"[A]n insurance company cannot be held liable for periods of risk it never contracted to cover." Pennsylvania National Mutual Casualty Ins. Co. v. Roberts ,
Plaintiff Allstate Insurance Company ("Allstate") has filed a declaratory judgment action against defendants Stanley Rochkind, individually and as trustee of the assets of both Dear Management and Construction Company ("Dear Management") and Uptown Realty Co. Limited Partnership ("Uptown").
Beginning in June 1988, Allstate issued a Personal Umbrella Policy (ECF 1-3, the "Policy") to Rochkind, who owns and manages residential properties in Baltimore. ECF 1, ¶ 11. The Policy, which provided excess personal liability coverage to Rochkind, was continually renewed over the next decade.
According to Allstate, Sherald's total lead exposure was 3858 days; it insured Rochkind for 1195 days; and therefore Allstate's total liability is 30.1% of any damages awarded against Rochkind (1195/3858). ECF 25 at 1.
Three motions are now pending. First, Allstate has moved for summary judgment (ECF 22), supported by a memorandum of law (ECF 22-1) (collectively the "Allstate Motion") and two exhibits. ECF 22-2; ECF 22-3. Defendants filed a consolidated opposition and a cross motion for summary judgment or, in the alternative, to certify issues to the Maryland Court of Appeals. ECF 25 ("Cross Motion"). They also submitted two exhibits. ECF 25-1; ECF 25-2. Plaintiff filed a consolidated reply and opposition. ECF 29. Defendants replied (ECF 38) and submitted the Affidavit of Paul Rogers, M.D., an expert in neurodevelopmental pediatrics. ECF 28-1. The Affidavit pertains to Sherald's period of exposure to lead.
Allstate has moved to strike the Affidavit of Dr. Rogers. ECF 39. Defendants oppose the motion (ECF 40), and Allstate submitted a reply. ECF 43.
The Motions are fully briefed and no hearing is necessary to resolve them. See Local Rule 105.6. For the foregoing reasons, I shall deny the motions.
I. Factual Summary
On February 27, 2017, in the Circuit Court for Baltimore City, Sherald sued Rochkind, individually and as trustee of the assets of Dear Management and Uptown. Sherald v. Rochkind , No. 24-C-17-000943; see also ECF 1-2. Sherald, who is now 23-years of age, alleged claims of negligence. He asserted that his mother, grandparents, and great grandmother lived at or visited 2722 Riggs Avenue in Baltimore City ("Property") from 1964 to the "present." Id. at 5, ¶ 5. According to Sherald, the Property was operated and controlled by Rochkind, Dear Management, and Uptown. Id. at 4-5, 13-15. Moreover, he asserted that he was exposed to lead paint at the Property from the time of his birth on March 6, 1996, to the "present," while either residing or visiting at the Property. Id. at 5. However, Sherald also appears to have alleged that damaging exposure occurred only until June 1999. Id. at 13-15; see ECF 25 at 33, 43-45.
Allstate was not a party to the Tort Case. The parties do not state whether Allstate provided a defense to Rochkind in the suit. See ECF 1-2.
During the pendency of the Tort Case, the parties engaged in discovery. During discovery, Sherald stated in an answer to an interrogatory: "Since birth, [Sherald] has always spent most of his time at [Rochkind's] rental property located at 2722 Riggs Avenue, where he currently resides." ECF 22-2 at 5. However, Sherald also stated that his parents "held [other] rental residences where Plaintiff would usually, but not always, sleep and call home." Id. He identified three other residences where he had lived: One from birth to age 2; a second from ages 2 to 7; and a
Of relevance here, Sherald described the condition of the Property, id. at 7:
The premises were not maintained by the landlord, and the painted surfaces were deteriorating throughout the rental property. Areas of chipping, peeling and flaking paint include the trim/woodwork around windows, doors and the baseboards. Also, walls, doors and kitchen cabinets. These areas of deteriorated paint were in most all rooms of the house, including the bedrooms, living room and kitchen. The front porch area woodwork was chipping, peeling and flaking as well. Plaintiff was frequently at or near these areas of deteriorated paint as an infant and toddler, and throughout his life.
Further, Sherald stated that Rochkind "did not correct the deteriorated paint conditions when asked to do so or when otherwise informed of the presence of chipping peeling and flaking paint inside the premises." Id. at 7-8.
In addition, Sherald provided his blood lead levels with respect to five dates. Id. at 9. His first test is dated March 7, 1997, and his last test is dated September 27, 2006. Id. The parties appear to agree for the purposes of the motions that Sherald's final blood lead levels were elevated. See ECF 25 at 33; ECF 29 at 7.
After some discovery, the Tort Case settled, and the parties stipulated to a dismissal of that case, with prejudice. See Sherald v. Rochkind , No. 24-C-17-000943, ECF 56/0, ECF 57/0 (Feb. 8, 2019; March 13, 2019).
II. The Policy
As noted, Allstate's request for declaratory judgment arises out of a Personal Umbrella Policy of insurance issued to Rochkind. See ECF 1-3. The Policy covered the Property from June 13, 1988 until June 13, 2000. Id. at 8; ECF 1, ¶ 11.
The Policy (ECF 1-3) "applies to an occurrence anywhere in the world while the insurance is in force." Id. at 10. An "occurrence" is "an accident or continuous exposure to conditions." Id.
