Mutual Fire Ins. Co. v. Ackerman

• Decision Date: 13 April 2005
• Docket Number: No. 2565,2565
• Citation: 162 Md. App. 1,872 A.2d 110
• Parties: MUTUAL FIRE INSURANCE COMPANY OF CALVERT COUNTY v. Corwin L. ACKERMAN, Personal Representative of the Estate of Phyllis Morss, et al.
• Court: Court of Special Appeals of Maryland

872 A.2d 110

162 Md. App. 1

MUTUAL FIRE INSURANCE COMPANY OF CALVERT COUNTY v. Corwin L. ACKERMAN, Personal Representative of the Estate of Phyllis Morss, et al.

No. 2565, September Term, 2003.

Court of Special Appeals of Maryland.

April 13, 2005.

George E. Reede, Jr. (Lisa B. Capitos, on brief), Baltimore, for appellant.

Walter W. Sawyer, III, Baltimore, for appellee.

Panel MURPHY, C.J., ADKINS, BISHOP, JOHN J., JR. (Retired, Specially Assigned) JJ.

ADKINS, J.

Appellant Mutual Fire Insurance Company of Calvert County ("Mutual Fire") challenges the summary judgment granted by the Circuit Court for St. Mary's County in favor of appellee Michael O'Brien. The circuit court judgment required that an insurance policy issued by Mutual Fire cover losses sustained as the result of a fire damaging a house identified as "the dwelling" on real property owned by O'Brien. Mutual Fire raises two issues on appeal:

I. Did the circuit court err in finding that the house on the property was used principally for dwelling purposes within the meaning of the insurance policy?

II. Did the circuit court err in finding that the vandalism exclusion in the dwelling section of the insurance policy did not operate to exclude coverage for damage caused by arson?

For the reasons explained below, we shall vacate the summary judgment and remand the case for further proceedings.

FACTS AND LEGAL PROCEEDINGS

Phyllis Morss, and then later her estate, owned three lots known as lots 6, 7, and 8, Section I, Town Creek Farms Subdivision, located on Three Notch Road in California, Maryland ("the property"). The property was improved by a house rented out as a residence for many years ("the house"). Although the evidence is disputed as to when the last tenants moved out, there was evidence that the house was vacant for two years prior to the loss.

On September 24, 1999, Mutual Fire issued to Corwin Ackerman, the personal representative of Morss' estate, a one-year "Dwelling Property" insurance policy, which included coverage for loss of the house caused by fire. Nearly one year later, on September 18, 2000, the house was extensively damaged by fire, intentionally set by unknown individuals. Thereafter, Ackerman notified Mutual Fire of the fire loss and submitted proof of loss as required under the policy. Mutual Fire denied the claim for two reasons: (1) the house was no longer "used principally for dwelling purposes" as required under the policy because the property had been "vacant for months, with no utility service," and (2) arson was considered to be a form of vandalism, which was specifically excluded from coverage because the house had been vacant for 30 days prior to the loss.

A month before the fire, Ackerman contracted to sell the property to appellee O'Brien. Over a year after the fire, in January 2002, Ackerman deeded the property to O'Brien and shortly thereafter, assigned him all rights under the Mutual Fire policy.

On February 10, 2003, Ackerman and appellee O'Brien filed a complaint in the Circuit Court for St. Mary's County against Mutual Fire, alleging breach of contract. Upon cross-motions for summary judgment, the circuit court concluded that: (1) the house had retained its character as a dwelling, and (2) arson did not constitute vandalism under the policy language. Consequently, the court granted Ackerman and O'Brien's motion for summary judgment on the issue of liability. The parties then stipulated to the amount of damages, and on January 15, 2004, the circuit court entered judgment in favor of O'Brien in the amount of $76,746.63.¹ Mutual Fire noted a timely appeal.

Additional facts will be included where necessary.

STANDARD OF REVIEW

Summary judgment is appropriate where there is no dispute as to any material fact and the moving party is entitled to judgment as a matter of law. See Md. Rule 2-501(e). In reviewing a grant of summary judgment, we must determine whether the circuit court's ruling was legally correct. See Converge Servs. Group, LLC v. Curran, 383 Md. 462, 476, 860 A.2d 871 (2004). " `We review the same information from the record and decide the same issues of law as the trial court.'" Info. Sys. & Network Corp. v. Fed. Ins. Co., 145 Md.App. 457, 463, 805 A.2d 1141, cert. denied, 372 Md. 430, 813 A.2d 258 (2002) (citation omitted).

DISCUSSION

In this case, Mutual Fire and O'Brien

agree on the terms of the insurance contract but disagree as to the proper interpretation. Since the extent of [the insurer's] liability rests on the construction of the disputed language, rather than on the language itself, this is a proper question of law for the court.

