Kurland v. Ace Am. Ins. Co., Civil No. JKB-15-2668

• Decision Date: 23 January 2017
• Docket Number: Civil No. JKB-15-2668
• Parties: RICHARD KURLAND, ET AL. v. ACE AMERICAN INSURANCE CO., ET AL.
• Court: U.S. District Court — District of Maryland

RICHARD KURLAND, ET AL. v. ACE AMERICAN INSURANCE CO., ET AL.

Civil No. JKB-15-2668

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

January 23, 2017

MEMORANDUM

Richard and Marti Kurland ("Plaintiffs") have sued ACE American Insurance Company ("ACE") and Bankers Standard Insurance Company ("Bankers Standard") ("Defendants"), alleging breach of contract. Now pending is Defendants' motion for summary judgment. The issues have been briefed and no hearing is necessary. See Local Rule 105.6 (D. Md. 2016). For the following reasons, the motion will be granted in part and denied in part.

I. BACKGROUND

Bankers Standard issued an insurance policy to Plaintiffs, effective from June 1, 2014, to June 1, 2015, that insured their residence and personal property at 10 Spring Forest Court in Owings Mills, Maryland. (ECF No. 29-3). The policy is an "all-risk" policy, meaning it covers all perils except those specifically excluded. (Id. at 26; ECF No. 1 at 4). Plaintiffs purchased the insured residence in 2011 and lived there with their two minor children. (ECF No. 32 at 2).

During the coverage period, Plaintiffs discovered the residence was sustaining water damage, partly due to a leaky roof. (ECF No. 1 at 4; ECF No. 35 at 6). This water damage also caused mold to grow, including inside the HVAC system. (ECF No. 1 at 4; ECF No. 29-1 at 3). Plaintiffs' personal property was also damaged by water and mold. (ECF No. 32 at 3). After mold was detected inside the residence in March 2015, (ECF No. 1 at 4-5; ECF No. 1-2), Plaintiffs permanently vacated the residence on April 22, 2015, (ECF No. 32 at 3). They lived in an apartment complex and hotel room before permanently relocating. (Id.).

After receiving a claim from Plaintiffs pursuant to the insurance policy, Defendants inspected the residence on April 20, 2015. (ECF No. 32 at 4; ECF No. 35-1 at 1). On May 12, 2015, Defendants issued a check to Plaintiffs for $24,830.90, in purported settlement of all covered losses. (ECF No. 32 at 4; ECF No. 1-3). A document accompanying the check clarified that this overall amount was comprised of three smaller sub-payments of $12,830.90, $10,000, and $2,000, and that a $5,000 deductible had also been subtracted. It further clarified that each of these sub-payments was for "water/mold damage," but did not further elaborate. (ECF No. 1-3).

Believing that this payment did not reflect the full extent of their covered losses, Plaintiffs brought this action in federal court, invoking diversity jurisdiction under 28 U.S.C. § 1332(a)(1). (ECF No. 1 at 3). Defendants moved for summary judgment, (ECF No. 29), Plaintiffs responded, (ECF No. 32), and Defendants replied, (ECF No. 35).

II. LEGAL STANDARD

"The court shall grant summary judgment 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." Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing predecessor to current Rule 56(a)). The burden is on the moving party to demonstrate the absence of any genuine dispute of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). If sufficient evidence exists for a reasonable jury to render a verdict in favor of the party opposing themotion, then a genuine dispute of material fact is presented and summary judgment should be denied. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). However, the "mere existence of a scintilla of evidence in support of the [opposing party's] position" is insufficient to defeat a motion for summary judgment. Id. at 252. The facts themselves, and the inferences to be drawn from the underlying facts, must be viewed in the light most favorable to the opposing party, Scott v. Harris, 550 U.S. 372, 378 (2007); Iko v. Shreve, 535 F.3d 225, 230 (4th Cir. 2008), who may not rest upon the mere allegations or denials of his pleading but instead must set out specific facts showing a genuine dispute for trial, Fed. R. Civ. P. 56(c)(1).

III. ANALYSIS

This motion for summary judgment raises two broad issues. First, Defendants claim summary judgment is appropriate with respect to ACE because ACE "was not a party to any contract of insurance with Plaintiffs." (ECF No. 29-1 at 8). They also claim summary judgment is appropriate because no breach of contract occurred. Each issue will be examined in turn.

a. Status of ACE as a Party to the Lawsuit

The first issue is whether ACE is a proper party. Defendants claim ACE is not a proper party - and summary judgment should thus be entered in its favor - because "the terms of the insurance Policy . . . do not identify ACE as a party to the contract of insurance." (ECF No. 29-1 at 9). The policy here was issued by Bankers Standard, not ACE, and thus ACE cannot be held liable for breaching a contract to which it was not a party, Defendants claim. (Id. at 8-9).

