and such failure to
maintain contributed directly or indirectly to the loss or
damage or to the extent of such loss or damage.
(Id. at 85-86.) The Endorsement "Schedule"
listed the "Automatic Sprinkler System" and
"Automatic Fire Alarm" as the types of protective
devices that Adell had to maintain. (Id.)
Adell's Baltimore facility had two sprinkler systems, and
the Endorsement obligated Adell to maintain "[a]ll"
of them in "complete working order." (Id.)
One sprinkler system connected to Buildings Five and Six
while a second connected to Buildings One through Four. (Mt.
Hawley Mem. M.S.J. Ex. 24(C, F), ECF. No. 110-26) The fire
destroyed Buildings Five and Six. (Mt. Hawley Mem. M.S.J. Ex.
11 at 10.)
a week of the fire, Mt. Hawley began its investigation and
delivered an advance payment of $1 million to Adell. (Adell
Mem. M.S.J. Ex. 13.) At the end of October, Mt.
informed Adell by letter that its investigation revealed that
some of the protective devices may not have responded to the
Based on the facts known to date, it is believed that the
sprinkler system in Building 5 did not activate, and there
was no audible sound (water motor gong) indicating the
sprinkler system's activation. The lack of a gong usually
indicates that water was not flowing in the system. It is
also believed that the post indicator valve that controls the
system's water flow in Building 5 was in a closed
position, which means that water was prevented from entering
the sprinkler system.
(Mt. Hawley Mem. M.S.J. Ex. 16(B) at 18, ECF No. 110-18.) The
letter made clear that Mt. Hawley would continue to
investigate the Adell fire but would do so "under an
express reservation of rights." (Id. at 19, )
January 2017, Mt. Hawley filed a complaint in this court,
seeking a declaration that it did not owe Adell under the
insurance contract and seeking restitution for the advance
payment. (Compl. at 1, ECF No.l.) Adell filed a counterclaim,
alleging breach of contract and lack of good faith under Md.
Code Ann. Cts. & Jud. Proc. § 3-1701 (West 2016).
(Answer & Countered, ECF No. 10; First Am. Countercl.,
ECF No. 41.) After engaging in a hard-fought discovery
battle, see Mt, Hawley Ins. Co. v. Adell Plastics,
Inc., No. 17-252, slip op. at 1-2 (D. Md. Aug, 22,
2017), both parties have moved for summary judgment on their
claims. In doing so, they attach voluminous exhibits.
presents the protective devices' monitoring logs; loss
control inspection reports of the Baltimore facility;
depositions of witnesses to the fire and employees of the
companies involved in the insurance dispute; and several
pieces of correspondence regarding the facility and the fire.
Through this evidence, Adell supports its assertion that it
properly maintained the protective devices by hiring Fireline
Corp., a fire equipment distribution business, to inspect and
repair their protective systems and by allowing both Fireline
and other loss control inspectors to inspect the devices and
prepare them when needed. (See Adell Mem. M.S.J. Ex.
20, ECF No. 95-21; Ex. 55, ECF No. 95-56; Ex. 57, ECF No.
95-58; Ex. 59, ECF No. 95-60; Ex. 65, ECF No. 95-66.) Adell
puts forth testimony and monitoring logs that indicate that
the post-indicator valve, which connects the sprinklers to
the municipal water supply, was locked open and functioning
at the time of the fire. (See Adell Mem. M.S.J. Ex.
22, ECF No. 95-23; Ex. 45, ECF No. 95-46; Ex. 46, ECF No.
95-47; Ex. 55; Ex. 57.) Testimony from Adell employees and
monitoring logs indicate that water flowed from the
sprinklers in response to the fire. (See Adell Mem.
M.S.J. Ex. 22; Ex. 67, ECF No. 95-68.) Finally, Adell's
interpretation of the monitoring logs illustrates a
functioning sprinkler and alarm system that responded to the
fire. (See Adell Mem. M.S.J. Ex. 40, ECF No. 95-41;
Ex. 45; Ex. 46; Ex. 51, ECF No. 95-52.)
Hawley's evidence conflicts on each point. Mt. Hawley
puts forth inspection reports, the Fireline agreement with
Adell, and several witness declarations to show that Adell
failed to maintain the sprinklers in complete working order
because it failed to contract for and receive complete
inspections of the protective devices, as recommended by the
National Fire Protection Association ("NFPA").
(See Mt. Hawley Mem. M.S.J. Ex. 11; Ex. 21, ECF No.
110-23; Ex. 22(B, C, I), ECF No. 110-24; Ex. 23(B), ECF No.
110-25.) Mt. Hawley presents evidence that the post-indicator
valve may have sat in the closed position or, even, in
disrepair for some time. (See Mt. Hawley Mem. M.S.J.
Ex. 11; Ex. 14, ECF No. 110-16; Ex. 21; Ex. 22(B, F, G, H);
Ex. 23(0).) Many of the first responders to the fire testify
that water was not flowing from the sprinklers in Building 5
on the day of the fire and that the lack of sprinklers
contributed to the rapid spread of the fire. (See
Mt. Hawley Mem. M.S.J. Ex. 3, ECF No. 110-5; Ex. 4, ECF No.
110-6; Ex. 5, ECF No. 110-7; Ex. 6, ECF No. 110-8; Ex. 7, ECF
No. 110-9; Ex. 8, ECF No. 110-10; Ex. 9, ECF No. 110-11; Ex.
10, ECF No. 110-12.) Finally, Mt. Hawley interprets the
monitoring logs differently and concludes that they reflect a
broken sprinkler system that failed to adequately respond to
the fire. (See Mt. Hawley Mem. M.S.J. Exs. 13, ECF
addition, the parties dispute how Mt. Hawley became
Adell's insurer in the first place. Mt. Hawley claims
that, when Adell applied for insurance in April 2016, the
application contained material misrepresentations as to the
Baltimore facility's sprinkler system, code violations,
and prior insurance coverage. (Mt. Hawley Mem. M.S.J, at 46.)
Mt. Hawley offers communications showing that Adell's
prior insurance provider, Verlan Fire Insurance Co., did not
renew its policy and that several insurance providers
declined to cover Adell-facts Adell omitted from its
insurance application. (Mt. Hawley Mem. M.S.J. Ex. 20; Ex.
22(1, J, K, L); Ex. 23(1, J).) Adell offers testimony from
Verlan's corporate designee stating that Verlan in fact
offered to renew and that the insurance providers that
declined to extend coverage to Adell were all under the
umbrella corporation of The Hanover Insurance Group. (Adell
Opp. & Reply at 28, ECF. No. 118; Adell Opp. & Reply
Ex. 90 at 110, 22-23, 27, ECF No. 118-16.)
the volume of evidence, both parties assert that there is no
genuine issue of material fact. At this stage, the ...