Pa. Nat'l Mut. Cas. Ins. Co. v. Jeffers

• Decision Date: 31 January 2020
• Docket Number: No. 960,960
• Parties: PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY v. TAJAH JEFFERS ET AL.
• Court: Court of Special Appeals of Maryland

PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY
v.
TAJAH JEFFERS ET AL.

No. 960

COURT OF SPECIAL APPEALS OF MARYLAND

September Term, 2017
January 31, 2020

LIABILITY INSURANCE - PRO-RATA ALLOCATION

In cases involving bodily injury resulting from continuous exposure to harmful substances, Maryland courts engage in a "pro rata by time-on-the-risk allocation" of liability among insurers. Under this method, an insurer is liable for that period of time it was on the risk compared to the entire period during which damages occurred. This method of calculating an insurer's pro rata share of a judgment obtained against its insured requires a court to identify a numerator (representing the insurer's coverage period, or time on the risk) and a denominator (representing the entire period in which the injured person suffered bodily injury). The court then multiplies the resulting ratio by the total judgment amount to determine the insurer's pro rata share.

In this case, two plaintiffs had obtained judgments against an insured party. One plaintiff experienced elevated blood-lead levels prior to her residence at a property owned by the insured. Both plaintiffs continued to exhibit elevated blood-lead levels after moving out of the insured's property. Here, the plaintiffs' period of injury is measured by the entire period in which they displayed elevated blood-lead levels, including when they did not reside at the insured's property.

LIABILITY INSURANCE - IN UTERO DAMAGES

While an unborn child may suffer bodily injury from exposure to lead while in utero, plaintiffs seeking to recover damages must present sufficient evidence to establish when any such injury began. In this case, there was no evidentiary basis to conclude that the unborn child began to suffer bodily injury at any specific point while she was in utero. Accordingly, the period before the child's birth was excluded from the calculation of the liability insurer's pro rata share of her judgment based on its time on the risk.

LIABILITY INSURANCE - POST-JUDGMENT INTEREST

A "standard interest clause" in an insurer's policy often states that the insurer will pay "[a]ll interest on the full amount of any judgment that accrues after entry of the judgment and before [it has] paid, offered to pay or deposited in court the part of the judgment that is within the applicable limits of insurance." Under such a clause, an insurer is liable for all post-judgment interest accruing from the time the original judgment is entered, even if the insurer is not obligated to indemnify the insured for the entire judgment. The insurer's obligation comes to an end when it pays, unconditionally offers to pay, or deposits into court the principal amount of its liability under the judgment. The insurer need not tender all interest that it owes in order to toll its obligation for the payment of interest.

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Circuit Court for Baltimore City
Case No. 24-C-16-003198

REPORTED

Berger, Arthur, Beachley, JJ.

Opinion by Arthur, J.

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This case involves two issues of insurance coverage that have arisen in the context of judgments for lead poisoning. The first issue concerns the extent of an insurer's duty to indemnify its insured for damages for continuous bodily injury that occurred before, during, and after the policy period, including bodily injury that may have occurred while a child was in utero. The second concerns the extent of an insurer's contractual obligation to pay "[a]ll interest on the full amount of any judgment" when it is obligated to indemnify its insured for only part of a judgment.

We shall hold that the insurer in this case was not obligated to indemnify the insured for bodily injury that occurred before its policy period began or after its policy period ended. Although we recognize that an unborn child may suffer bodily injury from exposure to lead while in utero, we shall hold that the evidence in this case was insufficient to establish when any such injury began, and thus insufficient to establish an obligation on the insurer's part. Finally, we shall hold that the insurer must pay post-judgment interest on the entire amount of the judgment even if it is obligated to indemnify its insured for only part of the judgment.

In view of those decisions, we shall reverse the judgment below in part, affirm the judgment in part, and remand the case for further proceedings consistent with this opinion.

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FACTUAL AND PROCEDURAL BACKGROUND

A. Hollins Street Property and Penn National Liability Insurance Policy

Tajah Jeffers was born on July 9, 1992. She moved to 2116 Hollins Street in Baltimore with her parents on March 17, 1994.

Tajah resided at 2116 Hollins Street from March 17, 1994, until March 26, 1998, when her family moved into a certified lead-free home. She had blood-lead levels above the Centers for Disease Control and Prevention's reference level of concern of 5 μg/dL¹ from September 24, 1993 (before she moved into 2116 Hollins Street), until June 2, 1998 (after she moved out).

Tajah's sister, Tynae Jeffers, resided at 2116 Hollins Street from her birth, on November 8, 1996, until March 26, 1998. Tynae had elevated blood-lead levels from shortly after her birth until November 25, 1998 (after she moved out).

