Hartford Acc. and Indem. Co. v. Sherwood Brands, Inc.

• Decision Date: 01 September 1995
• Docket Number: No. 1442,1442
• Parties: HARTFORD ACCIDENT AND INDEMNITY CO., et al. v. SHERWOOD BRANDS, INC. ,
• Court: Court of Special Appeals of Maryland

Page 94

111 Md.App. 94

680 A.2d 554

HARTFORD ACCIDENT AND INDEMNITY CO., et al. v. SHERWOOD BRANDS, INC.

No. 1442, Sept. Term, 1995.

Court of Special Appeals of Maryland.

June 27, 1996.

Reconsideration Denied Aug. 29, 1996.

Hugh E. Donovan (Donovan & Broderick, on the brief), Silver Spring, for Appellants

Albert D. Brault (Daniel L. Shea, James M. Brault and Brault, Graham, Scott & Brault, on the brief), Rockville, for Appellee.

Argued before BLOOM, FISCHER and SALMON, JJ.

SALMON, Judge.

Appellee, Sherwood Brands, Inc. ("Sherwood"), filed a breach of contract and declaratory judgment action against Hartford Accident and Indemnity Co. and Hartford Fire Insurance Co. (hereinafter referred to collectively as "Hartford") in the Circuit Court for Montgomery County on June 25, 1993. The complaint alleged that Hartford had wrongfully refused to provide a defense for Sherwood when it was sued by Osem Food Industries, Ltd. ("Osem"), in the United States District Court for the Middle District of North Carolina, and had refused to indemnify Sherwood under a comprehensive general liability insurance policy ("CGL" policy) issued to Sherwood by Hartford.

Sherwood's motion for partial summary judgment was granted by Judge James L. Ryan, who held that Hartford, as a matter of law, had a duty to defend Sherwood under the terms of the CGL policy. At a subsequent hearing on December 15, 1994, Judge William P. Turner held that Hartford had a duty to indemnify Sherwood and to pay legal costs incurred by Sherwood in defense of the Osem litigation.

The issue of damages was tried before a jury beginning July 26, 1995. The jury found that all attorneys' fees and defense costs paid by Sherwood, as well as the $100,000 settlement agreed to by Sherwood, were fair and reasonable. Final judgment in favor of Sherwood was entered on August 3, 1995, for the sum of $497,366.22. This timely appeal followed, in which Hartford raises five issues, which have been rephrased for clarity:

I. Was the trial judge legally correct in finding that Hartford had a duty to defend Sherwood under the CGL policy?

II. Was the trial judge legally correct in finding that Sherwood had not made a material misrepresentation of fact at the time the policy was issued?

III. Was the trial judge legally correct in finding that Sherwood's two-and-one-half year delay in notifying Hartford of the Osem litigation did not actually prejudice Hartford?

IV. Was the trial judge legally correct in finding that Hartford was liable for the payment of legal fees and other defense costs incurred by Sherwood prior to notifying Hartford of the Osem litigation?

V. Was the trial judge legally correct in finding that Hartford was liable for the payment of legal fees and other defense costs incurred before the effective date of the CGL policy issued to Sherwood?

Sherwood filed a cross-appeal, which raises an additional issue:

VI. Did the trial judge err in failing to award it prejudgment interest?

FACTS

Sherwood is a North Carolina corporation that markets and distributes food products worldwide. On January 6, 1989, Osem filed suit against Sherwood, alleging that Sherwood was distributing and marketing a soup package virtually identical On February 27, 1989, Osem filed a "Supplement to Complaint," alleging that Sherwood had altered the soup package that had been the subject of the consent order and that the "altered or 'new' soup package is identical or substantially identical to its 'old' package complained of in the original complaint." Osem alleged that it had first learned of the new package "[w]ithin the past several weeks."

in color, design, and graphics to a soup package used by Osem. Osem claimed that Sherwood's intent was to confuse the public and profit from the substantial goodwill associated with Osem's packaging by distributing and marketing the soup package in violation of federal and North Carolina law. Sherwood denied Osem's claims. Appellee, however, did consent to an order, entered on January 31, 1989, in which it agreed to discontinue using the soup package.

Osem amended its complaint again on August 14, 1989, alleging that Sherwood had "published and disseminated false and misleading statements concerning [Osem] and its 'Gourmet Cuisine' soup products" in a letter dated November 28, 1988. Attached and made a part of the complaint was a copy of the offending letter, which Sherwood had sent to F.W. Woolworth Co.

Sherwood retained William B. Spry, Jr. to defend Osem's claims. ¹ Sherwood also retained Lawrence R. Hefter, a trademark specialist with Finnegan, Henderson, Faraday, Garrett & Dunner, in March 1989. In May 1991, Sherwood replaced Mr. Hefter with Floyd A. Gibson, an experienced trademark litigator with Bell, Selzer & Gibson. Shortly after being hired, Mr. Gibson advised Uziel Frydman, Sherwood's sole stockholder, that Osem's claims might be covered by liability insurance.

