Bayside Fire Prot., LLC v. Everest Indem. Ins. Co.
| Decision Date | 21 March 2022 |
| Docket Number | Case No.: GJH-20-2794 |
| Citation | 592 F.Supp.3d 454 |
| Parties | BAYSIDE FIRE PROTECTION, LLC, Plaintiff, v. EVEREST INDEMNITY INSURANCE CO., Defendant. |
| Court | U.S. District Court — District of Maryland |
Frank J. Emig, Law Office of Frank J. Emig, Silver Spring, MD, for Plaintiff.
John B. Mumford, Kyle Raymond Rene, Hancock, Daniel & Johnson, P.C., Glen Allen, VA, for Defendant.
In this action, Plaintiff Bayside Fire Protection, LLC, requests a declaration that Defendant Everest Indemnity Insurance Company was required to defend Bayside in a lawsuit pursuant to an insurance policy. ECF No. 4. Pending before the Court is Defendant Everest's Motion to Dismiss for Failure to State a Claim, ECF No. 10, and Plaintiff Bayside's Motion for Partial Summary Judgment, ECF No. 12. A hearing on the Motions is not necessary. See Loc. R. 105.6 (D. Md. 2021). For the reasons stated below, the Court will deny Everest's Motion to Dismiss and grant Bayside's Motion for Partial Summary Judgment.
Bayside is a Maryland company that provides fire suppression systems. ECF No. 4 ¶ 4.2 Everest is a Delaware corporation that is licensed to transact insurance business in Maryland. Id. ¶ 5. Between 2014 and 2015, 539 Randolph Street NW, LLC, a developer and non-party to this action, converted a residential building into a three-unit condominium in Washington, D.C. Id. ¶ 7. The general contractor, Grange Contracting, LLC, subcontracted the installation of the fire suppression and sprinkler systems to Bayside. Id. One of the condo units was purchased by Andrew L. Engle and the Estate of Barry S. Engel, non-parties here, who were dissatisfied with the condition of the unit and of the property. Id. ¶ 9.
The Engels filed suit on May 11, 2018, in the Superior Court of the District of Columbia against Grange and various subcontractors involved in the construction. Id. ¶ 9 ("D.C. Lawsuit").3 Bayside was added to the lawsuit in June of 2019. Id. ¶ 10. The Engels alleged that Bayside had negligently "failed to install a fire alarm at the exterior of the Property," "failed to provide sprinkler coverage for the exterior balcony," "failed to install the sprinkler manifold in an accessible location," "failed to install a fire department connection," and "failed to install a fire annunciator panel[,]" among other things. Id. ¶ 11. The Engels sought over a million dollars in damages from Bayside. Id. Bayside timely answered and defended itself. Id. ¶ 12.
Prior to this suit, Bayside had obtained a general liability insurance policy from Everest that was effective from July 21, 2018 until July 21, 2019. Id. ¶ 14; see also ECF No. 4-2 ("CGL Policy"). The CGL Policy contained exclusions for damage to property that was not physically injured due to a defect in the insured's work, as well as any loss Bayside incurred to repair its own work due to a defect, deficiency, or dangerous condition. ECF No. 4-2 at 18. Bayside alleges that enhanced coverage to the CGL Policy was made through the Errors and Omissions Endorsement. Id. ¶ 16; see also ECF No. 4-3 ("E&O Endorsement"). The E&O Endorsement required Everest to "pay those sums that the insured becomes legally obligated to pay as compensatory damages ... because of any ‘loss’ that results from a negligent act, error or omission to which this insurance applies.’ " ECF No. 4-3 at 1. Loss is defined as "injury or damage other than ‘bodily injury,’ ‘property damage,’ or ‘personal and advertising injury.’ " Id. at 4. Plaintiff alleges that it reasonably expected that any alleged damage from negligent acts would fall under this coverage. ECF No. 4 ¶ 18.
In December 2019, Bayside demanded that Everest defend it in the D.C. Lawsuit and pay any resulting liability. Id. ¶ 19. Everest refused, claiming that the exclusions set forth in the CGL Policy also applied to the E&O Endorsement and that the D.C. plaintiffs’ claims fell under several exclusions. Id. ¶ 20. Bayside initially filed this Complaint in the Circuit Court for Calvert County, Maryland, on August 21, 2020. ECF No. 1. Bayside brings two counts in the Complaint. In Count I, Bayside seeks a declaratory judgment pursuant to § 3-406 of the Maryland Uniform Declaratory Judgments Act that the CGL Policy and Errors and Omissions Endorsement provide coverage for the claims asserted in the D.C. Lawsuit. Id. ¶ 25. Bayside requests that the Court order Everest to defend Bayside in the D.C. Lawsuit, and direct Everest to indemnify Bayside for any loss or liability in that lawsuit. Id. In Count II, Bayside seeks damages to cover its need to retain and pay counsel to defend in the D.C. Lawsuit and for attorneys’ fees in bringing this action against Everest. Id. ¶¶ 26–30.4 Everest removed the action to this Court on the basis of diversity jurisdiction on September 25, 2021. ECF No. 6.