Pursuant to the Policy, "Allstate will defend an insured if sued as the result of an occurrence covered by this policy even if the suit is groundless, false or fraudulent." Id. at 14. Further, "Allstate will pay when an insured becomes legally obligated to pay for personal injury or property damage caused by an occurrence ." Id. at 12.
Effective June 13, 1999, Allstate added an endorsement to the Policy. Id. at 17-19 (the "Endorsement"). The Endorsement contains several exclusions, including an exclusion for physical injury resulting from exposure to lead. Id. at 18, Exclusion 10 (the "Lead Coverage Exclusion"). The Endorsement provides, id. at 17-19:
Policy Endorsement
The following endorsement changes your policy. Please read this document carefully and keep it with your policy.
This Endorsement Changes Your Policy-Keep It With Your Policy
Personal Umbrella Policy
Amendatory Endorsement-AP779
* * *
D. The following exclusions are added:
10. to personal injury or bodily injury which results in any manner from any type of vapors, fumes, acids, toxic chemicals, toxic gases, toxic liquids, toxic soils, waste materials, irritants, contaminants, or pollutants, including, but not limited to:
a) lead in any form;
b) asbestos in any form;
c) radon in any form; or
d) oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from a storage tank.
* * *
11. to property damage consisting of, or caused by, any type of vapors, fumes, acids, toxic chemicals, toxic gases, toxic liquids, toxic solids, waste materials, irritants, contaminants, or pollutants, including, but not limited to:
a) lead in any form;
b) asbestos in any form;
c) radon in any form; or
d) oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from a storage tank.
* * *
12. to any liability imposed upon any insured by any governmental authority for personal injury or bodily injury which results in any manner from, or for property damage consisting of, or caused by, any type of vapors, fumes, acids, toxic chemicals, toxic gases, toxic liquids, toxic soils, waste materials, irritants, contaminants, or pollutants, including, but not limited to:
a) lead in any form;
b) asbestos in any form;
c) radon in any form; or
d) oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from a storage tank.
13. to any loss, cost or expense arising out of any request, demand, or order that any insured test for, monitor, clean up, remove, contain, treat, detoxify, or neutralize, or in any way respond to or assess the effects of any vapors, fumes, acids, toxic chemicals, toxic gases, toxic liquids, toxic soils, waste materials, irritants, contaminants, or pollutants, including, but not limited to:
a) lead in any form;
b) asbestos in any form;
c) radon in any form; or
d) oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from a storage tank.
Allstate asserts that Maryland law governs the legal issues in this diversity case. ECF 22-1 at 8. Defendants do not contest the point; they assume, without discussion, that Maryland law applies here. See ECF 25.
In an action based upon diversity of citizenship, a federal court must apply the substantive law of the state in which it sits, including that state's choice of law rules. Klaxon Co. v. Stentor Elect. Mfg. Co. ,
In a contract claim, Maryland courts follow the rule of lex loci contractus , applying the substantive law of the state where the contract was formed, unless there is a choice-of-law provision in the contract. Erie Ins. Exch. v. Heffernan ,
The Policy does not appear to contain a choice of law clause. See ECF 1-3. Nor is it clear that the Policy was executed in Maryland, although the Property and the insureds are located in Maryland. But, "[t]ypically, '[t]he locus contractus of an insurance policy is the state in which the policy is delivered and the premiums are paid.' " Porter Hayden ,
"In any event, because the parties implicitly agree that Maryland law governs their claims, [the Court] need not inquire further into the choice-of-law questions." Vanderhoof-Forschner v. McSweegan ,
IV. Motion for Certification
Before proceeding to the cross motions for summary judgment, the Court must consider whether it should even reach them or, instead, certify questions to the Maryland Court of Appeals, as requested by defendants.
Under the Maryland Uniform Certification of Questions of Law Act ("Certification Act"), Md. Code (2013 Repl. Vol., 2017 Supp.), § 12-601 et seq. of the Courts and Judicial Proceedings Article ("C.J."), this Court may certify to the Maryland Court of Appeals a question of law "if the answer may be determinative of an issue in pending
The two issues address the proper method of allocating the damages and defense costs arising from lead-paint poisoning disputes. The first issue (the "Allocation Issue") concerns whether Allstate is liable for all of the damages and defense costs (the "all sums method") or, instead, only the portion of the damages equal to its share of the time on the risk (the "pro rata method"). The second issue (the "Exposure Issue") concerns the duration of Sherald's exposure to lead.
As to the Allocation Issue, defendants maintain that the all sums method applies. It provides that an insurer whose coverage is triggered is liable for the full amount of the judgment against the policyholder, up to the amount of its policy limit. ECF 25 at 14-33. Not surprisingly, Allstate supports the pro rata method, which limits an insurer's liability to " 'that period of time it was on the risk compared to the entire period during which damages occurred.' " ECF 22-1 at 8 (quoting Mayor & City Council of Baltimore v. Utica Mut. Ins. Co. ,
With respect to the Exposure Issue, when using the pro rata method to calculate the insurer's share of the damages, the exposure period represents the denominator, i.e. , the total period of the tort plaintiff's risk. However, when employing the all sums method, the length of the tort plaintiff's exposure period does not affect the allocation of the damages. Instead, the insurer is liable for all damages up to the policy limit.