Acting on Mr. Gibson's advice, Sherwood notified Hartford of the Osem litigation on June 18, 1991.

Hartford advised Sherwood on July 2, 1991 that the "late notice presents a possibility of prejudice of [Hartford's] rights" and that the policy might not cover the loss. Hartford stated it would research and determine coverage under a reservation of rights. Hartford disclaimed coverage on September 18, 1991, on the ground that "all of the allegations occurred prior to the inception date of the Hartford policy."

On November 30, 1992, Sherwood agreed to pay $100,000 to Osem in settlement of Osem's trade dress infringement ² and unfair and deceptive trade practice claims.

Sherwood filed this action on June 25, 1993, for indemnification for the $100,000 paid to Osem under the settlement agreement and for attorneys' fees and expenses incurred in defending against Osem's claims. On August 31, 1994, Judge Ryan held that Hartford had a duty to defend Sherwood in the Osem litigation under the terms of the insurance policy. A second hearing on partial summary judgment was held on December 15, 1994, at which time Judge Turner ruled that Hartford, having shown no prejudice by the late notice, was responsible for Sherwood's pre-notice attorneys' fees and that Hartford had a duty to indemnify Sherwood. The jury was charged with determining the amount of damages.

The jury found that the following fees and expenses were fair, reasonable and necessary to the defense of Sherwood

                against Osem:  $64,960.00 charged by Mr. Hefter; 3  $102,688.98 charged by Mr. Gibson;  $61,074.00 charged by Mr. Spry for defense of the trademark claim;  and $56,069.26 charged by Mr. Spry for defense of the defamation claim.  The jury also found that the $100,000 settlement between Sherwood and Osem had been paid and that the settlement was fair and reasonable.  The jury further determined that Sherwood was not entitled to pre-judgment interest.  Final judgment was entered on August 3, 1995, and included awards of $23,336.78 in litigation expenses in connection with the Osem litigation and $89,237.20 in attorneys' fees, costs, and expenses in connection with the prosecution of the Montgomery County declaratory judgment action.  The judgment totalled $497,366.22, plus post-judgment interest and costs.  Additional facts will be added as necessary
                

STANDARD OF REVIEW

We recently summarized the standard of review applicable to the resolution of issues I through V in General Accident Ins. Co. v. Scott, 107 Md.App. 603, 611-12, 669 A.2d 773, cert. denied, 342 Md. 115, 673 A.2d 707 (1996):

Maryland Rule 2-501 provides that a court shall enter summary judgment on the motion of a party where "there is no genuine dispute as to any material fact and ... the party is entitled to judgment as a matter of law." ... [T]he court's task is not to decide disputed facts. Coffey v. Derby Steel Co., 291 Md. 241, 247, 434 A.2d 564 (1981). Rather, it is to determine whether there are disputes as to material facts, Impala Platinum Ltd. v. Impala Sales (U.S.A.), Inc., 283 Md. 296, 326, 389 A.2d 887 (1978), whose resolution would somehow affect the outcome of the case. King v. Bankerd, 303 Md. 98, 111, 492 A.2d 608 (1985). In reviewing a trial court's grant of summary judgment, an appellate court must also determine whether the trial court's ruling In order to defeat a motion for summary judgment, the opposing party must show with some particularity that there is a genuine dispute as to a material fact. Beatty v. Trailmaster Products, Inc., 330 Md. 726, 737, 625 A.2d 1005 (1993). In determining whether there are any material facts in dispute, the trial court must give the non-moving party the benefit of all reasonable inferences and must resolve all inferences in the light most favorable to the non-moving party. Id. at 739, 625 A.2d 1005; Clea v. Mayor and City Council of Baltimore, 312 Md. 662, 678, 541 A.2d 1303 (1988). But "general allegations which do not show facts in detail and with precision are insufficient to prevent summary judgment." Beatty, supra, 330 Md. at 738, 625 A.2d 1005. Nor are mere conclusory denials or allegations sufficient to overcome a motion for summary judgment. See Seaboard Surety Co. v. Richard F. Kline, Inc., 91 Md.App. 236, 243, 603 A.2d 1357 (1992). As the Court said in Beatty, "the mere existence of a scintilla of evidence in support of the plaintiff's claim is insufficient to preclude the grant of summary judgment." Beatty, supra, 330 Md. at 738, 625 A.2d 1005.

was legally correct. Baltimore Gas and Electric Co. v. Lane, 338 Md. 34, 43, 656 A.2d 307 (1995); Nationwide Mutual Insurance Co. v. Scherr, 101 Md.App. 690, 694, 647 A.2d 1297 (1994).

DISCUSSION

I.

Appellants contend that all of the allegations of wrongful conduct on Sherwood's part contained in the Osem complaint and its amendments occurred prior to February 23, 1989, the inception date of the CGL policy and, therefore, the trial court erred when it granted summary judgment and ruled that Hartford had a duty to defend Sherwood under...