509 F.Supp.3d 460
D. Maryland2020Background
- On July 30, 2016 Ellicott City experienced ~6.6 inches of rain and extensive flooding; a nearby water main broke and the foundations of 8227 and 8231 Main Street washed away.
- Properties are owned by Kara Brown; DSB (owned by Howard Brown) is insured by Affiliated FM under a policy covering 204 named locations; the Main Street properties were not named but fit within the Policy’s Unnamed Locations coverage.
- The Policy provides a $750,000,000 overall limit, with sub-limits; flood coverage includes a $250,000,000 annual aggregate but contains a $50,000 annual aggregate "as respects Errors & Omissions, Off-Premises Service Interruption, Unnamed Locations and Supply Chain combined."
- Plaintiffs submitted a claim after the loss; Affiliated paid $50,000, asserting the $50,000 flood annual aggregate sub-limit applied to Unnamed Locations.
- Plaintiffs sued; parties filed cross-motions for summary judgment. Maryland law governs contract interpretation; the court reviewed policy language and expert evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Number of occurrences on July 30, 2016 | There were two occurrences (flood and separate water main break) so multiple sub-limits should apply | The loss was one "occurrence" under the Policy definition because one discrete physical event (foundations washed away) resulted from concurrent causes | Court: Single occurrence — multiple contributing causes do not create separate occurrences under the Policy definition |
| 2. Whether water main break damage is "flood" | The water main break is a distinct non-flood cause and should not be subsumed by the Policy's flood definition | Policy's flood definition expressly includes damage from flood regardless of any other cause contributing concurrently or in sequence | Court: Flood definition subsumes concurrent causes; the combined effects are flood damage under the Policy |
| 3. Applicability of the $50,000 sub-limit language | The $50,000 phrase applies only if all listed coverages (Errors & Omissions, Off-Premises Service Interruption, Unnamed Locations, Supply Chain) are implicated simultaneously, which Plaintiffs argue is not the case | The plain language limits the combined annual aggregate for those listed coverages for flood to $50,000; thus Unnamed Locations flood claims are subject to the $50,000 annual aggregate | Court: $50,000 annual aggregate applies to flood claims for Unnamed Locations (the clause limits combined coverage for listed items to $50,000) |
| 4. Annual-aggregate vs. per-occurrence sub-limit | Plaintiffs argued the clause should be read to avoid an annual aggregate applying in this context | Affiliated: Policy permits conversion of some sub-limits from per-occurrence to annual aggregate where expressly stated | Court: The Policy expressly converted the sub-limit to an annual aggregate for the listed items; $50,000 annual aggregate governs |
Key Cases Cited
- People’s Ins. Counsel Div. v. State Farm Fire & Cas. Ins. Co., 214 Md. App. 438 (2013) (insurance-policy interpretation follows contract principles)
- United Servs. Auto. Ass’n v. Riley, 393 Md. 55 (2006) (contract interpretation is a question of law suitable for summary judgment)
- Sy-Lene of Washington, Inc. v. Starwood Urban Retail II, LLC, 376 Md. 157 (2003) (Maryland applies objective contract interpretation)
- Clendenin Bros., Inc. v. U.S. Fire Ins. Co., 390 Md. 449 (2006) (unambiguous policy language can be decided as a matter of law)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (standard for summary judgment and need for more than a scintilla of evidence)
- Catalina Enters. v. Hartford Fire Ins. Co., 67 F.3d 63 (4th Cir. 1995) (courts avoid contract constructions that produce absurd results)