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Allstate Insurance Co. v. Rochkind

United States District Court, D. Maryland

March 31, 2019

ALLSTATE INSURANCE COMPANY Plaintiff,
v.
STANLEY ROCHKIND, et al. Defendants.

          MEMORANDUM OPINION

          Ellen Lipton Hollander United States District Judge.

         "[A]n insurance company cannot be held liable for periods of risk it never contracted to cover." Pennsylvania National Mutual Casualty Ins. Co. v. Roberts, 668 F.3d 106, 109 (4th Cir. 2012). The insurance dispute at here issue concerns this "straightforward" principle. Id. But, the dispute is anything but straightforward.

         Plaintiff Allstate Insurance Company ("Allstate") has filed a declaratory judgment action against defendants Stanley Rochkind, individually and as trustee of the assets of both Dear Management and Construction Company ("Dear Management") and Uptown Realty Co. Limited Partnership ("Uptown").[1] See ECF 1 ("Complaint"). Allstate has also sued Malik Sherald, who was the plaintiff in a lead paint action that he filed against Rochkind in February 2017 in the Circuit Court for Baltimore City (the "Tort Case"). In the Tort Case, Sherald alleged injury from lead paint exposure in connection with a property owned, maintained, and/or managed by Rochkind. See ECF 1-2 (the Tort Case Complaint).[2]

         Beginning in June 1988, Allstate issued a Personal Umbrella Policy (ECF 1-3, the "Policy") to Rochkind, who owns and manages residential properties in Baltimore. ECF 1, ¶ 11. The Policy, which provided excess personal liability coverage to Rochkind, was continually renewed over the next decade. Id. But, on June 13, 1999, Allstate modified the terms to exclude coverage for claims arising from lead paint exposure. Id. Then, on or about June 13, 2000, Allstate cancelled the Policy. ECF 1-3 at 8; see also ECF 22-1 at 2; ECF 38 at 9. Allstate now seeks a declaration that it has no duty to defend or indemnify Rochkind for injuries allegedly sustained by Sherald arising from lead paint exposure on or after June 13, 1999, i.e., the effective date of the lead paint exclusion. Id. ¶ 12.

         According to Allstate, Sherald's total lead exposure was 3858 days; it insured Rochkind for 1195 days; and therefore Allstate's total liability is 30.1% of any damages awarded against Rochkind (1195/3858). ECF 25 at l.[3] According to Allstate, Rochkind is liable for the remaining 69.9% of any judgment in favor of Sherald. ECF 1 at 6.

         Three motions are now pending. First, Allstate has moved for summary judgment (ECF 22), supported by a memorandum of law (ECF 22-1) (collectively the "Allstate Motion") and two exhibits. ECF 22-2; ECF 22-3. Defendants filed a consolidated opposition and a cross motion for summary judgment or, in the alternative, to certify issues to the Maryland Court of Appeals. ECF 25 ("Cross Motion"). They also submitted two exhibits. ECF 25-1; ECF 25-2. Plaintiff filed a consolidated reply and opposition. ECF 29. Defendants replied (ECF 38) and submitted the Affidavit of Paul Rogers, M.D., an expert in neurodevelopmental pediatrics. ECF 28-1. The Affidavit pertains to Sherald's period of exposure to lead.

         Allstate has moved to strike the Affidavit of Dr. Rogers. ECF 39. Defendants oppose the motion (ECF 40), and Allstate submitted a reply. ECF 43.

         The Motions are fully briefed and no hearing is necessary to resolve them. See Local Rule 105.6. For the foregoing reasons, I shall deny the motions.

