Aetna Ins. Co. v. Aaron

• Decision Date: 01 September 1996
• Docket Number: No. 187,187
• Citation: 685 A.2d 858,112 Md.App. 472
• Parties: AETNA INSURANCE COMPANY v. Albert G. AARON. ,
• Court: Court of Special Appeals of Maryland

Page 472

112 Md.App. 472

685 A.2d 858

AETNA INSURANCE COMPANY v. Albert G. AARON.

No. 187, Sept. Term, 1996.

Court of Special Appeals of Maryland.

Dec. 3, 1996.

Edward C. Bacon (McCarthy, Bacon & Costello, L.L.P., on the brief), Lanham, for appellant.

Brian C. Parker (Gebhardt & Smith, on the brief), Baltimore, for appellee.

Argued before FISCHER, HOLLANDER, and EYLER, JJ.

HOLLANDER, Judge.

In this case, we are called upon to decide whether the liability portion of a homeowner's policy applies to the costs of preventative measures undertaken on the insured's property in order to prevent damage to the property of a third party. Albert G. Aaron, appellee, instituted a declaratory judgment action against Aetna Insurance Company ("Aetna"), appellant, to determine whether Aetna is obligated to defend and indemnify him with regard to a suit instituted against Aaron by his condominium association. The Circuit Court for Baltimore City (Ward, J.) granted summary judgment in favor of Aaron. On appeal, Aetna challenges that decision, asking us to consider the following questions 1. Did the trial court err in entering summary judgment in favor of Albert Aaron on the issue of the duty of Aetna to defend the claims brought against Albert Aaron by the Council of Unit Owners of the Warrington Condominium?

2. Did the trial court err in entering summary judgment in favor of Albert Aaron on the issue of the duty of Aetna to indemnify Mr. Aaron for any judgment entered against Mr. Aaron by the Council of Unit Owners of the Warrington Condominium?

3. Did the trial court err in ordering that Aetna was obligated to reimburse Mr. Aaron for all costs and expenses, including reasonable attorney's fees, incurred by Mr. Aaron in bringing the declaratory judgment action and in defending the underlying lawsuit?

We conclude that the trial court properly determined that Aetna had a duty to defend Aaron. We also agree that, under certain circumstances, an insurer may be obligated to indemnify its insured for remediation expenses incurred in connection with the insured's property. Accordingly, we shall affirm.

Factual Summary

In 1984, Aaron purchased Unit 1300 in The Warrington Condominium (the "Warrington"), located in Baltimore. His unit, which included a large glass enclosure (the "Glass Enclosure") installed around the balcony area, is located directly above Unit 1200. From approximately June 8, 1984 through at least June 8, 1989, Aetna issued a series of homeowner's insurance policies to Aaron (hereinafter collectively referred to as the "Policy"), which provided first-party property coverage and liability insurance with respect to Aaron's condominium unit. In particular, the Policy insured appellee against damage to his unit due to certain specified perils, and it provided coverage for certain claims asserted by third parties. The Policy stated, in pertinent part:

If a claim is made or a suit is brought against any insured for damages because of bodily injury or property damage to which this coverage applies, we will:

a. pay up to our limit of liability for the damages for which the insured is legally liable; and

b. provide a defense at our expense by counsel of our choice.

(Bold face in original.) The Policy defined "property damage" as "physical injury to or destruction of tangible property, including loss of use of this property." The Policy also included the following "exclusion" as to coverage:

2. Coverage E--Personal Liability, does not apply to:

* * * * * *

b. property damage to property owned by the insured;

(Bold face in original).

In 1985, Rita St. Clair, the owner of Unit 1200, first began to experience water leaks in her condominium. The common areas of the building were also plagued by intermittent water problems. Between 1985 and 1993, various contractors attempted to resolve the leaks. Eventually, in 1993, it was determined that Aaron's Glass Enclosure was the source of the problems. Consequently, the Council of Unit Owners of The Warrington (the "Council") repaired appellee's Glass Enclosure in order to prevent further leaks into St. Clair's unit and the common areas. Thereafter, the Council filed suit against Aaron to recover the sum of $97,370.73, which represented the amount it expended to repair the Glass Enclosure. The suit alleged that Aaron was contractually obligated to repair any part of his unit that caused damage to the property of others. Based on a theory of quantum meruit, the Council also contended that Aaron was responsible for the cost of the repairs.

Aaron submitted the Council's claim to Aetna, which declined coverage. In view of Aetna's position, Aaron filed a declaratory judgment action against Aetna, seeking a determination of his rights under the Policy.

