United States District Court, D. Maryland
MT. HAWLEY INS. CO., Plaintiff,
ADELL PLASTICS, INC., Defendant.
K. BREDAR CHIEF JUDGE.
January 2017, Mt. Hawley Insurance Co. (“Mt.
Hawley”) sued Adell Plastics, Inc.
(“Adell”), seeking a declaration that their
commercial property insurance contract did not cover
Adell's losses resulting from a fire. The fire began on
October 4, 2016 and proceeded to demolish several buildings
at Adell's Baltimore facility. Since January 2017, Mt.
Hawley and Adell have engaged in significant discovery and,
most recently, moved for summary judgment. This Court decided
the cross-motions for summary judgment, denying Adell's
motion in full and Mt. Hawley's motion in part. Mt.
Hawley Ins. Co. v. Adell Plastics, Inc., Civ. No.
JKB-17-252 (D. Md. Oct. 11, 2018). Pending before the Court
is Mt. Hawley's motion to partially reconsider.
See Fed. R. Civ. P. 54(b). The issues have been
fully briefed. No. hearing is required. See Local
Rule 105.6 (D. Md. 2016). For the reasons set forth below,
the Court will grant Mt. Hawley's motion to partially
reconsider and deny its partial motion for summary judgment.
Mt. Hawley's Motion to Partially Reconsider
Hawley asks the Court to reconsider its partial motion for
summary judgment on Adell's lack of good faith claim.
(Mot. Recon. at 2, ECF No. 137.) Rule 54(b) governs
reconsideration of orders that are not final judgments in a
case and provides that “any order or other decision,
however designated, that adjudicates fewer than all the
claims or the rights and liabilities of fewer than all the
parties does not end the action as to any of the claims or
parties and may be revised at any time.” Fed.R.Civ.P.
54(b). Mt. Hawley asserts that, although the Court ruled on
Adell's argument that Mt. Hawley lacked good
faith in its investigation, the Court did not rule on
Mt. Hawley's argument that Mt. Hawley demonstrated
good faith in its investigation. (Mot. Recon. at 2.) Mt.
Hawley is correct. (See Mt. Hawley Mem. M.S.J. at
41, ECF No. 110-1.) Consequently, the Court exercises its
discretion to reconsider its judgment and decide Mt.
Hawley's partial motion for summary judgment on
Adell's lack of good faith claim. Lynn v. Monarch
Recovery Mgmt., Inc., 953 F.Supp.2d 612, 618 (D. Md.
2013) (“[W]hen warranted, a district court retains the
power to reconsider and modify its interlocutory judgments at
any time before final judgment.”).
Mt. Hawley's Motion for Partial Summary
prevail on its lack of good faith claim, see Md.
Cts. & Jud. Proc. § 3-1701 (West 2016), Adell must
establish that (1) it was entitled to coverage and (2) Mt.
Hawley acted in bad faith, see St. Paul Mercury Ins. Co.
v. Am. Bank Holdings Inc., 819 F.3d 728, 739 (4th Cir.
2016). It follows that Mt. Hawley may defeat the lack of good
faith claim by showing the absence of either element. In its
previous Memorandum, the Court concluded that the parties
genuinely disputed whether Mt. Hawley owed coverage to Adell
and, therefore, held that Adell could not establish lack of
good faith at the summary judgment stage. Mt.
Hawley, Civ. No. JKB-17-252. In its motion to
reconsider, Mt. Hawley adds that Adell's lack of good
faith claim fails at the summary judgment stage.
motion for partial summary judgment, Mt. Hawley bears the
burden of showing that Adell's lack of good faith claim
fails. “The court shall grant summary judgment if the
movant shows that 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 burden is on
the moving party to demonstrate the absence of any genuine
dispute of material fact. Adickes v. S.H. Kress &
Co., 398 U.S. 144, 157 (1970). “[I]t is clear . .
. that at the summary judgment stage the judge's function
is not himself 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,
Inc., 477 U.S. 242, 249 (1986). Having held that the
issue of coverage is genuinely disputed, the Court turns to
whether the parties genuinely dispute the material issue of
Mt. Hawley's good faith or lack thereof.
faith” is defined in the statute as “an informed
judgment based on honesty and diligence supported by evidence
the insurer knew or should have known at the time the insurer
made a decision on a claim.” Md. Code Ann. Cts. &
Jud. § 3-1701(a)(4); see, e.g., Barry v.