         I. Factual Summary

         On February 27, 2017, in the Circuit Court for Baltimore City, Sherald sued Rochkind, individually and as trustee of the assets of Dear Management and Uptown. Sherald v. Rochkind, No. 24-C-17-000943; see also ECF 1-2. Sherald, who is now 23-years of age, alleged claims of negligence. He asserted that his mother, grandparents, and great grandmother lived at or visited 2722 Riggs Avenue in Baltimore City ("Property") from 1964 to the "present." Id. at 5, ¶ 5. According to Sherald, the Property was operated and controlled by Rochkind, Dear Management, and Uptown. Id. at 4-5, 13-15. Moreover, he asserted that he was exposed to lead paint at the Property from the time of his birth on March 6, 1996, to the "present," while either residing or visiting at the Property. Id. at 5. However, Sherald also appears to have alleged that damaging exposure occurred only until June 1999. Id. at 13-15; see ECF 25 at 33, 43-45.

         Allstate was not a party to the Tort Case. The parties do not state whether Allstate provided a defense to Rochkind in the suit. See ECF 1-2.

         During the pendency of the Tort Case, the parties engaged in discovery. During discovery, Sherald stated in an answer to an interrogatory: "Since birth, [Sherald] has always spent most of his time at [Rochkind's] rental property located at 2722 Riggs Avenue, where he currently resides." ECF 22-2 at 5. However, Sherald also stated that his parents "held [other] rental residences where Plaintiff would usually, but not always, sleep and call home." Id. He identified three other residences where he had lived: One from birth to age 2; a second from ages 2 to 7; and a third from 2003 to the present. ECF 22-2 at 5.

         Of relevance here, Sherald described the condition of the Property, id. at 7:

The premises were not maintained by the landlord, and the painted surfaces were deteriorating throughout the rental property. Areas of chipping, peeling and flaking paint include the trim/woodwork around windows, doors and the baseboards. Also, walls, doors and kitchen cabinets. These areas of deteriorated paint were in most all rooms of the house, including the bedrooms, living room and kitchen. The front porch area woodwork was chipping, peeling and flaking as well. Plaintiff was frequently at or near these areas of deteriorated paint as an infant and toddler, and throughout his life.

         Further, Sherald stated that Rochkind "did not correct the deteriorated paint conditions when asked to do so or when otherwise informed of the presence of chipping peeling and flaking paint inside the premises." Id. at 7-8.

         In addition, Sherald provided his blood lead levels with respect to five dates. Id. at 9. His first test is dated March 7, 1997, and his last test is dated September 27, 2006. Id. The parties appear to agree for the purposes of the motions that Sherald's final blood lead levels were elevated. See ECF 25 at 33; ECF 29 at 7.

         After some discovery, the Tort Case settled, and the parties stipulated to a dismissal of that case, with prejudice. See Sherald v. Rochkind, No. 24-C-17-000943, ECF 56/0, ECF 57/0 (Feb. 8, 2019; March 13, 2019).[4] The parties have not provided the Court with the terms of the settlement.

         II. The Policy

         As noted, Allstate's request for declaratory judgment arises out of a Personal Umbrella Policy of insurance issued to Rochkind. See ECF 1-3. The Policy covered the Property from June 13, 1988 until June 13, 2000. Id. at 8; ECF 1, ¶11.

         The Policy (ECF 1 -3) "applies to an occurrence anywhere in the world while the insurance is in force." Id. at 10. An "occurrence" is "an accident or continuous exposure to conditions." Id.

         Pursuant to the Policy, "Allstate will defend an insured if sued as the result of an occurrence covered by this policy even if the suit is groundless, false or fraudulent." Id. at 14. Further, "Allstate will pay when an insured becomes legally obligated to pay for personal injury or property damage caused by an occurrence." Id. at 12.[5] The Policy defines "personal injury," in relevant part, to include "bodily injury, sickness, disease or death of any person." Id. at 11.

