All Class Construction, LLC v. Mutual Benefit Ins., 2014 U.S. Dist. LEXIS 24568

Mutual Benefit moved to dismiss or for summary judgment; court granted.
Action is an insurance coverage dispute removed to federal court; plaintiffs are All Class Construction, LLC, William Chaffman, David Dzergoski, and John Cirone, alleging two counts against Mutual Benefit.
Policy issued 12/6/2012 to BOC Masonry, LLC, with a 2013 amendment adding All Class as insured; policy covers personal and advertising injury (P&A) and defense duties when applicable; limits include $1 million P&A per person/organization and $2 million general aggregate.
Underlying Pennsylvania suit alleges LeCompte and others engaged in schemes related to assignments, noncompete/solicitation, and misappropriation of confidential information; some counts name All Class and the named plaintiffs.
Mutual Benefit denied coverage in June 2013; subsequent letters reiterated denial and referenced the policy terms and exclusions; underlying case settled for over $300,000; plaintiffs incurred attorney’s fees.
Court analyzes Maryland good-faith standard under Md. Code for insurance disputes, and finds no genuine dispute about coverage under the policy as to P&A, leading to dismissal of Count I and grant of summary judgment on Count II.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Count I alleging failure to act in good faith survives	Schwaber/Millennium suggest totality-of-circumstances standard shows lack of good faith.	Exhaustion and policy interpretation support a reasonable denial; no lack of good faith shown.	Count I dismissed for lack of good faith.
Whether P&A Injury coverage potentially applies to the Underlying Suit	Allegations bring within P&A Injury through publication and misrepresentation theories.	Exclusions and lack of advertisement, plus publications pre-dating the policy, remove potential coverage.	Count II granted summary judgment for Mutual Benefit; no P&A Coverage.

Millennium Inorganic Chemicals Ltd. v. National Union Fire Ins. Co. of Pittsburgh, PA, 893 F.Supp.2d 715 (D.Md.2012) (duty to defend analyzed under totality of circumstances)
St. Paul Fire & Marine Ins. Co. v. Pryseski, 292 Md. 187, 438 A.2d 282 (Md. 1981) (two-question framework for insurer defense obligations)
Walk v. Hartford Cas. Ins. Co., 382 Md. 1, 852 A.2d 98 (Md. 2004) (defining potentiality of coverage in defense duties)
Litz v. State Farm Fire & Cas. Co., 346 Md. 217, 695 A.2d 566 (Md. 1997) (insurer duty to defend when potential coverage exists)
Aetna Cas. & Sur. Co. v. Cochran, 337 Md. 98, 651 A.2d 859 (Md. 1995) (contract interpretation governs coverage analysis)
Cowan Sys., Inc. v. Harleysville Mut. Ins. Co., 457 F.3d 368 (4th Cir.2006) (duty to defend favorable to insured when potential coverage exists)
Walk v. Hartford Cas. Ins. Co., 382 Md. 1, 852 A.2d 98 (Md. 2004) (duty to defend; potentiality standard)