The parties dispute the end date of Sherald's exposure period. According to Allstate, the Fourth Circuit in Roberts ,
A. Proposed Questions for Certification
Defendants propose the following two questions for certification to the Maryland Court of Appeals, which I quote in full, ECF 25 at 34:
1. Where a carrier becomes legally obligated to pay damages and defense costs for bodily injury caused by an "occurrence" by the happening of some portion of that bodily injury during the policy period, is the triggered policy liable up to its limits for the entire amount of indemnity and defense costs, or is the policy's liabilitylimited to a pro rata portion of the indemnity and defense costs based upon the number of years which the policy provided coverage and the years of which bodily injury took place (the "Allocation Issue"); and
2. Where a lead paint plaintiff only alleges exposure during the policy period, is the carrier entitled to unilaterally calculate the entire period over which plaintiff has recorded elevated blood levels as the "period of exposure" for Roberts -type allocation [i.e. , pro rata allocation] (the "Exposure Issue")?[6 ]
To this Court's knowledge, the Maryland Court of Appeals has not addressed either of the questions proposed for certification. But, the Maryland Court of Special Appeals has addressed the first question. See Md. Cas. Co. v. Hanson ,
B. Standard for Certification
The role of a federal court when considering an issue of state law is to "interpret the law as it believes that state's highest court of appeals would rule." Abadian v. Lee ,
The Certification Act provides that the Court may certify a question of law to the Maryland Court of Appeals "if the answer may be determinative of an issue in pending litigation in the certifying court and there is no controlling [Maryland] appellate decision, constitutional provision, or statute...." C.J. § 12-603. The purpose of the Certification Act "is 'to promote the widest possible use of the certification process in order to promote judicial economy and the proper application of [Maryland]'s law in a foreign forum.' " Proctor v. WMATA ,
The Fourth Circuit has endorsed certification of substantial, unresolved questions of state law to a state's highest court, where a certification procedure is available and resolution of the question is necessary to the case. Certification "ensur[es] the correct legal outcome, aid[s] in judicial economy, and manifest[s] proper respect for federalism." Sartin v. Macik ,
When deciding whether certification of a question of law is appropriate, a federal court must undertake a two-part inquiry. First, the court must consider whether the answer " 'may be determinative
Notably, for the purpose of C.J. § 12-603, a decision of an intermediate state appellate court is not a "controlling appellate decision." Proctor ,
"A federal court cannot refuse to follow an intermediate appellate court's decision simply because it believes the intermediate court's decision was wrong, bad policy, or contrary to the majority rule in other jurisdictions."
C. Question 1: The Allocation Issue
In essence, defendants seek to certify the question of whether the pro rata method or the all sums method applies when an insurer becomes obligated to pay damages and defense costs for a tort plaintiff's continuous exposure to lead.
For example, according to defendants, the Maryland Court of Special Appeals' adoption of the pro rata method in Utica ,
Allstate argues that certification is unnecessary as Maryland case law firmly supports using the pro rata method to allocate damages in continuous injury cases like this one. ECF 29 at 16-21. Allstate does not address defendants' arguments regarding
The Maryland Court of Special Appeals has decided three cases addressing the use of pro rata allocation in continuous injury cases. First, in 2002, the court considered how to allocate liability among several insurance companies for property damage resulting from the installation and presence of asbestos-containing insulation in a building. Utica,
"At the time [the insured] purchased each individual insurance policy, we doubt that [it] could have had a reasonable expectation that each single policy would indemnify [it] for liability related to property damage occurring due to events taking place years before and years after the term of each policy .... [T]here is no logic to support the notion that one single insurance policy among 20 or 30 years worth of policies could be expected to be held liable for the entire time period."
(quoting Public Service Company of Colorado v. Wallis and Companies ,
Moreover, the court "disagree[d] with ... the 'all sums' and 'joint and several approach' in general. " Id. at 310,
In 2005, in Riley,
The Court of Special Appeals reached the same conclusion again the following year in another lead paint case. See Hanson,
Notably, the Fourth Circuit has also concluded that Maryland law requires application of the pro rata method in lead poisoning cases. In Roberts ,
However, defendants argue that Utica conflicts with the Maryland Court of Appeals' reasoning in Mitchell ,
In this language, defendants see an endorsement of the all-sums method. ECF 25 at 40. But, the Mitchell Court addressed the triggering of coverage, not the means of allocating damages. Indeed, the court did not address the all-sums and pro rata methods. Moreover, the Fourth Circuit rejected a similar argument in In re Wallace ,
Defendants make much of the fact that, during the Mitchell Court's discussion of whether coverage was triggered, it quoted Zurich Ins. Co. v. Raymark Industries ,
To be sure, the Mitchell Court quoted Zurich . But, as noted, it never discussed the proper methodology for allocating damages. In essence, defendants argue that, by quoting a portion of Zurich , Mitchell endorsed Zurich in its entirety. Id. at 41. However, when a court cites a case for one proposition, it is not implicitly endorsing every other proposition contained in that case. Indeed, almost immediately after quoting Zurich , the Mitchell Court quoted Ins. Co. of No. Am. v. Forty-Eight Insulations ,
Defendants also argue that Ins. § 19-102(a) conflicts with the pro rata method. That provision states: "A liability insurance policy issued in the State may not require the insured to pay for liability or loss under the policy."