Everest filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) on October 16, 2020. ECF No. 10. Bayside responded in opposition on October 22, 2020. ECF No. 13. Everest filed a reply on November 5, 2020. ECF No. 14. In the Reply, Everest argued that Bayside had been dismissed from the D.C. Lawsuit, and thus, the action must be dismissed or Bayside must be ordered to amend the Complaint to clarify that the action applies to the "narrow question" of Bayside's entitlement to attorneys’ fees during the time Bayside alleged that Everest was required to defend. Id. at 2. Bayside then filed a Motion for Leave to File Sur-Reply on November 10, 2020, arguing that Everest had improperly raised a new argument. ECF No. 16. Everest opposed this motion. ECF No. 19.
During this time, Bayside also filed a Motion for Partial Summary Judgment as to Count I of the Complaint. ECF No. 12. Bayside requested summary judgment on its claim that the D.C. plaintiffs’ claims fell under the scope of Bayside’ coverage with Everest and thus, Everest was required to defend it. Id. at 2. Everest filed a response in opposition on November 5, 2020. ECF No. 15. Bayside filed a reply on November 13, 2020. ECF No. 17.
This Court granted leave to file a sur-reply on February 11, 2022, ECF No. 20, which Bayside then filed, ECF No. 21. In the Sur-Reply, Bayside clarified that, on April 12, 2021, the crossclaims against it were dismissed, but Bayside's request for a determination that Everest was required to defend it in the D.C. Lawsuit remained, as Bayside would ultimately have been responsible for any damages by contribution or indemnification for the eight-month period Bayside remained in the D.C. lawsuit Id. at 2. Therefore, Bayside argues that this Court must still adjudicate the pending Motion to Dismiss and the pending Motion for Partial Summary Judgment. Id.
The purpose of a motion to dismiss is to test the sufficiency of the plaintiff's complaint. See Edwards v. City of Goldsboro , 178 F.3d 231, 243 (4th Cir. 1999). The U.S. Supreme Court has clarified the standard applicable to Rule 12(b)(6) motions. See Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) ; Bell Atl. Corp. v. Twombly , 550 U.S. 544, 556, 127 S. Ct. 1955, 1965, 167 L. Ed. 2d 929 (2007). These cases make clear that Rule 8 "requires a ‘showing,’ rather than a blanket assertion, of entitlement to relief." Twombly , 550 U.S. at 556 n.3, 127 S.Ct. 1955 (quoting Fed. R. Civ. P. 8(a)(2) ). This showing must consist of at least "enough facts to state a claim to relief that is plausible on its face." Id. at 570, 127 S. Ct. 1955, 1965. "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Iqbal , 556 U.S. at 679, 129 S.Ct. 1937. In so doing, the Court must construe all factual allegations in the light most favorable to the plaintiff. See Harrison v. Westinghouse Savannah River Co. , 176 F.3d 776, 783 (4th Cir. 1999).
Generally speaking, "a motion to dismiss ‘is rarely appropriate in a declaratory judgment action.’ "
120 W. Fayette St., LLLP v. Mayor & City Council of Baltimore City , 413 Md. 309, 355, 992 A.2d 459, 487 (2010) (quoting Broadwater v. State , 303 Md. 461, 466, 494 A.2d 934, 936 (1985) ); see also Palmer v. Audi of Am., Inc. , No. 14-cv-3189-GJH, 2015 WL 222127, at *2 (D. Md. Jan. 13, 2015) (). However, a declaratory judgment "can be appropriate on certain occasions to resolve questions of insurance policy coverage that are ‘independent and separable from the claims asserted in a pending suit by an injured third party.’ " Nautilus Ins. Co. v. BSA Ltd. P'ship , 602 F. Supp. 2d 641, 649 (D. Md. 2009) (quoting Brohawn v. Transamerica Ins. Co. , 276 Md. 396, 405, 347 A.2d 842, 848 (1975) ). Thus, a court may decide whether "the allegations in the underlying ... suit create a duty ... to defend[.]" Id.
Summary judgment is appropriate if "materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations ..., admissions, interrogatory answers, or other materials," Fed. R. Civ. P. 56(c), show that there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see also Celotex Corp. v Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The party moving for summary judgment bears the burden of demonstrating that no genuine dispute exists as to material facts. Pulliam Inv. Co. v. Cameo Props. , 810 F.2d 1282, 1286 (4th Cir. 1987). If the moving party demonstrates that there is no evidence to support the nonmoving party's case, the burden shifts to the nonmoving party to identify specific facts showing that...
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