Plaintiffs concede that the policy lists Bankers Standard as the sole issuer but claim summary judgment is inappropriate because "the evidence is less than clear as to the relativeroles ACE and Bankers Standard play in the Policy, the dispute over coverage, and the payment of the claim." (ECF No. 32 at 6-7). For instance, they note that "ACE" is printed on "virtually every page" of the policy; the policy and accompanying endorsements are named the "ACE Platinum Portfolio"; the policy states that Bankers Standard is "an ACE Group Company"; and the check sent to Plaintiffs in purported settlement of their covered losses "appears to list 'ace group' [sic] as the payor, and also lists ACE Private Risk Services and Bankers Standard Insurance Company." Plaintiffs also claim the only other evidence regarding the relationship between ACE and Bankers Standard is an "ACE Group Privacy Statement" noting that the ACE Group of Companies use the name Bankers Standard Insurance Company. (Id.).

In Maryland, insurance policies are interpreted in the same manner as contracts. See Collier v. MD-Individual Practice Ass'n, 327 Md. 1, 5 (1992). Absent an indication the parties intended to use words in a special sense, policy terms are accorded their "usual, ordinary, and accepted meaning." Bausch & Lomb, Inc. v. Utica Mutual Ins. Co., 330 Md. 758, 779 (1993). And "[c]lear and unambiguous language . . . must be enforced as written." Catalina Enterprises, Inc. Pension Trust v. Hartford Fire Ins. Co., 67 F.3d 63, 65 (4th Cir. 1995) (citing Board of Trustees of State Colleges v. Sherman, 280 Md. 373, 380 (1977).

"To prevail in an action for breach of contract, a plaintiff must prove that the defendant owed the plaintiff a contractual obligation and that the defendant breached that obligation." Taylor v. NationsBank, N.A., 365 Md. 166, 175 (2001). The general rule is that "a person cannot be held liable under a contract to which he was not a party," although "a person not originally a party to a contract may later accept or adopt it, and he will then be bound by it." Snider Bros., Inc. v. Heft, 271 Md. 409, 414 (1974); accord Whiting-Turner Contracting Co. v. Liberty Mut.Ins. Co., 912 F. Supp. 2d 321, 333 (D. Md. 2012). A non-party may become bound by a contract if that party's conduct is "sufficient to manifest acceptance of the terms of a written contract." Porter v. General Boiler Casing Co., Inc., 284 Md. 402, 411 (1979).

Here, the plain language of the contract lists Bankers Standard as the sole issuer of the policy. (See ECF No. 29-3 at 2, 3, 6, 8, 12). Plaintiffs' claim that ACE may still be bound by the contract, this plain language notwithstanding, is meritless. For instance, the fact that "ACE" appears in a header at the top of many policy pages does not mean ACE issued the policy. See Whiting-Turner, 912 F. Supp. 2d at 326-27 (suggesting Liberty Mutual was not a party - even though its logo appeared on the policy form - because the policy listed Liberty Mutual Fire Insurance Company as the issuer). ACE is also not bound by the contract simply because the policy notes that Bankers Standard is an "ACE Group Company." See Fenzel v. Grp. 2 Software, LLC, 2016 WL 865363, at *11 (D. Md. Mar. 7, 2016) (sole owner of a corporation not a party to contract where contract lists the corporation, but not the owner, as a party); see generally Dixon v. Process Corp., 38 Md. App. 644, 652-53 (1978) (corporate parents generally not liable for obligations of their subsidiaries). Because the plain language of the policy here is unambiguous, external evidence - such as the check offered to Plaintiffs - is irrelevant. See Clendenin Bros. v. U.S. Fire Ins. Co., 390 Md. 449, 459 (2006).

Based on the above, ACE is not a proper party to this lawsuit. Bankers Standard is listed as the sole issuer, and there is no evidence that ACE has accepted or adopted the contract originally made between Plaintiffs and Bankers Standard. Thus, ACE cannot be liable for the alleged breach of contract, and the court will grant Defendants summary judgment on this issue.

b. Breach of Contract Claims

Plaintiffs also claim Bankers Standard has breached the terms of the insurance policy by not fully compensating them for their covered losses. Plaintiffs oiler several arguments in this regard, which will be explored in turn.

1. Water Damage

Plaintiffs first claim that summary judgment is inappropriate because Bankers Standard has not explained how it calculated Plaintiffs' losses. This matters in part because the policy limits payments for losses "caused by" mold to $10,000. (see ECF No. 32 at 7; ECF No. 29-3 at 14, 20),¹ but does not contain as restrictive a cap for other types of covered losses, such as water damage or equipment breakdown. In essence, Plaintiffs speculates that Bankers Standard reduced payouts by categorizing losses that were in fact caused by water damage or equipment breakdown as losses caused by mold and thus subject to the $10,000 limit. (ECF No. 32 at 7-9). In a slight variation, Plaintiffs also claim summary judgment is inappropriate because Bankers...