Nationwide Mut. Ins. Co. v. Scherr, 101 Md.App. 690, 695, 647 A.2d 1297 (1994), cert. denied, 337 Md. 214, 652 A.2d 670 (1995).

Our construction of an insurance policy is guided by the well-established principles applicable to the construction of contracts in general. See ABC Imaging of Wash., Inc. v. Travelers Indem. Co. of America, 150 Md.App. 390, 396, 820 A.2d 628, cert. denied, 376 Md. 50, 827 A.2d 112 (2003). In interpreting an insurance contract, we

examine the policy as a whole. Absent evidence that the parties intended a special or technical meaning, words are accorded their usual, ordinary, and accepted meanings. A word's ordinary meaning is the meaning that a reasonably prudent layperson would give to the term. If a reasonable layperson could infer two different meanings from the language used, the language is ambiguous. The court may still construe an ambiguous contract, however, where there is no factual dispute presented by the evidence.

Scherr, 101 Md.App. at 695, 647 A.2d 1297 (citations omitted).

With these principles in mind, we turn to the interpretation of the insurance policy in this case.

I. Dwelling Purposes

Under the section "Coverages," and subsection "Coverage A-Dwelling," the policy provides that Mutual Fire covered "the dwelling on the Described Location, used principally for dwelling purposes." Mutual Fire claims that because the property was in a state of disrepair, with no working utilities, and allegedly being used as a "drug den," it was not being "used principally for dwelling purposes," and therefore, denial of coverage was justified.

The terms "dwelling" and "dwelling purposes" are not defined under the policy. Therefore, we accord them their "usual, ordinary, and accepted meanings." See Scherr, 101 Md.App. at 695, 647 A.2d 1297. Random House defines "dwelling" as "a building or place of shelter to live in, place of residence, abode, home." The Random House Dictionary of the English Language 445 (unabr. ed. 1973) ("RHDEL"). Black's Law Dictionary defines "dwelling-house" as "[t]he house or other structure in which a person lives; a residence or abode." Black's Law Dictionary 524 (7th ed. 1999)("Black's"). "Purpose" is defined as "the reason for which something exists or is done, made, used, etc." RHDEL 1167.

These dictionary definitions, while incorporating the concept of occupancy by a person or persons, do not suggest that actual, continuous occupancy is required in order for property to qualify as a dwelling or a building used for dwelling purposes.² Nor does the policy itself state or suggest that occupancy by the insured or anyone else is required to sustain coverage. Indeed, Mutual Fire concedes that, in this case, vacancy alone did not justify the denial of coverage. Mutual Fire, rather, alleges that the circuit court failed to consider the condition and use of the property when it granted summary judgment to O'Brien.

This contention is only partially correct. Ruling from the bench, the court explained:

The fact that people may have been using or dealing drugs... out of [the property] doesn't turn it into a commercial building.... Not having furniture in it, not having utilities hooked up, does not change that and in fact you—if you say that those are the factors that make it no longer a dwelling unit, then that would happen the minute somebody moves out and—and I don't think that's acceptable.

The circuit court further reasoned that, "as long as [the property is] intended to be used as a dwelling and has not been converted into . . . commercial office or . . . retail [space],. . . it remains a dwelling unit." Thus, the circuit court did consider some facts as to usage and condition of the house.

It is undisputed that the house was used as a dwelling until the last tenants moved out. And we think that the circuit court properly placed the burden on Mutual Fire to prove that it was no longer a "dwelling" or being "used principally for dwelling purposes," because this contention was in the nature of an affirmative defense. See 6 Couch on Insurance 3d § 81.81 (Lee R. Russ ed., 2004) ("Couch") ("The defenses that representations in an application are either ... material to the risk,[³] or that the insurer in good faith would not have issued the policy had it known the true facts, are affirmative defenses which the insurer must plead and prove by a preponderance of the evidence"); 6 Couch § 94.108 ("Condition in fire policy suspending or restricting insurance in case of vacancy or unoccupancy is a special limitation or exclusion, not a condition precedent, and insurer had burden of proof"); 17 Couch § 254:86 ("The insurer generally bears the burden of establishing any affirmative defense it raises").

We also agree with the circuit court that the mere facts that the tenants had moved out, the property needed some repair, and the utilities were turned off would not alone have been sufficient to meet Mutual Fire's burden on its affirmative defense. Nevertheless, we think the summary judgment record also contained other facts, which, in combination with these facts, are sufficient to create a material dispute of fact on the issue of whether the property was used principally for dwelling purposes.

First, Corwin Ackerman, personal representative of Phyllis Morss' estate, acknowledged in deposition...