CX Reinsurance Co. v. Johnson, 0691/20

In the 1990s–2000s numerous children living in rental properties allegedly suffered lead-paint injuries while those properties were covered by commercial general liability "occurrence" policies issued by CX Reinsurance and later Liberty Mutual.
In 2015 CX sued several landlords in federal court seeking rescission of the policies for alleged application fraud; CX and landlords then entered Rescission Settlement Agreements that eliminated or sharply reduced coverage for lead claims.
The injured individuals (many of whom were minors when injured) were not parties to those rescission settlements and sued in Baltimore City Circuit Court for a declaratory judgment that: they are intended third‑party beneficiaries of the policies, their rights vested before the rescissions, and the rescissions cannot impair those vested rights.
The circuit court granted summary judgment for the plaintiffs; the insurers appealed.
The Court of Special Appeals affirmed, holding plaintiffs are intended third‑party beneficiaries, their rights vested at the time of injury, and the rescission agreements were ineffective as to those vested rights.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Are the injured plaintiffs intended third‑party beneficiaries of the liability policies?	Plaintiffs: liability policies are issued for the benefit of potential tort victims; plaintiffs are intended beneficiaries and may enforce the policies.	Insurers: plaintiffs are at best incidental beneficiaries; no enforceable rights absent judgment or settlement against the insured.	Held: Plaintiffs are intended third‑party beneficiaries as a matter of Maryland law/policy.
Did plaintiffs’ rights in the policies vest before the rescission settlements, so the settlements cannot defeat those rights?	Plaintiffs: rights to enforce vest at the time of injury; rescission after injury cannot impair vested third‑party rights.	Insurers: rights do not vest until the third party secures a judgment or until insured becomes legally obligated; rescission/settlement can modify coverage.	Held: Plaintiffs’ rights vested at the time of injury; subsequent rescission agreements were ineffective as to those vested rights.

Jackson v. Dackman Co., 422 Md. 357 (Md. 2011) (struck down Maryland’s $17,000 cap on lead‑related personal injury awards)
Jones v. Hyatt Ins. Agency, Inc., 356 Md. 639 (Md. 1999) (recognized injured tort claimants may be third‑party beneficiaries of insurance procurement agreements)
Mesmer v. Md. Auto. Ins. Fund, 353 Md. 241 (Md. 1999) (insurance policies are governed by general contract principles)
120 W. Fayette St., LLLP v. Mayor of Balt., 426 Md. 14 (Md. 2012) (explained intended vs. incidental third‑party beneficiary test)
CR‑RSC Tower I, LLC v. RSC Tower I, LLC, 429 Md. 387 (Md. 2012) (further elaborated factors distinguishing intended and incidental beneficiaries)
Spates v. Spates, 267 Md. 72 (Md. 1972) (discussed vesting rules for third‑party beneficiaries and special rule for minors)
Harford Mut. Ins. Co. v. Woodfin Equities Corp., 344 Md. 399 (Md. 1997) (explained limits on direct actions against insurers in underlying tort proceedings)
Phillips v. Allstate Indem. Co., 156 Md. App. 729 (Md. Ct. Spec. App. 2004) (noted liability policies are generally for the benefit of injured third parties)
Travelers Ins. Co. v. Godsey, 260 Md. 669 (Md. 1971) (third‑party beneficiary stands in the insured’s shoes and may enforce rights subject to the insured’s defenses)