In light of the unambiguous case law, I see no ground for certification as to the Allocation Issue. The defendants have not presented " 'persuasive data that the highest court of the state would decide otherwise.' "
Defendants have cited other jurisdictions that apply the all sums method, ECF 25 at 15-16, 16 n.30, as well as policy considerations in support of it. Id. at 22-25. But see SCOTT M. SEAMAN & JASON R. SCHULZE , ALLOCATION OF LOSSES IN COMPLEX INSURANCE COVERAGE CLAIMS § 4:3 (2018) ("The pro rata approach ... appears to be the emerging trend among decisions."). Even if these arguments are valid, however, a federal court's belief that "the intermediate court's decision was wrong, bad policy, or contrary to the majority rule in other jurisdictions" is not persuasive data. Assicurazioni ,
D. Question 2: The Exposure Issue
The parties dispute the proper method for determining how long Sherald was exposed to lead paint, i.e. , the exposure period. In particular, the parties disagree over the proper end date.
Allstate contends that Sherald was exposed to lead at the Property until at least the date of Sherald's "last blood lead level," on September 27, 2006. ECF 22-1 at 10 (citing ECF 22-2 at 5, 8-9). Conversely, defendants maintain that the end date should be set at June 13, 1999, when coverage for injuries from exposure to lead terminated under the Policy, because Sherald's tort suit alleged damaging exposure only through that date. ECF 25 at 33, 44-45; see ECF 1-2 at 13, 15. But, because Maryland courts have not decided how to calculate the length of the exposure period, defendants seek certification.
The Court and the parties have identified only two federal cases, based on Maryland law, addressing the calculation of the end date. See SEAMAN & SCHULZE § 10:2 (explaining that nationwide, there is a "relative dearth of legal decisions on proper start and stop dates for allocation purposes, as opposed to trigger rulings"). In both cases, to determine the end date, the courts looked to the record from the
In the first case, an insurer sought declaratory judgment limiting its responsibility for damages to a tort plaintiff to its pro rata share. Pennsylvania Nat. Mut. Cas. Ins. Co. v. Attsgood Realty , JFM-09-2650,
By contrast, the court set the end date of the exposure period to the date of the tort plaintiff's final elevated blood lead level, not the date when the tort plaintiff moved from the Property. The court said: "[The tort plaintiff] continued to reside at the subject premises until sometime in 1998 but I find that the August 1995 test should be the cut-off date for application of the continuous trigger rule because by that time the harm had been done." Id. at *1 n. 2.
On appeal, the Fourth Circuit found substantial evidence in the record that the tort plaintiff had been exposed to lead since her birth. Roberts ,
In Pennsylvania Nat'l Mut. Cas. Ins. Co. v. Jacob Dackman & Sons, LLC , RDB-16-cv-2640,
The court stated that after the tort plaintiff permanently vacated the premises, he continued to have elevated blood lead levels. Jacob Dackman ,
As the Jacob Dackman Court recognized, a court need not set the start or end dates of the exposure period to correspond with the first or last date of a test showing an elevated blood lead level. Id. at *3. Rather, the court must determine the appropriate dates based on the evidence. This is a question of fact, not law, and is therefore inappropriate for certification. See C.J. § 12-603 ("The Court of Appeals of this State may answer a question of law
Of import here, the record on this issue is underdeveloped. The underlying Tort Case settled before trial, and the parties have submitted only two exhibits (ECF 22-2; ECF 38-1) that are relevant to the analysis. See Sherald v. Rochkind , No. 24-C-17-000943, ECF 56/0 (Feb. 8, 2019).
Accordingly, certification as to the Exposure Issue is not warranted under Maryland law.
V. Cross Motions for Summary Judgment
In its motion for summary judgment, Allstate seeks a declaration that (1) the Policy does not cover damages resulting from exposure to lead paint on or after June 13, 1999, when the Policy first excluded coverage for lead paint poisoning, and (2) Rochkind is responsible for all damages and defense costs resulting from any exposure after that date. Id. at 6. In their Cross Motion, defendants argue that Allstate is not entitled to such a declaration. See ECF 25. They maintain that the pro rata method does not apply here and the Lead Coverage Exclusion is invalid. Id. at 3-33. Further, they contest the duration of Sherald's exposure to lead. Id. at 43-45.
A. Standard of Review
Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment is appropriate only "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." See Celotex Corp. v. Catrett ,
The Supreme Court has clarified that not every factual dispute will defeat a summary judgment motion. "By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc. ,
A fact is "material" if it "might affect the outcome of the suit under the governing law."
Notably, "[a] party opposing a properly supported motion for summary judgment 'may not rest upon the mere
The district court's "function" is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson ,
In sum, to avoid summary judgment, there must be a genuine dispute as to material fact. In Iraq Middle Mkt. Dev. Found. ,
When, as here, the parties have filed cross motions for summary judgment, the court must consider "each motion separately on its own merits 'to determine whether either of the parties deserves judgment as a matter of law.' " Rossignol v. Voorhaar ,
B. Principles of Contract Construction
In the federal courts, declaratory judgments are authorized by the Declaratory Judgment Act,
Maryland law is well settled that "the interpretation of an insurance policy is governed by the same principles generally applicable to the construction of other contracts." Mitchell v. AARP ,
In " 'deciding the issue of coverage under an insurance policy, the primary principle of construction is to apply the terms of the insurance contract itself.' " Universal Underwriters Ins. Co. v. Lowe ,
The Maryland Court of Appeals has explained that judicial "interpretation of insurance contracts to determine the scope and limitations of the insurance coverage, like any other contract, begins with the language employed by the parties." MAMSI Life & Health Ins. Co. v. Callaway ,
"If the policy's language is clear and unambiguous, the Court will assume the parties meant what they said." Capital City ,
If the court deems the provisions of an insurance policy unambiguous, the meaning of the terms is determined by the court as a matter of law. Clendenin Bros. Inc. ,
" '[U]nlike the majority of other states, Maryland does not follow the rule that insurance policies are to be most strongly construed against the insurer.' " Capital City ,
C. Discussion
Allstate seeks a declaration that caps its liability at its pro rata allocation of damages, which Allstate estimates is 30.1%.