Nationwide Mut. Ins. Co., 298 F.Supp.3d 826, 831 (D. Md.
2018) (holding insured stated lack of good faith claim by
alleging insurer's delay, failure to dispute nature or
cost of injury, and unwillingness to negotiate). “Cases
construing [this] good-faith standard are sparse.”
All Class Const., LLC v. Mut. Benefit Ins. Co., 3
F.Supp.3d 409, 416 (D. Md. 2014). These cases have settled on
a totality-of-the-circumstances approach, looking to: (1)
“measures taken by the insurer to resolve the coverage
dispute promptly or in such a way as to limit any potential
prejudice to the insureds”; (2) “the substance of
the coverage dispute or the weight of legal authority on the
coverage issue”; and (3) “the insurer's
diligence and thoroughness in investigating the facts
specifically pertinent to coverage.” Cecilia
Schwaber Trust Two v. Hartford Accident & Indem.
Co., 636 F.Supp.2d 481, 486-87 (D. Md. 2009). On its
own, the fact that an insurer disputes coverage will not
sustain a lack of good faith claim. Class Produce Grp.,
LLC v. Harleysville Worcester Ins. Co., Civ. No.
ELH-16-3431, 2018 U.S. Dist. LEXIS 49023, at *27-28 (D. Md.
March 23, 2018). Rather, “[t]he question of good faith
turns . . . on . . . what the insurer reasonably believed and
articulated they covered at the time of denial.”
Charter Oak Fire Co. v. Am. Capital, Ltd., Civ. No.
DKC-09-100, 2016 WL 827380, at *15 (D. Md. March 3, 2018).
Hawley asserts it acted with honesty and diligence and
performed a reasonable investigation. (Mt. Hawley Mem. M.S.J.
at 41; Mem. Mot. Recon. at 14, ECF No. 137-1.) Mt. Hawley
supports this assertion with a declaration from its claim
professional detailing the steps taken immediately after the
fire. (Mt. Hawley Mem. M.S.J. Ex. 16, ECF No. 110-18.) Mt.
Hawley also cites its correspondence with Adell, including an
October 2016 reservation of rights letter and January 2017
denial of coverage letter. (Mt. Hawley Mem. M.S.J. Ex.
16(B)(D)(L).) Based on the declaration and correspondence,
Mt. Hawley argues its claim professional sufficiently
investigated and reasonably decided the claim. (Mem. Mot.
Recon. at 16.) Throughout the process, Mt. Hawley
communicated with Adell, explaining the investigation and, in
the end, the denial of coverage. (Id. at 17.) Mt.
Hawley concludes that “no reasonable trier of fact
could find that Mt. Hawley lacked good faith in its handling
of this matter.” (Id.)
disagrees, offering several examples of Mt. Hawley's bad
faith, which Adell supports with deposition testimony. (Mem.
Opp. Mot. Recon. at 6-8, ECF No. 142; see also Adell
Mem. M.S.J. at 28-32, ECF No. 95.) Mt. Hawley responds to
each assertion of bad faith in turn. (Mem. Reply Supp. Mot.
Recon. at 8-11, ECF No. 143.) The Court does not repeat every
bad faith argument here; instead, it notes those arguments on
which it relies in finding a dispute of fact. For example,
Adell argues Mt. Hawley stopped covering Adell's losses
for a reason other than the coverage dispute, pointing to the
information available to Mt. Hawley at the time it made the
decision to dispute coverage-e.g., Mt. Hawley concluded there
would be no subrogation several days before it issued its
reservation of rights letter. (Mt. Hawley Mem. M.S.J. Ex. 23
at 170:13- 173:22, ECF No. 95-24.) Next, Adell argues Mt.
Hawley delayed obtaining the sprinkler system monitoring logs
even though Mt. Hawley knew the evidence would be critical to
the dispute. (Mem. Opp. Mot. Recon. at 7; Adell Mem. M.S.J.,
Ex. 9 at 184:21-186:4.) Mt. Hawley claims it requested the
monitoring logs from Adell, (Mt. Hawley Mem. M.S.J., Ex.