         Effective June 13, 1999, Allstate added an endorsement to the Policy. Id. at 17-19 (the "Endorsement"). The Endorsement contains several exclusions, including an exclusion for physical injury resulting from exposure to lead. Id. at 18, Exclusion 10 (the "Lead Coverage Exclusion"). The Endorsement provides, id. at 17-19:

         Policy Endorsement

The following endorsement changes your policy. Please read this document carefully and keep it with your policy.
This Endorsement Changes Your Policy-Keep It With Your Policy
Personal Umbrella Policy

         Amendatory Endorsement-AP779

         D. The following exclusions are added:

10. to personal injury or bodily injury which results in any manner from any type of vapors, fumes, acids, toxic chemicals, toxic gases, toxic liquids, toxic soils, waste materials, irritants, contaminants, or pollutants, including, but not limited to:
a) lead in any form;
b) asbestos in any form;
c) radon in any form; or
d) oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from a storage tank.
* * *
11. to property damage consisting of, or caused by, any type of vapors, fumes, acids, toxic chemicals, toxic gasses, toxic liquids, toxic solids, waste materials, irritants, contaminants, or pollutants, including, but not limited to:
a) lead in any form; -
b) asbestos in any form;
c) radon in any form; or
d) oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from a storage tank.
* * *
12. to any liability imposed upon any insured by any governmental authority for personal injury or bodily injury which results in any manner from, or for property damage consisting of, or caused by, any type of vapors, fumes, acids, toxic chemicals, toxic gases, toxic liquids, toxic soils, waste materials, irritants, contaminants, or pollutants, including, but not limited to:
a) lead in any form;
b) asbestos in any form;
c) radon in any form; or
d) oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from a storage tank.
13. to any loss, cost or expense arising out of any request, demand, or order that any insured test for, monitor, clean up, remove, contain, treat, detoxify, or neutralize, or in any way respond to or assess the effects of any vapors, fumes, acids, toxic chemicals, toxic gases, toxic liquids, toxic soils, waste materials, irritants, contaminants, or pollutants, including, but not limited to:
a) lead in any form;
b) asbestos in any form;
c) radon in any form; or
d) oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from a storage tank.

         III. Choice of Law

         Allstate asserts that Maryland law governs the legal issues in this diversity case. ECF 22-1 at 8. Defendants do not contest the point; they assume, without discussion, that Maryland law applies here. SeeECF25.

         In an action based upon diversity of citizenship, a federal court must apply the substantive law of the state in which it sits, including that state's choice of law rules. Klaxon Co. v. Stentor Elect. Mfg. Co., 313 U.S. 487, 496-97 (1941); see Colgan Air, Inc. v. Raytheon Aircraft Co., 507 F.3d 270, 275 (4th Cir. 2007); see Colgan Air, Inc. v. Raytheon Aircraft Co., 507 F.3d 270, 275 (4th Cir. 2007); Ground Zero Museum Workshop v. Wilson, 813 F.Supp.2d 678, 696 (D. Md. 2011); Baker v. Antwerpen Motorcars, Ltd, 807 F.Supp.2d 386, 389 n. 13 (D. Md. 2011).

         In a contract claim, Maryland courts follow the rule of lex loci contractus, applying the substantive law of the state where the contract was formed, unless there is a choice-of-law provision in the contract. Erie Ins. Exch. v. Heffernan, 399 Md. 598, 618, 925 A.2d 636, 648 (2007); Am. Motorists Ins. Co. v. ARTRA Group, Inc., 338 Md. 560, 573, 659 A.2d 1295, 1301 (1995); see also Cunningham v. Feinherg, 441 Md. 310, 326, 107 A.3d 1194, 1204 (2015); Lewis v. Waletzky, 422 Md. 647, 657 n.8, 31 A.3d 123, 129 n.8 (2011). "For choice-of-law purposes, a contract is made where the last act necessary to make the contract binding occurs." Konover Property Trust, Inc. v. WHE Assocs., Inc., 142 Md.App. 476, 490, 790 A.2d 720, 728 (2002) (citing Commercial Union Ins. Co. v. Porter Hayden Co., 116 Md.App. 605, 672, 698 A.2d 1167, 1200 (1997), cert, denied, 348 Md. 205, 703 A.2d 147 (1997)).