Defendants disagree. First, they maintain that the all sums method, not the pro rata method, applies here. As discussed, the all sums method provides that an insurer whose coverage is triggered is liable for the full amount of the judgment against the policyholder, up to the amount of its policy limit. By contrast, the pro rata method provides that an "insurer is liable for that period of time it was on the risk compared to the entire period during which damages occurred." ECF 22-1 at 8 (internal citation omitted) (emphasis omitted). Second, defendants maintain that the Lead Coverage Exclusion is invalid. Third, they claim that even if the pro rata method applies to damages, Allstate is responsible for all of Rochkind's defense costs in the underlying suit. Fourth, they claim that the final test of Sherald's blood lead level is not the appropriate end point for determining Sherald's exposure period to lead (i.e. , the denominator in the pro rata calculation).
1. Stanovich Affidavit
Defendants rely on the Affidavit of Craig. F. Stanovich to support many of their contentions. ECF 25-1. Stanovich holds designations as a Chartered Property and Casualty Underwriter; Certified Insurance Counselor; Certified Risk Manager; and Associate in Underwriting.
Fed. R. Evid. 702 permits expert testimony from "[a] witness who is qualified as an expert by knowledge, skill, experience, training, or education" if the "specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue[.]" But, the opinion must be "based on sufficient facts or data", Rule 702(b), and it must be "the product of reliable principles and methods", Rule 702(c), that are "reliably applied" to "the facts of the case." Rule 702(d) ; see, e.g., United States v. Smith ,
But, testimony that states a legal conclusion is not admissible. Elat v. Ngoubene ,
Although the Fourth Circuit has noted that "[t]he line between a permissible opinion on an ultimate issue and an impermissible legal conclusion is not always easy to discern," this is not one of those cases. McIver ,
2. The Pro Rata Method
i. Reconsidering the Pro Rata Method
Defendants urge the Court to reconsider the well established case law supporting use of the pro rata method. See ECF 25 at 14-33. They also maintain that the Maryland Court of Special Appeals is likely to reconsider application of the pro rata method in Robinson v. CX Re , No. 01888, Sept. Term 2016 (Md. Ct. Spec. App.). Although Robinson was argued on November 9, 2017, it apparently has not yet been decided. Therefore, defendants urge the Court to delay ruling on the Allstate Motion until the Court of Special Appeals decides Robinson.
However, as indicated, the Court of Special Appeals and the Fourth Circuit have made clear that the pro rata method governs damage allocations in continuous injury disputes in Maryland. See Roberts ,
ii. The Policy
Defendants maintain that the pro rata method does not apply here because the Policy is different from the kind of insurance policy at issue in Roberts ,
In Roberts , the insurance policy stated that it did not cover "damages ... for injuries that occurred outside of the policy period." Roberts ,
But, the Policy contains other language limiting the scope of its coverage. The Policy states that it "applies to an occurrence anywhere in the world while the insurance is in force ." ECF 1-3 at 10 (second emphasis added). " "Whether it is phrased as 'during the policy period' or 'while the insurance is in force,' " the resulting plain meaning is the same." Allstate Ins. Co. v. Blue , ADC-18-1199,
iii. The Unavailability Rule
Next, defendants allege that Rochkind could not obtain coverage for lead exposure after the Lead Coverage Exclusion
The Court is not persuaded by this argument. Defendants cite no authority for the existence of such a rule in Maryland, nor could the Court find any Maryland cases discussing such a rule. Moreover, "the vast majority of decisions applying a pro rata allocation methodology require that the policyholder contribute for 'bare' periods regardless of whether applicable insurance was 'available' or 'unavailable.' " SEAMAN & SCHULZE § 4:3. Additionally, as Allstate notes, defendants provide no evidence that Rochkind could not obtain insurance covering lead exposure. See ECF 29 at 12 n.2.
As the Roberts Court said,
3. Lead Coverage Exclusion
i. Pollution Exclusion
Defendants next claim that the Endorsement does not apply to personal injuries resulting from lead-paint inside a residence. As noted earlier, the Endorsement states, in relevant part, ECF 1-3 at 18 (emphases in Policy):
D. The following exclusions are added:
10. to personal injury or bodily injury which results in any manner from any type of vapors, fumes, acids, toxic chemicals, toxic gases, toxic liquids, toxic soils, waste materials, irritants, contaminants, or pollutants, including, but not limited to:
a) lead in any form;
b) asbestos in any form;
c) radon in any form; or
d) oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from a storage tank.
