Perini/Tompkins Joint Venture v. ACE American Insurance Company
2013 U.S. App. LEXIS 24865
| 4th Cir. | 2013Background
- PTJV (joint venture) was a named insured under an Owner Controlled Insurance Program (OCIP) primary ($2M) and excess ($25M) liability policies issued to project owner Gaylord for construction of a hotel/convention center in Oxon Hill, MD.
- During construction an atrium truss failed (Sept. 2007) causing significant property damage; an ACE representative was on-site during and after the Collapse.
- PTJV sued Gaylord seeking nearly $80M; Gaylord counterclaimed for about $65M. PTJV settled the Gaylord counterclaim on Nov. 26, 2008, without obtaining ACE’s written consent and credited/recovered large sums as part of the settlement.
- PTJV first gave ACE formal written notice nearly six months after the settlement and later sought coverage/reimbursement under the Policies; ACE reserved rights and denied coverage citing, among other things, voluntary payments made without consent and no-action clauses.
- The district court granted summary judgment for ACE because PTJV settled without insurer consent in breach of the Policies; the Fourth Circuit affirmed, applying Maryland choice-of-law rules but finding the outcome the same under Tennessee law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether PTJV can recover under the Policies after settling underlying litigation without insurer consent | PTJV says Md. Code §19-110 requires ACE to prove actual prejudice from breach of notice/cooperation before denying coverage; thus fact issue precludes summary judgment | ACE says Policies’ voluntary-payment and no-action clauses make insurer consent a condition precedent to coverage; failure to obtain consent bars recovery and prejudice proof is unnecessary (or is established as a matter of law) | Held: PTJV breached the consent provisions; insurer need not prove prejudice under §19-110 for no-action/consent defenses; even if required, prejudice is inferred as a matter of law. |
| Whether Maryland or Tennessee law governs interpretation of the Policies | PTJV argues Maryland law (forum) should control | ACE points to lex loci contractus pointing to Tennessee (policy issued/delivered there) | Held: Tennessee is the state where policies were made, but outcome is the same under both states’ law; Fourth Circuit affirmed on either ground. |
| Whether ACE waived its right to assert late-notice/consent defenses | PTJV argues ACE’s conduct (on-site rep, delay, alleged statements) amounted to waiver/estoppel or creates factual dispute | ACE contends its communications preserved rights and expressly disclaimed waiver; waiver requires clear, intentional relinquishment of a known right | Held: No waiver—PTJV failed to show ACE intentionally relinquished its contract rights; summary judgment proper. |
| Whether statutory or common-law prejudice is required for insurer to prevail when consent/no-action clause is breached | PTJV: §19-110 and common law require insurer show actual prejudice | ACE: §19-110 does not apply to defenses based on no-action/consent clauses; common law also permits treating insurer as prejudiced when presented a fait accompli | Held: §19-110 is inapplicable to no-action/consent defenses (Phillips Way); courts may infer prejudice as a matter of law where insured settles without consent. |
Key Cases Cited
- Phillips Way, Inc. v. Am. Equity Ins. Co., 795 A.2d 216 (Md. Ct. Spec. App. 2002) (no-action/consent clause bars recovery; insurer need not prove prejudice from failure-to-consent defense)
- Prince George’s Cnty. v. Local Gov’t Ins. Tr., 879 A.2d 81 (Md. 2005) (insurer prejudiced as a matter of law when insured delayed notice until after judgment, creating a fait accompli)
- Anderson v. Dudley Moore Ins. Co., 640 S.W.2d 556 (Tenn. Ct. App. 1982) (insured who made ex parte payments without carrier involvement violated voluntary-payment clause and could not recover)
- Alcazar v. Hayes, 982 S.W.2d 845 (Tenn. 1998) (presumption of prejudice from untimely notice, rebuttable by insured; distinguished from fait accompli context)