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Colony Insurance Co. v. R & P Automotive, LLC

United States District Court, D. Maryland

November 16, 2018

COLONY INSURANCE COMPANY, Plaintiff,
v.
R & P AUTOMOTIVE, LLC, et al., Defendants.

          MEMORANDUM OPINION

          Beth P. Gesner Chief United States Magistrate Judge

         Plaintiff Colony Insurance Company (“Colony, ” or “plaintiff”) brings this action seeking a declaratory judgment that its insurance policy with defendant R & P Automotive, LLC (“R&P”) is void ab initio, of no force and effect, and properly rescinded. (ECF No. 42 at 3). Plaintiff joined as defendants Rose Tamaris, Master Systems Automotive, Inc. (“Master”), Matthew Anders, and Main Street America Assurance Company (“Main Street”). (ECF No. 42 at 4-5). Currently pending before the court are: (1) Defendant Matthew Anders' Motion for Summary Judgment (“Anders' Motion”) (ECF No. 77); (2) Defendants Master, R&P, and Rose Tamaris' Joint Motion for Summary Judgment (“R&P Group's Motion”) (ECF No. 78); (3) Defendant Main Street's Motion for Summary Judgment Joining R&P's Motion for Summary Judgment (“Main Street's Motion”) (ECF No. 79); (4) Plaintiff's Motion for Summary Judgment and Response in Opposition to Defendants' Motions for Summary Judgment (“Plaintiff's Motion”) (ECF No. 80); (5) Defendant Matthew Anders' Reply to Plaintiff's Response to His Motion for Summary Judgment and Plaintiff's Motion for Summary Judgment (“Anders' Reply”) (ECF No. 81); (6) Defendants Rose Tamaris, Master, and R&P's Opposition to Plaintiff's Motion for Summary Judgment and Reply to Plaintiff's Opposition to Defendants' Motion for Summary Judgment (“R&P's Reply”) (ECF No. 83); (7) Defendant Main Street's Response to Plaintiff's Motion for Summary Judgment (“Main Street's Reply”) (ECF No. 85); and (8) Plaintiff's Reply to Defendants' Responses Regarding Motions for Summary Judgment (“Plaintiff's Reply”) (ECF No. 86). A hearing was held on October 24, 2018. (ECF No. 88). For the reasons stated below, Plaintiff's Motion (ECF No. 80) is GRANTED in part and DENIED in part and Anders' Motion (ECF No. 77), the R&P Group's Motion (ECF No. 78), and Master's Motion (ECF No. 79) are GRANTED in part and DENIED in part.

         I. BACKGROUND

         In ruling on a motion for summary judgment, this court considers the facts and draws all reasonable inferences in the light most favorable to the nonmoving party. Scott v. Harris, 550 U.S. 372, 378 (2007). When the parties have filed cross-motions for summary judgment, in “considering each individual motion, the court must take care to ‘resolve all factual disputes and any competing, rational inferences in the light most favorable' to the party opposing that motion.” Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (quoting Wightman v. Springfield Terminal Ry. Co., 100 F.3d 228, 230 (1st Cir. 1996)).

         In 2012, Rose Tamaris formed R & P Automotive, LLC (“R&P”). (ECF No. 78-2). R&P provided auto detailing services, primarily for DARCARS at DARCARS' Honda dealership location in Bowie, MD. (ECF No. 77-3 at 6). Mrs. Tamaris' late husband, Andreas Tamaris, owned another entity, Master Systems Automotive, Inc. (“Master”), which also provided auto detailing services, but primarily for DARCARS at DARCARS' Lexus of Silver Spring location. Id. In 2015, Mrs. Tamaris acquired full ownership of Master from Mr. Tamaris. (ECF Nos. 77-3 at 6-7, 78-4). Mrs. Tamaris also owned a third entity, East Coast Automotive, LLC (“East Coast”), another auto detailing business. (ECF No. 77-3 at 4-5).

         In 2013, Mrs. Tamaris applied for insurance from plaintiff for R&P with the assistance of insurance agent Jon Christiana of C&E Insurance and Financial Services. (ECF No. 78-5). On the insurance application, under the heading “Applicant Information, ” “R & P Automotive, LLC” is listed under “Business Trade Name.” (ECF No. 78-6 at 1). The business entity is identified as an “LLC” and operations are described as “auto detailer.” Id. Question three asked “are you involved in any additional business operations other than what is described above?” and the box marked “No” is checked. Id. Question 10, titled “Rating Exposure Basis, ” directed the applicant to “list ALL Owners, Employees and Drivers.” (ECF No. 78-6 at 2). The sole party listed in response is Rose Tamaris, described as “Owner/Operator.” Id. On the last page of the application, Rose Tamaris signed above a line “Applicant's Signature” and below a declaration stating “I declare to the best of my knowledge that all statements herein are true and no material facts have been suppressed or misstated. I am also aware that my operation may be inspected by the Insurance Company.” (ECF No. 78-6 at 5).

         Plaintiff issued a policy of garage coverage insurance to R&P for a year starting in October of 2013 and renewed this policy for a year starting in October of 2014. (ECF No. 78-1 at 4). In July 2015, plaintiff paid a claim for property damage to a vehicle caused by one of R&P's workers. (ECF No. 78-1 at 5). On October 16, 2015, R&P submitted a renewal application for insurance. (ECF No. 78-1 at 6). On this application, Question 16 asked about prior claims history. (ECF No. 78-7 at 2). A box for “Losses Reported in Last 36 months” was checked and “Tristate has all information” was written under “Date of Loss, Amount, ” and “Description of Loss.” Id. Additionally, in this application, Question 5 was reworded slightly and asked “Do you have an ownership interest in or operate any other business?” Id. The box for “No” was checked. Id. Rose Tamaris signed her name on the last page with the same declaration that was in the 2013 application. (ECF No. 78-7 at 7). Plaintiff again renewed the policy for a year beginning in October of 2015. (ECF No. 78-1 at 4).