* * *
12. to any liability imposed upon any insured by any governmental authority for personal injury or bodily injury which results in any manner from, or for property damage consisting of, or caused by, any type of vapors, fumes, acids, toxic chemicals, toxic gases, toxic liquids, toxic soils, waste materials, irritants, contaminants, or pollutants, including, but not limited to:
a) lead in any form;
b) asbestos in any form;
c) radon in any form; or
d) oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from a storage tank.
13. to any loss, cost or expense arising out of any request, demand, or order that any insured test for, monitor, clean up, remove, contain, treat, detoxify, or neutralize, or in any way respond to or assess the effects of any vapors, fumes, acids, toxic chemicals, toxic gases, toxic liquids, toxic soils, waste materials, irritants,contaminants, or pollutants, including, but not limited to:
a) lead in any form;
b) asbestos in any form;
c) radon in any form; or
d) oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from a storage tank.
Defendants maintain that the Lead Coverage Exclusion (i.e. , Exclusion 10), which applies to personal and bodily injury, is actually a pollution exclusion. Id. at 10-12. They claim that when it is read in context with Exclusion 12 and Exclusion 13, it is evident that the Lead Coverage Exclusion applies only to environmental pollution. That is, in defendants' view, the Lead Coverage Exclusion terminated coverage of personal injuries resulting from environmental exposure to lead, such as "lead paint stripped from a building that contaminates the soil." Id. However, defendants believe that the Policy continues to cover lead paint that remains inside the residence. Id. at 12.
In Sullins v. Allstate Ins. Co. ,
We do not cover bodily injury or property damage which results in any manner from the discharge, dispersal, release, or escape of:
a) vapors, fumes, acids, toxic chemicals, toxic liquids or toxic gases;
b) waste materials or other irritants, contaminants or pollutants.
The insurer argued that lead paint fell within the terms "contaminants" and "pollutants."
In light of the ambiguity, the court construed the policy against the drafter, the insurance company. Sullins ,
A judge in this district previously considered a pollution exclusion, but the policy defined "pollutants" to include " 'substances which are generally recognized in industry or government to be harmful or toxic to persons , property or the environment[.]' " Clipper Mill Fed., LLC v. Cincinnati Ins. Co. , JFM-10-1647,
Here, the exclusion applies to "personal injury or bodily injury which results in any manner from any type of ... contaminants
ii. Inadequate Notice of Lead Coverage Exclusion
Defendants contend that Rochkind received inadequate notice of the Endorsement and therefore the Lead Coverage Exclusion. ECF 25 at 8-9. As a result, they claim that the Lead Coverage Exclusion is invalid.
Maryland cases are clear that an insurance policy may be considered a "renewed" policy even though it contains new terms. See World Ins. Co. v. Perry ,
"Upon receipt of proper notice, the insured has the duty to read the notice, and the insurer is not responsible for an insured's failure to do so."
In Benner , the Fourth Circuit concluded that an amendatory endorsement provided adequate notice of a new exclusion provision. The exclusion provision appeared "under the bold-faced heading entitled 'Coverage Exclusions,' " in "straightforward" and "unambiguous terms."
Here, Allstate's renewal policy includes three pages of specific changes to the Policy. ECF 1-3 at 17-19. The top of the first page is titled, in large, bold-faced letters: "Policy Endorsement." Id. at 17. Directly under the title, a bold-faced and italicized subheading says, "The following endorsement changes your policy. Please read this document carefully and keep it with your policy. " Id. A few lines below this subheading, another subheading, also bold-faced and italicized, states: "This Endorsement Changes Your Policy-Keep It With Your Policy [.]" Id. The remainder of the document contains unambiguous amendatory language. On the second page, in a standard font and normal typeface, the text states, id. at 18:
D. The following exclusions are added:
10. to personal injury or bodily injury which results in any manner from any type of vapors, fumes, acids, toxic chemicals, toxic gases, toxic liquids, toxic soils, waste materials, irritants, contaminants, or pollutants, including, but not limited to:
a) lead in any form;
b) asbestos in any form;
c) radon in any form; or
d) oil, fuel oil, kerosene, liquid propane or gasoline intended for, or from a storage tank.
This amendatory endorsement sufficed to place Rochkind on notice of the exclusion. Further, by paying the premium and retaining the Policy for 19 years, without objecting to the changes, Rochkind is presumed to have ratified the changes. Benner ,
iii. Inadequate Consideration for Lead Coverage Exclusion
Defendants also argue that the Endorsement and its Lead Coverage Exclusion are invalid because Rochkind received no consideration for the exclusion of coverage. ECF 25 at 10. That is, Rochkind received no reduction in premiums even though the Policy provided less coverage than the prior policy year. See ECF 1-3 at 6-8. Indeed, Rochkind paid $ 547 for three consecutive years, starting with the Policy year beginning on June 13, 1997.
Allstate counters that defendants cannot contest the adequacy of the consideration because Rochkind retained the Policy, without objection, for nearly two decades. ECF 29 at 9-10. It also maintains that by refraining from increasing Rochkind's premiums, it provided Rochkind with consideration. Id. at 10-11.