         The Policy does not appear to contain a choice of law clause. See ECF 1-3. Nor is it clear that the Policy was executed in Maryland, although the Property and the insureds are located in Maryland. But, "[t]ypically, '[t]he locus contractus of an insurance policy is the state in which the policy is delivered and the premiums are paid.'" Porter Hayden, 116 Md.App. at 673, 698 A.2d at 1200 (citation and some internal quotation marks omitted). This is because delivery of the policy and the payment of the premium are ordinarily the last acts necessary to make an insurance policy binding. See Aetna Cas. & Sur. Co. v. Souras, 78 Md.App. 71, 77, 552 A.2d 908, 911 (1989).

         In any event, because the parties implicitly agree that Maryland law governs their claims, [the Court] need not inquire further into the choice-of-law questions." Vanderhoof-Forschner v. McSweegan, 215 F.3d 1323 (Table) at *2 n.2 (4th Cir. 2000) (citing American Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997) ("[W]here the parties have agreed to the application of the forum law, their consent concludes the choice of law inquiry.")). Accordingly, I shall apply the substantive law of Maryland.

         IV. Motion for Certification

         Before proceeding to the cross motions for summary judgment, the Court must consider whether it should even reach them or, instead, certify questions to the Maryland Court of Appeals, as requested by defendants.

         Under the Maryland Uniform Certification of Questions of Law Act ("Certification Act"), Md. Code (2013 Repl. Vol., 2017 Supp.), § 12-601 et seq. of the Courts and Judicial Proceedings Article ("C.J."), this Court may certify to the Maryland Court of Appeals a question of law "if the answer may be determinative of an issue in pending litigation in the certifying court and there is no controlling [Maryland] appellate decision, constitutional provision, or statute" Defendants maintain that two unsettled questions of State law are potentially dispositive of this case and therefore they ask the Court to certify them to the Maryland Court of Appeals. See ECF 25 at 33-50.

         The two issues address the proper method of allocating the damages and defense costs arising from lead-paint poisoning disputes. The first issue (the "Allocation Issue") concerns whether Allstate is liable for all of the damages and defense costs (the "all sums method") or, instead, only the portion of the damages equal to its share of the time on the risk (the "pro rata method"). The second issue (the "Exposure Issue") concerns the duration of Sherald's exposure to lead.

         As to the Allocation Issue, defendants maintain that the all sums method applies. It provides that an insurer whose coverage is triggered is liable for the full amount of the judgment against the policyholder, up to the amount of its policy limit. ECF 25 at 14-33. Not surprisingly, Allstate supports the pro rata method, which limits an insurer's liability to "that period of time it was on the risk compared to the entire period during which damages occurred.'" ECF 22-1 at 8 (quoting Mayor & City Council of Baltimore v. Utica Mut. Ins. Co., 145 Md.App. 256, 313, 802 A.2d 1070, 1104 (2002), cert, granted, 371 Md. 613 (2002), cert, dismissed, 374 Md. 81 (2003)) (emphasis in original). That is, an '"insurer's liability (up to its policy limit) is measured by the underlying loss multiplied by the ratio of time covered by the policy to the time subject to the risk. The denominator of this fraction [is] the total period of risk .. . [and] the numerator ... is ... the portion of [the total period of risk] during which [the insured] had coverage from [the insurer].'" ECF 22-1 at 9 (quoting Sybron Transition Corp. v. Security Ins. of Hartford, 258 F.3d 595, 597 (7th Cir. 2001) (second alteration mine; all other alterations in Allstate's Motion); see also Roberts, 668 F.3d at 113; Utica, 145 Md.App. at 312, 802 A.2d at 1103-04.

         With respect to the Exposure Issue, when using the pro rata method to calculate the insurer's share of the damages, the exposure period represents the denominator, i.e., the total period of the tort plaintiffs risk. However, when employing the all sums method, the length of the tort plaintiffs exposure period does not affect the allocation of the damages. Instead, the insurer is liable for all damages up to the policy limit.

