United States District Court, D. Maryland
L. Hollander, United States District Judge.
case involves a dispute concerning insurance coverage. The
litigation is rooted in the partial collapse of a building
during a waterproofing project.
State Automobile Mutual Insurance Company (“State
Auto”), as subrogee of Kirkley-Ruddick Funeral Home,
P.A. (the “Funeral Home”) and Scott and Cheryl
Ruddick, and as assignee of Budget Waterproofing, Inc.
(“Budget”), filed suit against Ronald Lennox and
State Farm Fire and Casualty Company (“State
Farm”). ECF 1 (the “Complaint”). In 2016,
while Budget was performing a waterproofing project for
Funeral Home, the structure partially collapsed. Funeral
Home's insurer, State Auto, paid over $300, 000 on the
claim and then sought to recover from Budget's insurance
company, State Farm. However, State Farm denied coverage.
Complaint, State Auto alleges that Mr. Lennox, who operated
an insurance agency in Glen Burnie, Maryland, failed to
procure adequate liability insurance for Budget, in breach of
an agreement with Budget and in violation of his duty to
exercise due care. Jurisdiction is founded on diversity of
citizenship. 28 U.S.C. § 1332(a).
Complaint contains four counts. Count I alleges that Mr.
Lennox breached a “contractual duty to exercise due
care in obtaining liability insurance” for Budget. ECF
1, ¶¶ 24-30. Count II asserts that Mr. Lennox acted
negligently in procuring insurance Budget's insurance
policy. Id. ¶¶ 31-39. Count III lodges a
breach of contract claim against State Farm on a theory of
principal-agent liability. Id. ¶¶ 40-52.
And, Count IV asserts that State Farm is vicariously liable
for Mr. Lennox's negligence. Id. ¶¶
53-67. Four exhibits are attached to the Complaint. ECF 1-2
to ECF 1-4. Defendants have moved to dismiss the Complaint
(ECF 10, the “Motion”), supported by one exhibit.
ECF 10-1. Plaintiff opposes the Motion (ECF 12), and
defendants have replied. ECF 13.
hearing is necessary to resolve the Motion. See
Local Rule 105(6). For the reasons that follow, I shall grant
the Motion in part and deny it in part. ECF 10.
Home is located in Glen Burnie, Maryland. ECF 1, ¶ 14.
At the relevant time, Funeral Home was insured against
property damage under a State Auto insurance policy.
Id. ¶ 18. State Auto is an Ohio corporation
that is authorized to issue insurance policies in Maryland.
Id. ¶ 1. Budget is a waterproofing contractor
incorporated under the laws of Maryland, with its principal
place of business in Linthicum Heights, Maryland.
Id. ¶ 2. In its line of work, Budget
“routinely excavate[s] below the floors and adjacent to
the foundation walls of existing buildings.”
Id. ¶ 7.
about May 6, 2015, Budget purchased, through Mr. Lennox, a
commercial general liability insurance policy (the
“Policy” or the “CGL Policy”) issued
by State Farm. Id. ¶ 10; ECF 1-1 (CGL Policy).
The CGL Policy was effective from May 6, 2015 to May 6, 2016.
Id. ¶ 13.
time of the purchase of the Policy, Mr. Lennox was a
Maryland-licensed insurance agent operating a State Farm
insurance agency in Glen Burnie, Maryland. ECF 1, ¶ 8.
According to plaintiff, Mr. Lennox “knew or should have
known that Budget Waterproofing needed liability coverage for
the collapse or partial collapse of buildings.”
Id. ¶ 11.
Policy was modified by an addendum titled “CMP-4600
ARTISAN AND SERVICE CONTRACTOR ENDORSEMENT.” ECF 1-1 at
64 (the “Addendum”). The Addendum contains the
following warning at the top of the first page: “THIS
ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT
CAREFULLY.” Id. In pertinent part, the
Addendum provided, id.:
“SECTION II-LIABILITY is amended as
a. The following exclusions are added under Section
II-Exclusions of SECTION II-LIABILITY:
Collapse Hazard “Property
damage” arising out of or included within the
“collapse hazard.” This exclusion does not apply
(1) Operations performed for you by others;
(2) “Property damage” included
within the “products-completed operations hazard”
or the “underground property damage hazard.”