After some discovery was conducted, Aaron moved for summary judgment in the declaratory judgment action. In his motion, he contended that the undisputed facts established that Aetna had an obligation to defend and indemnify him under the terms of the Policy and was thus also liable for his attorneys' fees, costs, and expenses in connection with the declaratory judgment action. He relied on the Policy language, which provides protection for "a suit for damages" (i.e., the Council's suit), instituted "because of ... property damage ...." (i.e., the damage to Unit 1200 and the common areas). To support his assertion, he submitted a report dated September 30, 1993 from an engineering firm retained by the Council, which concluded that water was leaking internally from the Glass Enclosure and "finding its way" to St. Clair's unit and the common elements of the building.

Aaron further argued that the Council's claim was not within the Policy's exclusion for property that he owned (hereinafter, the "owned property exclusion"), because the repairs to the Glass Enclosure were necessary to prevent imminent damage to third-party property. Aaron asserted that the repairs were undertaken to alleviate a condition with respect to his property that did not present any problem to him, but was damaging St. Clair's unit and the common areas. Alternatively, he argued that, if the factfinder in the Warrington suit determined that he did not even own the Glass Enclosure, then the owned property exclusion would not apply.

In its opposition, Aetna asserted that material facts were in dispute, making summary judgment inappropriate. ¹ Further, it contended that the Council's claim was barred by the Policy's owned property exclusion, and that the claim was not "for" property damage, as defined in the Policy.

On August 9, 1995, the court issued an order granting summary judgment in favor of Aaron. ² The order stated, in part:

[I]t is hereby determined that Aetna is liable to satisfy any judgment entered against Aaron in connection with the [Warrington suit] to the extent that the judgment is for (1) damages suffered by any third-party; (2) damages for the cost of investigating the source of the water leak into the condominium unit located below Aaron's condominium unit; or (3) damages for the cost of making repairs or doing other work to stop the water leak or to prevent further damage to either the common elements of the condominium or the condominium unit located below Aaron's unit;....

* * * * * *

[I]t is hereby determined that Aetna shall not be liable to satisfy any judgment entered against Aaron in connection with the [Warrington suit] to the extent that the judgment is solely for property damage to property owned by Aaron, provided, however, that Aetna shall be liable for repairs to Aaron's property that were made to stop the water leak or to prevent further damage to either the common elements of the condominium or the condominium unit located below Aaron's unit;....

The court also concluded that Aetna was obligated to defend Aaron in the Warrington suit and to reimburse him for the costs and attorneys' fees he incurred in connection with the declaratory judgment action.

On appeal, Aetna contends that the trial court improperly "extended" the scope of the Policy's coverage. It maintains that the Council did not assert a claim to recover "for" property damage sustained by a third party, and that the repairs to the Glass Enclosure do not constitute "property damage", as defined in the Policy. Central to Aetna's argument is its claim that the owned property exclusion bars coverage under the Policy. Aaron essentially renews the arguments he asserted below.

Discussion

I.

Summary judgment is not a procedural shortcut to avoid a trial. Rather, it is an appropriate method of resolving cases, prior to trial, when the facts are undisputed. Seaboard Surety Company v. Richard F. Kline, Inc., 91 Md.App. 236, 603 A.2d 1357 (1992). To grant summary judgment, a trial court must determine that there are no material facts in dispute, and that one party is entitled to judgment as a matter of law. Md. Rule 2-501; see Beatty v. Trailmaster Products, Inc., 330 Md. 726, 737-38, 625 A.2d 1005 (1993); Bagwell v. Peninsula Regional Med. Ctr., 106 Md.App. 470, 488, 665 A.2d 297 (1995), cert. denied, 341 Md. 172, 669 A.2d 1360 (1996); Bits "N" Bytes Computer Supplies, Inc. v. Chesapeake & Potomac Tel. Co., 97 Md.App. 557, 576-77, 631 A.2d 485 (1993), cert. denied, 333 Md. 385, 635 A.2d 425 (1994). In the absence of disputed material facts, an appellate court will review the trial court's grant of summary judgment to insure that the trial court reached the correct legal result. Beatty, 330 Md. at 737, 625 A.2d 1005; Heat & Power Corp. v. Air Prods. & Chems., Inc., 320 Md. 584, 578 A.2d 1202 (1990).

To defeat a motion for summary judgment, the party opposing the motion must produce evidence demonstrating that there is a dispute as to material facts. Scroggins v. Dahne, 335 Md. 688, 645 A.2d 1160 (1994). A fact is material if the outcome of the case depends on how the factfinder resolves the disputed fact. King v. Bankerd, 303 Md. 98, 111, 492 A.2d 608 (1985); ...