The elements of a contract "are offer, acceptance, and consideration." B-Line Med., LLC v. Interactive Digital Solutions, Inc. ,
Typically, a policyholder's premium "provides consideration for the benefits provided by the policy, no more and no less." Ropka ,
However, in some cases, an insurer may reduce coverage without reducing premiums, yet still provide adequate consideration. A "decrease in premium owing to a decrease in coverage can be completely obliterated by a rate increase that goes into effect at the same time." Ropka ,
In contrast, in Ropka ,
Here, Allstate renewed Rochkind's policy in 1999. At that time, it limited his coverage while the premiums remained unchanged. Allstate maintains that it provided consideration because it did not exercise its "ability to seek a higher rate." ECF 29 at 11. But, the record contains no evidence that Allstate relinquished a rate increase. However, unlike the insured in Ropka , who contested the sufficiency of the consideration within two to five years of the renewal, Rochkind retained the Policy for nearly 20 years, "an unreasonable length of time," before seeking to invalidate the Policy modification for lack of the consideration. Benner ,
The case of AC & R Insulation Co. v. Pennsylvania Manufacturers' Ass'n Ins. Co. ,
An insurance policy puts an insurer on notice that it may need to defend claims-or defend its denial of claims-for so long as the policy remains in existence. But an insurer can have no way to predict whether, decades down the line, an insured may draw into question the very process by which the insurance policy was entered into, and there is no reasonable way to prepare to defend such an action other than retaining forever an inordinate volume of records to show the insurer's conduct at the time each policy was issued. This also would put insurers at a significant disadvantage, as it would allow plaintiffs to keep a cause of action tucked away in their pocket-and maintain documentation to support their claim-with no notice or warning to an unwitting insurer who may be forced to defend its actions years later.
Indeed, in many cases, an insurer may face insurmountable obstacles to proving that it provided consideration for a policy written two decades earlier. The insurer would likely need to produce actuarial data or testimony from employees who worked on the policy in question. Many of the documents may have been destroyed pursuant to a corporate retention policy. And, many of the employees may have left the company, become difficult to locate, or died. Even if an employee is available, there is a good chance he or she will have no memory of a run-of-the-mill insurance policy written twenty-years ago.
Accordingly, because Rochkind sat on his rights for such an "unreasonable length of time," Allstate "may presume that [he] ratified any changes and agreed to all of the terms[,]" including the potential lack of consideration. Benner ,
4. Allocation of Defense Costs
Allstate seeks judgment limiting its liability for the cost of defending Rochkind to its pro rata share. ECF 1 at 6. Defendants contend that, pursuant to the Policy, Allstate is obligated to defend Rochkind and is therefore responsible for all of the defense costs. ECF 25 at 6-7. Allstate did not respond to defendants' argument. See ECF 29.
In relevant part, the Policy states: "Allstate will defend an insured if sued as the result of an occurrence covered by this policy, even if the suit is groundless, false or fraudulent." ECF 1-3 at 14 (emphases omitted).
Maryland law recognizes "an insurance company's duty to defend its insured for all claims which are potentially covered under an insurance policy." Maryland Cas. Co. ,
Determining whether an insurer has a duty to defend is a two-step process. In Capital City ,
"(1) what is the coverage and what are the defenses under the terms and requirements of the insurance policy? (2) do the allegations in the tort action potentially bring the tort claim within the policy's coverage? The first question focuses upon the language and requirements of the policy, and the second question focuses on the allegations of the tort suit. At times these two questions involve separate and distinct matters, and at other times they are intertwined, perhaps involving an identical issue."
(quoting St. Paul Fire & Marine Ins. Co. v. Pryseski ,
Therefore, in determining whether an insurer is obligated to defend a tort action, courts applying Maryland law first determine the coverage and defenses under the terms and requirements of the insurance contract, and in accordance with the principles of contract construction, as outlined above. Capital City ,
To my knowledge, Maryland courts have not directly addressed the allocation of a portion of defense costs to the insured in the context of a continuous injury dispute. See SEAMAN & SCHULZE , app. A (50-state survey of allocation decisions with a focus on decisions addressing allocation methodology). Nevertheless, in other contexts, the Fourth Circuit, the Maryland Court of Special Appeals, and other judges in this District have explicitly "endorsed the method of apportionment applied in Insurance Co. of North America v. Forty-Eight Insulations, Inc. ,
In Forty-Eight Insulations, Inc. ,
The manufacturer and its insurers disputed the allocation of the costs of defending the manufacturer from the onslaught of asbestos suits. The Sixth Circuit explained
Forty-Eight argues that the insurer's obligation to defend is very broad-broader than its obligation to indemnify. Under the very wording of the insurance policies, the insurance companies had a duty to defend based on the allegations in the complaint, even if the allegations are ["]groundless, false, or fraudulent ..."
Forty-Eight argues further that the duty to defend is sufficiently broad so that it arises when one count of the complaint is within policy coverage and other counts are not. In many such cases, courts have not permitted apportionment of defense costs between the insurer and the insured. From these cases, Forty-Eight argues that so long as any insurance company had a duty to defend, it (Forty-Eight) should not be liable for any costs of defense, even if part or most of the underlying lawsuit concerned periods of time when Forty-Eight was uninsured.
The court acknowledged that insurers often bear the full cost of defending the policyholder "when there is no reasonable means of prorating the costs of defense between the covered and the not-covered items."
The duty to defend arises solely under contract. An insurer contracts to pay the entire cost of defending a claim which has arisen within the policy period. The insurer has not contracted to pay defense costs for occurrences which took place outside the policy period. Where the distinction can be readily made, the insured must pay its fair share for the defense of the non-covered risk.
