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Nationwide Mutual Fire Insurance Co. v. Beazer Homes LLC

United States District Court, D. Maryland

October 1, 2019



          J. Mark Coulson United States Magistrate Judge

         The case is before me for all proceedings by the consent of the parties pursuant to 28 U.S.C. § 636(c). (ECF No. 25). Now pending is Plaintiff Nationwide Mutual Fire Insurance Company and Nationwide Mutual Insurance Company's (“collectively Nationwide”) Motion for Summary Judgment on all counts (ECF No. 30), and Beazer Home, LLC's (Beazer”) Cross Motion for Partial Summary Judgment. (ECF No. 42). Nationwide filed a combined Opposition to Beazer's motion and Reply. (ECF No. 44). Beazer filed its own Reply. (ECF No. 47). No. hearing is needed. See Loc. R. 105.6 (D. Md. 2018). For the reasons stated below:

1. Plaintiffs' Motion for Summary Judgment is GRANTED; and
2. Defendant's Cross-Motion for Partial Summary Judgment is DENIED.

         I. BACKGROUND

         Plaintiffs Nationwide are insurers organized under the State of Ohio and have their principal place of business in Ohio. (ECF No. 1 at p. 2). Defendant Beazer, a builder and property developer, is a limited liability company organized under the laws of the State of Delaware with its principal place of business in Atlanta, Georgia. Id.

         Beazer and various partners developed a mixed-use development, known as The Quarry at Greenspring, in Baltimore County, Maryland that includes retail, office, and residential space. (Id. at p. 3; ECF No. 30-1 at p. 2). This dispute concerns whether Nationwide's policies provide coverage for Beazer in two separate but related lawsuits brought against it by two homeowners associations, Greenspring Quarry Association (“GQA”) and Highlands at Greenspring Quarry Village Association (“Highlands”) (collectively, the “Associations”) to recover the costs incurred in maintaining and repairing common areas within the development.[1] (ECF No. 30-1 at p. 2). Beazer has resolved both suits. (ECF No. 47 at p. 13).

         The Underlying Suits by GQA and Highlands

         According to the complaints in the underlying lawsuits, [2] to facilitate the development, construction and eventual sale of the various segments of the overall project, it was necessary to identify certain common areas which would serve the needs of the entire project, including roads, lighting, drainage, utilities, sever connections, fencing, landscaping, security gates and identifying markers, and contained jointly used amenities such as a pool, tennis courts, and a clubhouse. (ECF No. 30-2 at pp. 4-5). To manage and govern the use and maintenance of the common areas, Beazer, together with its co-developers, executed and recorded a Declaration of Covenants, Conditions and Restrictions (the “Declaration of Covenants”). Id. Pursuant to the Declaration of Covenants, a “Master Association” (i.e., GQA) would be formed, comprising the four constituent Village Associations (of which Highlands was one). Id. Beazer named a group of its own employees and agents to serve as a majority of the initial GQA Board of Directors and continued to have undue influence over GQA's Board even after further elections/appointments. Id. at p. 5.[3] In turn, Beazer caused the GQA Board to hire Tidewater Property Management, Inc. (“Tidewater”), an entity with which it had close business relationships, to manage the property, including facilitating the payment of expenses for the common areas by improperly billing the Associations. Id. at pp. 5-6.

         Although the common areas were initially owned and maintained by Beazer, the Declaration of Covenants provided that Beazer would convey title to the common areas to GQA within ten years. At the time of such conveyances, Beazer's obligation to maintain the common areas so conveyed would cease, with those obligations passing to GQA and its constituent associations.[4] Id. at p. 6. The lawsuits allege that through its influence over the GQA Board of Directors and Tidewater, Beazer shifted the expenses for common area maintenance to GQA prematurely (who, in turn, presumably passed it on to its constituent Village Associations and ultimately individual unit-owners within those various associations), in violation of the Declaration of Covenants. Id. at pp. 6-7.