The following chart illustrates the blood-lead levels for Tajah and Tynae Jeffers at various points relevant to this case:

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Tajah Jeffers
Date Taken	Blood-Lead; Level (μg/dL)
September 24, 1993	13
October 29, 1993	11
March 9, 1994	13
June 2, 1994	14-15
September 30, 1994	19-20
March 24, 1995	13-14
September 8, 1995	11-13
May 1, 1996	11
November 13, 1996	13
May 14, 1997	11
September 19, 1997	10
June 2, 1998	7

Tynae Jeffers
Date Taken	Blood-Lead; Level (μg/dL)
May 14, 1997	4
September 17, 1997	6
May 1, 1998	22
November 25, 1998	8

The shaded areas of the tables show the children's elevated blood-lead levels when they were not living at 2116 Hollins Street.

Stewart Levitas and State Real Estate, Inc., owned, leased, and managed 2116 Hollins Street throughout the children's residency. Levitas and his company maintained a commercial general liability ("CGL") insurance policy issued by Pennsylvania National Mutual Casualty Insurance Co. ("Penn National"). The policy insured Levitas for the

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period from November 27, 1991, through August 1, 1997.² From August 1, 1997, through August 1, 1998, Levitas was insured by CNA Reinsurance.³

In the insuring agreement in its policy, Penn National agreed "to pay those sums" that Levitas became "legally obligated to pay as damages because of 'bodily injury' . . . to which this insurance applies." This agreement was qualified by a provision stating that "[t]his insurance applies to 'bodily injury' . . . only if . . . [t]he 'bodily injury' occurs during the policy period." The policy gave Penn National "the right and duty to defend any 'suit' seeking those damages."

B. Underlying Tort Action Against Levitas

On August 23, 2012, the Jeffers children filed suit against Levitas and his company in the Circuit Court for Baltimore City. The suit alleged that the children had suffered injuries from lead exposure as the result of the negligent management of 2116 Hollins Street. It appears that, pursuant to its obligations under the policy, Penn National provided a defense.

After a five-day jury trial in November 2014, the jury returned a verdict against Levitas, awarding $3,094,701.50 to Tajah Jeffers and $1,987,333.83 to Tynae Jeffers. The judgments were initially entered on December 2, 2014.

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Because of the statutory cap on non-economic damages, Md. Code (1974, 2013 Repl. Vol.), § 11-108 of the Courts and Judicial Proceedings Article, the court issued a revised judgment in favor of Tajah Jeffers in the amount of $2,413,134.33 and in favor of Tynae Jeffers in the amount of $1,650,619.33. The date on which the revised judgments were entered was December 14, 2014.

Levitas appealed, but we affirmed in an unreported opinion, Levitas v. Jeffers, No. 2180, Sept. Term 2014, 2015 WL 9306757 (Md. Ct. Spec. App. Dec. 21, 2015). On April 25, 2016, the Court of Appeals denied Levitas's petition for a writ of certiorari.

C. Declaratory Judgment Action Against Penn National

On May 16, 2016, the Jeffers children filed this suit in the Circuit Court for Baltimore City against Penn National and Levitas, to "collect on a final judgment" against Levitas. The children were able to bring a direct action against Levitas's insurer under Md. Code (1997, 2017 Repl. Vol.), § 19-102(b)(2) of the Insurance Article, which permits an injured party to bring an action against a tortfeasor's insurance company "for the lesser of the amount of the judgment recovered in the action against the insured or the amount of the policy" when the insured is insolvent.

As amended, the children's complaint alleged that Penn National had breached its contractual obligation under the policy by failing to indemnify Levitas for the "full amount" of the judgments. The children sought a declaratory judgment that Penn National's policy provides "insurance coverage for the entire amount" of the judgments.

In its answer to the complaint, Penn National asserted that it was obligated to indemnify Levitas only for the pro-rated portion of the damages that represented the

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bodily injury that the children had suffered while Penn National insured Levitas. Penn National denied that it was obligated to indemnify Levitas for the entire period during which the children had suffered bodily injury.⁴

D. Cross-Motions for Summary Judgment

Penn National moved for summary judgment. Its motion asserted that, pursuant to Mayor & City Council of Baltimore v. Utica Mutual Insurance Co., 145 Md. App. 256 (2002), cert. granted, 371 Md. 613 (2002), appeal dismissed, 374 Md. 81 (2003), the insurer's liability to the Jeffers children was limited to its pro-rata time-on-the-risk, i.e., that its...