Addendum defined “Collapse hazard” as
“‘structural property damage' and any
resulting ‘property damage' to any other property
at any time.” Id. at 65. Further, the Addendum
(c) “Structural property damage”
means the collapse of or structural injury to any building or
structure due to:
i. Grading of land, excavating, borrowing,
filling, back-filling, tunneling, pile driving, coffer-dam
work, or caisson work; or
ii. Moving, shorting underpinning, raising
or demolition of any building or structure or removal or
rebuilding of any structural support of that building or
December 5, 2015, Budget entered into a written agreement
with Funeral Home to install a subfloor drainage system. ECF
1, ¶ 15; see ECF 1-2 (Budget-Funeral Home
agreement). The project entailed digging below Funeral
Home's floor and adjacent to its foundation walls. ECF 1,
¶ 15. On February 24, 2016, while the project was
ongoing, Funeral Home partially collapsed. Id.
the collapse, Funeral Home filed a property claim with its
insurer, State Auto, for damages resulting from the
occurrence. Id. ¶ 18. After applying the $ 1,
000 deductible under the Policy, State Auto paid Funeral Home
$ 306, 347.73. Id. ¶ 19. State Auto notified
State Farm of Funeral Home's claim as well as State
Auto's subrogation interest. Id. ¶ 20.
December 21, 2016, State Farm denied liability coverage for
Budget, citing the collapse hazard exclusion in the CGL
Policy. Id. at ¶ 21; ECF 1-3 (Denial Letter).
It explained, ECF 1-3:
This letter serves as a follow-up to our conversation that
occurred on December 19, 2016. At that time, I informed you
following a review of our insured's policy, there is an
attached endorsement, CMP-4600 that prevents us from
extending coverage for this loss. This endorsement includes
an exclusion for property damage arising out of or included
in the “collapse hazard.” “Collapse
hazard” is defined as “structural property
damage” and any resulting property damage to any other
property at any time.
Auto, as subrogee of Funeral Home, filed suit against Budget
in this Court on January 17, 2018. ECF 1, ¶ 22; see
State Auto. Mut. Ins. Co. v. Budget Waterproofing, Inc.,
ELH-18-155 (D. Md.). The parties to that case settled on or
about September 18, 2018. ECF 1-4 (Settlement Agreement and
Release); ECF 10-1 (same).
the terms of the Settlement Agreement and Release, Budget
agreed to pay State Auto a total of $ 50, 000. ECF 1-4 at
2-3. Further, Budget “assign[ed] to State Auto all
claims that it owns, and/or claims it acquires relating to
the Incident, including, but not limited to, all rights
Budget Waterproofing may have against State Farm and its
agents, including without limitation Ron Lennox and Jim Chen
(“Assigned Claims”).” Id. at 3. In
return, State Auto agreed that, “[u]pon resolution of
the Assigned claims, ” State Auto and Funeral Home
“will release their claims against Budget Waterproofing
arising from or relating to the Incident and will stipulate
to dismiss, with prejudice and without costs, State
Auto's Subrogation Action.” Id. And, State
Auto promised that if it recovered in regard to the Assigned
Claims, it would “share that recovery, net of pro rata
fees and costs, with Budget Waterproofing on a 50:50
basis” up to “the first $ 100, 000 in gross
recovery.” Id. at 3. Notably, the agreement
provided that “Budget Waterproofing and its principals
and employees agree to fully cooperate with State Auto in its
efforts to pursue any of the Assigned Claims.”
litigation followed on May 10, 2019. ECF 1.