         Nationwide's Insurance Policies

          Nationwide insured GQA and Highlands by way of two Premier Businessowners Policies. (ECF No. 1 at pp. 6-7). The first, Premier Businessowners Policy number ACP BPHF 5183147087 (“Policy 7807) was issued to GQA effective from December 15, 2009 to December 15, 2018. (ECF Nos. 1-4 to 1-12). The second, Premier Businessowners Policy, number ACP BPHM 2404155109 (“Policy 5109”) was issued to the Highlands effective August 2009 to August 2018. (ECF Nos. 1-13 to 1-21). Nationwide argues that neither policy provides coverage because Beazer was not an “insured” under the applicable definitions, and, in any event, the existing coverage did not encompass the kind of liability alleged in the underlying lawsuits.


         This Court has diversity jurisdiction over the instant action pursuant to 28 U.S.C. § 1332, as there is no dispute that the parties are citizens of different states and the initial matter in controversy exceeds $75, 000. (ECF No. 1 at p. 3). Further, the Federal Declaratory Judgment Act provides:

In a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.

28 U.S.C. § 2201(a); See also All-Star Settlements, LLC v. Zurich Am. Ins. Co., 2011 WL 4543363, at *2-3 (D. Md. Sept. 28, 2011) (deeming it appropriate to exercise jurisdiction where ruling will clarify and settle the legal relations between the parties).

         Federal Rule of Civil Procedure 56(a) requires the Court to “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.” The moving party accomplish this by demonstrating the absence of any genuine dispute of material fact or by showing an absence of evidence to support the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986). “A dispute as to a material fact is genuine ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'” J.E. Dunn Const. Co. v. S.R.P. Dev. Ltd. P'ship, 115 F.Supp.3d 593, 600 (D. Md. 2015) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).

         A nonmoving party “opposing a properly supported motion for summary judgment ‘may not rest upon the mere allegations or denials of [his] pleadings,' but rather must ‘set forth specific facts showing that there is a genuine issue for trial.'” Bouchat v. Balt. Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003) (quoting Fed.R.Civ.P. 56(e)). A court is required to view the facts and draw reasonable inferences in the light most favorable to the nonmoving party. Iko v. Shreve, 535 F.3d 225, 230 (4th Cir. 2008). However, a court must also “abide by the ‘affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial.'” Heckman v. Ryder Truck Rental, Inc., 962 F.Supp.2d 792, 799-800 (D. Md. 2013) (quoting Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993)). Consequently, a party cannot create a genuine dispute of material fact through mere speculation or compilation of inferences. See Deans v. CSX Transp., Inc., 152 F.3d 326, 330-31 (4th Cir. 1998).

         Where, as here, the parties have filed cross-motions for summary judgment, this does not alter the summary judgment standard; rather, this Court must review each motion separately on its own merits to determine whether either of the parties deserves judgment as a matter of law. See Gemini Ins. Co. v. Earth Treks, Inc., 260 F.Supp.3d 467, 475 (D. Md. 2017), aff'd, 728 Fed.Appx. 182 (4th Cir. 2018). “When considering each individual motion, the Court must ‘resolve all factual disputes and any competing, rational inferences in the light most favorable' to the party opposing the motion. CX Reinsurance Co. Ltd. v. Levitas, 207 F.Supp.3d 566, 573 (D. Md. 2016) (quoting Rossingol v. Voorhar, 316 F.3d 516, 523 (4th Cir. 2003)).


         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. Allstate Ins. Co. v. Rochkind, 381 F.Supp.3d 488, 498 (D. Md. 2019). Because the Policies were delivered in Maryland, contain a Maryland Amendatory Provision, and the parties agree that Maryland law governs their claims (ECF No. 42-1 at p. 16), this Court need not inquire further into the choice-of-law questions and will apply Maryland law. Allstate, 381 F.Supp.3d at 498.

         “Maryland law is well settled that ‘the interpretation of an insurance policy is governed by the same principles generally applicable to the constructions of other contracts.'” Id. at 508 (quoting Mitchell v. AARP, 140 Md.App. 102, 116 (2001)). Accordingly, the ordinary principles of contract interpretation apply-- specifically, the objective interpretation of contracts-- when evaluating the terms of the insurance contract itself. CX, 207 F.Supp.3d at 574; Allstate, 381 F.Supp.3d at 508. Hence, the Court gives the words of an insurance contract their customary, ordinary, and accepted meaning, as determined by the fictional “reasonably prudent layperson.” Connors v. GEICO, 442 Md. 466, 482 (2015). A “term is considered ‘ambiguous if, to a reasonably prudent person, the term is susceptible to more than one meaning.'” Connors, 442 Md. at 482 (quoting Cole v. State Farm Mut. Ins. Co., 359 Md. 298, 305-06 (2000)).