         On September 14, 2016, Ana Morales, a worker for R&P, was working at the Lexus of Silver Spring dealership, Master's work site, and operated a vehicle that struck defendant Matthew Anders. (ECF Nos. 80-3, 77-3 at 19-20). At the time, defendant Main Street insured Master. (ECF No. 80-4 at 1). Main Street denied coverage for this claim because “[Ms. Morales] was temporarily helping [Master] by working at the Lexus of Silver Spring dealership” and therefore did not qualify as an insured under Master's policy. Id. R&P also submitted a claim to plaintiff for this incident, and plaintiff conducted an investigation. (ECF No. 78-12).

         On December 1, 2016, plaintiff rescinded R&P's insurance policy based on material misrepresentations it found in R&P's application. (ECF No. 78-14 at 1). Specifically, plaintiff stated that Mrs. Tamaris failed to disclose her ownership interest in Master and control over its operations and that Ms. Tamaris failed to list all owners, employees, and drivers. (ECF No. 78-14 at 1-2). Plaintiff alleges that these facts were material to plaintiff's acceptance of the risk of covering R&P's garage operations and that plaintiff relied upon these material misrepresentations in issuing the policy. (ECF No. 42 at 6-7). Plaintiff further alleges that, had R&P accurately and completely disclosed this information, plaintiff would not have issued the policy. (ECF No. 42 at 8). Plaintiff now seeks a declaration that this policy is void ab initio. (ECF No. 42 at 3).

         Anders moved for summary judgment on May 4, 2018, and argued that (1) there was no material misrepresentation when R&P answered that they did not have any interest in or operate any other business; (2) there was no material misrepresentation when R&P listed Rose Tamaris only owner, employee, or driver; and (3) if there was a misrepresentation, the policy cannot be voided ab initio under Maryland law. (ECF No. 77-1 at 5). Defendants R&P, Master, and Rose Tamaris jointly moved for summary judgment on May 4, 2018, and claimed that (1) Master and Rose Tamaris are entitled to summary judgment as a matter of law because they are not parties to the insurance contract; (2) R&P did not make any material misrepresentations because it did not own any other businesses and did not have any employees; and (3) plaintiff waived any right to rescind the policy because it knew or should have known that R&P used workers that it characterized as “independent contractors” after plaintiff investigated and paid a claim in July of 2015. (ECF No. 78 at 1-4). Finally, Defendant Main Street joined the R&P group's Motion for Summary Judgment and filed an accompanying memorandum arguing that (1) there were no misrepresentations on the policy applications and that, even if there were misrepresentations, (2) the policy could not be voided ab initio under Maryland law. (ECF No. 79-1 at 1, 7).

         On May 18, 2018, plaintiff moved for summary judgment and opposed defendants' motions. (ECF No. 80). Plaintiff argued that (1) it properly rescinded the policy based on the material misrepresentations regarding Mrs. Tamaris' ownership and control over other businesses and the size of her workforce; (2) it issued the policy in reliance on these material misrepresentations; and (3) the policy can be voided ab initio under Maryland law. (ECF No. 80-1 at 13, 19, 22).

         II. STANDARD OF REVIEW

         Summary judgment is appropriate when “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). A genuine dispute remains “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is properly considered “material” only if it might affect the outcome of the case under the governing law. Id. The party moving for summary judgment has the burden of demonstrating the absence of any genuine issue of material fact. Fed.R.Civ.P. 56(a); Pulliam Inv. Co., Inc. v. Cameo Props., 810 F.2d 1282, 1286 (4th Cir. 1987). On those issues for which the nonmoving party has the burden of proof, however, it is his or her responsibility to oppose the motion for summary judgment with affidavits or other admissible evidence specified in Federal Rule of Civil Procedure 56. Fed.R.Civ.P. 56(c); Mitchell v. Data Gen. Corp., 12 F.3d 1310, 1315-16 (4th Cir. 1993). If a party fails to make a showing sufficient to establish the existence of an essential element on which that party will bear the burden of proof at trial, summary judgment is proper. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

         When reviewing a motion for summary judgment, the court does not evaluate whether the evidence favors the moving or nonmoving party, but considers whether a fair-minded jury could return a verdict for the nonmoving party on the evidence presented. Anderson, 477 U.S. at 252. In undertaking this inquiry, the court views all facts and makes all reasonable inferences in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The nonmoving party, however, may not rest on its pleadings, but must show that specific, material facts exist to create a genuine, triable issue. Celotex, 477 U.S. at 324. A “scintilla” of evidence in favor of the nonmoving party, however, is insufficient to prevent an award of summary judgment. Anderson, 477 U.S. at 252. Further, “mere speculation” by the nonmoving party or the “building of one inference upon another” cannot create a genuine issue of material fact. Cox v. Cnty. of Prince William, 249 F.3d 295, 299-300 (4th Cir. 2001). Summary judgment should be denied only where a court concludes that a reasonable jury could find in favor of the nonmoving party. Anderson, 477 U.S. at 252.

         III. ...


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