16(D)), but Adell asserts it had no access to the logs and
could not request them because Adell had been advised not to
contact the monitoring companies, (Adell Mem. M.S.J., Ex. 20
at 128:4-129:23, ECF No. 95-21). Mt. Hawley replies that it
did not request the monitoring logs only from Adell but also
requested them from a detective, who had subpoenaed them.
(Mem. Reply Supp. Mot. Recon. at 10.)
type of back and forth convinces the Court that both parties
have presented sufficient facts to render the lack of good
faith issue genuinely disputed. The parties dispute why Mt.
Hawley stopped covering Adell's losses: Mt. Hawley claims
the investigation revealed the sprinklers never activated,
and Adell claims Mt. Hawley is using the sprinklers as
pretext to deny coverage after its attempts at subrogation
failed. (Mem. Mot. Recon. at 17; Mem. Opp. Mot. Recon. at 6.)
The parties also dispute Mt. Hawley's diligence in
obtaining the monitoring logs: Mt. Hawley claims it pursued
the logs from multiple sources, and Adell claims Mt. Hawley
failed to promptly obtain the logs despite understanding
their significance to the investigation. (Mem. Mot. Recon. at
15; Mem. Opp. Mot. Recon. at 7; Mem. Reply Supp. Mot. Recon.
at 10.) Significantly, the parties continue to dispute
whether Adell is entitled to coverage. See Mt.
Hawley, Civ. No. JKB-17-252. Because “the
substance of the coverage dispute” is a factor in
deciding lack of good faith, Cecilia Schwaber, 636
F.Supp.2d at 487, the questions of coverage and good faith
may be (and, in this case, appear to be) intertwined.
Hawley cites several cases for the proposition that, even
where the issue of coverage is still in dispute, courts may
conclude the insured failed to allege or establish a lack of
good faith. (Mem. Mot. Recon. at 1.) That general proposition
is undoubtedly true. See, e.g., All Class,
3 F.Supp.3d at 418 (noting that, regardless of whether the
insurer breached the contract, the insured failed to state
lack of good faith claim). Each of the cited cases dismissed
the lack of good faith claim because the insured failed to
allege sufficient bad faith. See All Class, 3
F.Supp.3d at 418 (dismissing lack of good faith claim because
insured supported claim with only two denial letters, which
sufficiently explained the denial of coverage, and,
consequently, insured failed to create reasonable inference
of bad faith); Pa. Nat'l Mut. Ins. Co. v. Tate
Andale, Inc., Civ. No. ADC-17-0670, 2018 U.S. Dist.
LEXIS 66981, at *15-16 (D. Md. April 19, 2018) (dismissing
lack of good faith claim because insurer provided lengthy
communications between parties in which insurer explained its
decision to deny coverage); Class Produce Grp., 2018
U.S. Dist. LEXIS 49023, at *26 (dismissing lack of good faith
claim because insured “alleged only conclus[ions,
]” e.g., that the insurer “fail[ed] to properly
case is distinguishable. Adell does not merely put forward
two denial letters or even a stream of correspondence
explaining the denial of coverage. See All Class, 3
F.Supp.3d at 418; Pa. Nat'l Mut., 2018 U.S.
Dist. LEXIS 66981, at *15-16. Nor does Adell solely offer the
conclusion that Mt. Hawley acted in bad faith, see Class
Produce Grp., 2018 U.S. Dist. LEXIS 49023, at *26;
though Adell does offer some conclusory statements-e.g.,
“Mt. Hawley shifted positions and furthered its own
interests to the detriment of its unsuspecting
policyholder”; “Mt. Hawley misled Adell.”
(Mem. Opp. Mot. Recon. at 7.) The Court does not rely on
unsupported or conclusory statements; rather, the Court has
examined the parties' arguments and accompanying exhibits
to determine that there is a genuine issue of material fact
as to Mt. Hawley's good faith.
there is any dispute of material fact, a court must
deny summary judgment. See Charter Oak, 2016 WL
827380, at *15 (denying cross-motions for summary judgment on
lack of good faith claim because a single letter claiming a
joint venture provision precluded coverage did not resolve
the dispute of fact as to whether the decision to deny
coverage was “based on honesty and diligence”).
The Court does note that the lack of good faith issue appears
to tilt in Mt. Hawley's favor. At the summary judgment
stage, however, it is not for the court to pile the evidence
onto the ...