         Moreover, under Maryland law, “an insurance policy, like any other contract, must be construed as a whole to determine the parties' intentions.” Arajona v. St. Paul Fire & Marine Ins. Co., 281 Md. 371, 375 (1977). This includes an examination of the character of the contract, its purpose, and the facts and circumstances of the parties at the time of execution. Pacific Indem. Co. v. Interstate Fire & Casualty Co., 302 Md. 383, 388 (1985). A court should “read the Endorsement and the Policy together as a single contract.” Capital City Real Estate LLC v. Certain Underwriters, 788 F.3d 375, 379 (4th Cir. 2015). “However, ‘[i]f the endorsement conflicts with the main policy, the endorsement controls.'” Id. (quoting Prince George's County v. Local Gov't Ins. Trust, 388 Md. 162, 173 (2005)). If a contract's language is plain and unambiguous, the court will enforce the terms of the policy as a matter of law. Harleysville Preferred Ins. Co. v. Rams Head Savage Mill, LLC, 237 Md.App. 705, 722 (2018). In such an instance, the “court has no alternative but to enforce those terms.” Megonnell v. United Services Auto Ass'n, 368 Md. 633, 656 (2002).

         However, if a contractual term (within the policy itself) is ambiguous, a court may “turn to extrinsic evidence to determine the intent of the parties.” Connors, 442 Md. at 480-81. See Interstate Fire & Cas. Co. v. Dimensions Assurance Ltd., 843 F.3d 133, 138 (4th Cir. 2016) (recognizing only the policy itself, not any extrinsic sources, can create an ambiguity). If ambiguity persists after examining extrinsic evidence, Maryland law directs that such language be construed “liberally in favor of the insured and against the insurer as drafter of the instrument.” Capital City, 788 F.3d at 379.

         The duty to defend is broader than the duty to indemnify, but is not limitless.[5] In determining whether an insurer has a duty to defend under an insurance policy, Maryland courts apply the following test:

(1) what is the coverage and what are the defenses under the terms and requirements of the insurance policy? (2) do the allegations in the [underlying] action potentially bring the [underlying] claim within the policy's coverage? The first question focuses upon the language and requirements of the policy, and the second question focuses on the allegations of the [underlying] suit. At times these two questions involve separate and distinct matters, and at other times they are intertwined, perhaps involving an identical issue.

Capital City, 788 F.3d at 379.

         In order to establish a duty to defend, allegations of the complaint must be analyzed to determine whether there is a “potentiality” that the claim may be covered by the policy. Perdue Farms, Inc. v. Traveler's Cas. & Surety Co., 448 F.3d 252, 259 (4th Cir. 2006). The party seeking coverage has the burden of proving that the claim is within the policy's insuring agreement. Further, the insurer has the burden of proving the applicability of any exclusions to coverage. Id. at 258.

         The crux of both motions for summary judgment is whether the insurance policy provides liability coverage for the injury claimed by the Associations. Correspondingly, the Court will first review the Policies at issue to determine the scope, and any limitations, within the insurance coverage, including whether the policy language presents ambiguity. For purposes of the present dispute, the two policies are not materially different and will be analyzed together. Thus, the contract's terms must be consulted, and the coverage at issue requires analyses of three documents: (1) the Premier Businessowners Liability Coverage Form (“Liability Coverage Form”); (2) the Maryland Amendatory Endorsement (“MAE”); and (3) the Directors and Officers Liability Endorsement (“D&O Liability Endorsement”). (ECF No. 30-1 at p. 1).

         The Liability Coverage Form

         The Liability Coverage Form addresses bodily injury, personal injury, advertising injury, property damage, and medical claims against the Associations. (ECF No. 30-4 at p. 2). It is undisputed that the claims for which Beazer seeks coverage do not fall into any of these coverage categories. (ECF No. 42-1 at p. 5). Nonetheless, further discussion of the Liability ...

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