Further, the court explained: "Were we to adopt [the manufacturer's] position on defense costs a manufacturer which had insurance coverage for only one year out of 20 would be entitled to a complete defense of all asbestos actions the same as a manufacturer which had coverage for 20 years out of 20."
The logic of Forty-Eight Institutions is compelling. On the other hand, Maryland has a strong presumption in favor of an insurer's duty to defend. Cochran ,
The parties' briefing on this issue only superficially addresses the complexity of resolving these potentially conflicting lines of cases. In light of the importance of this issue and the brevity of the parties' briefing, I decline to resolve the issue at this juncture.
5. The Exposure Period
Allstate contends that, pursuant to the Fourth Circuit's holding in Roberts,
Defendants assert that Allstate has assumed that "because Sherald had ah elevated blood lead level of 10 mcg/dL in 2006, his lead exposure must have extended until that time." ECF 25 at 33. Further, they argue that Sherald's Tort Case alleged exposure only through June 13, 1999. ECF 25 at 33, 44; see ECF 1-2 at 13, 15.
In support of these assertions, defendants make several representations about the testimony of their expert witnesses. However, the Court cannot consider an attorney's unsworn representations as valid evidentiary material under Rule 56(c). See Rountree v. Fairfax Cty. Sch. Bd. ,
Defendants also submitted the affidavit of Paul Rogers, M.D. ECF 38-1. Dr. Rogers stated that he has "served as an expert pediatrician in approximately 75 lead paint poisoning cases" and has been "qualified as an expert in pediatrics and childhood poisoning in the Circuit Court for Baltimore City." Id. ¶ 4. According to Dr. Rogers, most ingestion of lead occurs when a child is between the ages of 8 months and 3 years old. Id. ¶ 11. In his opinion, "within a reasonable degree of medical probability," Sherald "was exposed to flaking and chipping lead paint and leaded dust at [the Property] from approximately the age of 9 months to at least his third birthday[.]" Id. ¶ 14. He also opined that "the blood tests that were recorded on April 26, 2000, when Malik was 4 years old, and on September 27, 2006, when Malik was 10 ½ years old, were the result of lead that was stored in his body from the exposure that occurred by his 3rd birthday." Id. Further, Dr. Rogers stated that, in his opinion, Sherald's "exposure to lead ... from approximately 9 months until 3 years of age, was a substantial contributing factor to causing permanent brain damage to Malik Sherald[.]" Id. ¶ 16.
As noted, a court must determine the appropriate end date based on the evidence in the case before it. Jacob Dackman ,
Accordingly, I reach no conclusion as to the length of the exposure period. And, I shall deny, as moot, Allstate's motion to strike.
VI. Conclusion
For the foregoing reasons, I shall deny the Allstate Motion, the defendants' Cross Motion, and Allstate's motion to strike.
The parties shall be directed to submit a proposed scheduling order, jointly if possible, concerning the remaining issues.
An Order follows.
Notes
Dear Management and Uptown are forfeited Maryland corporations. ECF 1, ¶¶ 3-4.
Jurisdiction in this case is founded in this case on diversity, pursuant to
My calculation suggests that 1,195 divided by 3,858 equals 30.97%, but the discrepancy is not material.
A "court may properly take judicial notice of 'matters of public record' and other information that, under Federal Rule of Evidence 201, constitute 'adjudicative facts.' " Goldfarb v. Mayor and City Council of Baltimore ,
After the 1999 modification, the Policy said: "Allstate will pay when an insured becomes legally obligated to pay for personal injury, property damage or bodily injured caused by an occurrence." ECF 25 at 5 (internal footnotes omitted). This change does not affect the resolution of the cross motions.
See Roberts ,
An injury is continuous when it results from repeated exposure to substantially the same general harmful conditions over a period of time. See Injury , Black's Law Dictionary (10th ed. 2014) (defining a "continual injury" as an "injury that recurs at repeated intervals."). It also notes that it is "termed (but improperly) continuous injury."
The parties also appear to dispute the start date, but this issue was not fully addressed. Allstate maintains that the start of the exposure period is Sherald's date of birth, March 6, 1996. ECF 22-1 at 10. Defendants appeared to agree in their Cross Motion. See ECF 25. However, in their reply, they assert that the proper start date is actually November 6, 1996, when Sherald was eight-months old. ECF 38 at 3.
By raising this issue only in their reply, defendants arguably deprived Allstate of a chance to respond. Accordingly, I shall focus my analysis on the end date. Sprint Nextel Corp. v. Simple Cell Inc. ,
The Roberts Court observed that the length of exposure (55 months) is the denominator, while the period of coverage (24 months) is the numerator. And, it observed: "[T]he denominator drives the amount of Penn National's liability. Roberts [the tort plaintiff] seeks to shrink it as much as possible in order to maximize her recovery" from the insurance company. Id. at 116.
As noted, after the 1999 modification, the Allstate Policy said: "Allstate will pay when an insured becomes legally obligated to pay for personal injury, property damage or bodily injured caused by an occurrence." ECF 25 at 5 (internal footnotes omitted). This change does not affect the resolution of this issue.
Allstate has not asserted limitations or laches.
As noted earlier, the Tort Case Complaint seems to have alleged exposure to lead dating from Sherald's birth until the time suit was filed in 2017. See ECF 1-2, ¶¶ 5-7.