Standard of Review
defendant may test the legal sufficiency of a complaint by
way of a motion to dismiss under Rule 12(b)(6). In re
Birmingham, 846 F.3d 88, 92 (4th Cir. 2017); Goines
v. Valley Cmty. Servs. Bd., 822 F.3d 159, 165-66 (4th
Cir. 2016); McBurney v. Cuccinelli, 616 F.3d 393,
408 (4th Cir. 2010), aff'd sub nom.,
McBurney v. Young, 569 U.S. 221 (2013); Edwards
v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999).
A Rule 12(b)(6) motion constitutes an assertion by a
defendant that, even if the facts alleged by a plaintiff are
true, the complaint fails as a matter of law “to state
a claim upon which relief can be granted.”
a complaint states a claim for relief is assessed by
reference to the pleading requirements of Fed.R.Civ.P.
8(a)(2). That rule provides that a complaint must contain a
“short and plain statement of the claim showing that
the pleader is entitled to relief.” The purpose of the
rule is to provide the defendants with “fair
notice” of the claims and the “grounds” for
entitlement to relief. Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555-56 (2007).
survive a motion under Fed.R.Civ.P. 12(b)(6), a complaint
must contain facts sufficient to “state a claim to
relief that is plausible on its face.”
Twombly, 550 U.S. at 570; see Ashcroft v.
Iqbal, 556 U.S. 662, 684 (2009) (citation omitted)
(“Our decision in Twombly expounded the
pleading standard for ‘all civil actions' . . .
.”); see also Paradise Wire & Cable Defined
Benefit Pension Plan v. Weil, 918 F.3d 312, 317 (4th
Cir. 2019); Willner v. Dimon, 849 F.3d 93, 112 (4th
Cir. 2017). To be sure, a plaintiff need not include
“detailed factual allegations” in order to
satisfy Rule 8(a)(2). Twombly, 550 U.S. at 555.
Moreover, federal pleading rules “do not countenance
dismissal of a complaint for imperfect statement of the legal
theory supporting the claim asserted.” Johnson v.
City of Shelby, Miss., 574 U.S. 10, 10 (2014) (per
curiam). But, mere “‘naked assertions' of
wrongdoing” are generally insufficient to state a claim
for relief. Francis v. Giacomelli, 588 F.3d 186, 193
(4th Cir. 2009) (citation omitted).
other words, the rule demands more than bald accusations or
mere speculation. Twombly, 550 U.S. at 555; see
Painter's Mill Grille, LLC v. Brown, 716 F.3d 342,
350 (4th Cir. 2013). If a complaint provides no more than
“labels and conclusions” or “a formulaic
recitation of the elements of a cause of action, ” it
is insufficient. Twombly, 550 U.S. at 555.
“[A]n unadorned, the-defendant-unlawfully-harmed-me
accusation” does not state a plausible claim of relief.
Iqbal, 556 U.S. at 678. Rather, to satisfy the
minimal requirements of Rule 8(a)(2), the complaint must set
forth “enough factual matter (taken as true) to
suggest” a cognizable cause of action, “even if .
. . [the] actual proof of those facts is improbable and . . .
recovery is very remote and unlikely.”
Twombly, 550 U.S. at 556 (internal quotation marks
reviewing a Rule 12(b)(6) motion, a court “must accept
as true all of the factual allegations contained in the
complaint” and must “draw all reasonable
inferences [from those facts] in favor of the
plaintiff.” E.I. du Pont de Nemours & Co. v.
Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011)
(citations omitted); see Semenova v. MTA, 845 F.3d
564, 567 (4th Cir. 2017); Houck v. Substitute Tr. Servs.,
Inc., 791 F.3d 473, 484 (4th Cir. 2015); Kendall v.
Balcerzak, 650 F.3d 515, 522 (4th Cir. 2011), cert.
denied, 565 U.S. 943 (2011). But, a court is not
required to accept legal conclusions drawn from the facts.
See Papasan v. Allain, 478 U.S. 265, 286 (1986);
Glassman v. Arlington Cty., 628 F.3d 140, 146 (4th
Cir. 2010). “A court decides whether [the pleading]
standard is met by separating the legal conclusions from the
factual allegations, assuming the truth of only the factual
allegations, and then ...