         The parties dispute the end date of Sherald's exposure period. According to Allstate, the Fourth Circuit in Roberts, 668 F.3d at 106, concluded that the end date is the date of the tort plaintiffs final test showing an elevated blood lead level. ECF 22-1 at 10. Defendants maintain that the end date is June 13, 1999, when coverage for lead exposure under the Policy terminated. They claim Sherald's Tort Case Complaint alleged damaging exposure only through that date. ECF 25 at 33; see ECF 1-2 at 13, 15.

         A. Proposed Questions for Certification

         Defendants propose the following two questions for certification to the Maryland Court of Appeals, which I quote in full, ECF 25 at 34:

1. Where a carrier becomes legally obligated to pay damages and defense costs for bodily injury caused by an "occurrence" by the happening of some portion of that bodily injury during the policy period, is the triggered policy liable up to its limits for the entire amount of indemnity and defense costs, or is the policy's liability limited to a pro rata portion of the indemnity and defense costs based upon the number of years which the policy provided coverage and the years of which bodily injury took place (the "Allocation Issue"); and
2. Where a lead paint plaintiff only alleges exposure during the policy period, is the carrier entitled to unilaterally calculate the entire period over which plaintiff has recorded elevated blood levels as the "period of exposure" for Roberts-type allocation [i.e., pro rata allocation] (the "Exposure Issue")?[6]

         To this Court's knowledge, the Maryland Court of Appeals has not addressed either of the questions proposed for certification. But, the Maryland Court of Special Appeals has addressed the first question. See Md. Cas. Co. v. Hanson, 169 Md.App. 484, 902 A.2d 152 (2006); Riley v. United Servs. Auto. Ass'n, 161 Md.App. 573, 871 A.2d 599 (2005), off d on other grounds, 393 Md. 55, 899 A.2d 819 (2006); Utica, 145 Md.App. 256, 802 A.2d 1070.

         B. Standard for Certification

         The role of a federal court when considering an issue of state law is to "interpret the law as it believes that state's highest court of appeals would rule." Abadian v. Lee, 117 F.Supp.2d 481, 485 (D. Md. 2000) (citing Liberty Mut. Ins. Co. v. Triangle Indus., Inc., 957 F.2d 1153, 1156 (4th Cir.), cert, denied, 506 U.S. 824 (1992)); accord Private Mortg. Inv. Servs., Inc. v. Hotel & Club Assocs., Inc., 296 F.3d 308, 312 (4th Cir. 2002) (stating that federal court's task in considering an issue of state law is to "predict how [the state's highest] court would rule if presented with the issue"). Thus, a federal court ordinarily cannot speak with precedential authority on a matter of state law. In several procedural contexts, the Supreme Court has invoked the principles of federalism and comity, stating; "Needless decisions of state law [by federal courts] should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law." United Mine Workers v. Gibbs, 383 U.S. 715, 726(1966).

         The Certification Act provides that the Court may certify a question of law to the Maryland Court of Appeals "if the answer may be determinative of an issue in pending litigation in the certifying court and there is no controlling [Maryland] appellate decision, constitutional provision, or statute ....." C.J. § 12-603. The purpose of the Certification Act "is 'to promote the widest possible use of the certification process in order to promote judicial economy and the proper application of [Maryland]'s law in a foreign forum.'" Proctor v. WMATA, 412 Md. 691, 705, 990 A.2d 1048, 1056 (2010) (emphasis in original) (quoting Certification Act, § 3 cmt.)).

         The Fourth Circuit has endorsed certification of substantial, unresolved questions of state law to a state's highest court, where a certification procedure is available and resolution of the question is necessary to the case. Certification "ensur[es] the correct legal outcome, aid[sj in judicial economy, and manifests] proper ...


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