PHILA. INDEMNITY INS. CO. v. Md. Yacht Club, Inc.
| Decision Date | 10 December 1999 |
| Docket Number | No. 79,79 |
| Citation | 129 Md. App. 455,742 A.2d 79 |
| Parties | PHILADELPHIA INDEMNITY INSURANCE CO. v. MARYLAND YACHT CLUB, INC. et al. |
| Court | Court of Special Appeals of Maryland |
Scott O. Reed (Karen A. Reardon and Reardon, Golinkin & Reed, on the brief, Chicago, Illinois, Kurt D. Karsten, Curtis H. Booth and Cowdrey, Thompson & Karsten, P.A., Annapolis, on the brief), for appellant.
John B. Sinclair (Miles & Stockbridge P.C., on the brief), Towson, for appellees.
Argued before HOLLANDER, SONNER and JOHN F. McAULIFFE (Retired, Specially assigned), JJ.
This appeal focuses on whether a bodily injury exclusion in a directors' and officers' ("D & O") liability insurance policy applied to a wrongful discharge action instituted against the insureds by a former employee who claimed he was fired from his job because of a work-related injury. Philadelphia Indemnity Insurance Company ("PIIC" or the "Insurer"), appellant, denied indemnity coverage and defense costs in connection with a wrongful discharge suit brought against Maryland Yacht Club, Inc. (the "Club") and three of its officers, Richard A. Weiss, Robin T. Barnes, and Bernard A. Fine, appellees. Dissatisfied with the Insurer's position, appellees initiated a declaratory judgment action against PIIC in the Circuit Court for Baltimore County, in which they also claimed breach of contract and negligence. After a motions hearing, judgment was entered in favor of appellees.
On appeal, PIIC presents four questions for our review, which we have condensed and reformulated as follows:
I. Did the circuit court err in construing the bodily injury exclusion?
II. Did the circuit court ignore the "last antecedent" rule when it determined that the bodily injury exclusion did not preclude coverage in this matter?
For the reasons discussed below, we shall affirm.
PIIC is a Pennsylvania-based insurer authorized to do business in Maryland. The Club is a nonprofit corporation that operates a navigating and sailing club in Pasadena. At the relevant time, the individual appellees were officers of the Club and members of the Club's Board of Governors 1 and Executive Committee (collectively, the "Officers"). Article V, § 1 of the Club's Constitution and By-Laws states that "[t]he affairs of the Corporation shall be managed by a Board of Governors." Article VI, § 2 empowers the Executive Committee "to conduct the business of the Club between meetings of the Board of Governors." Pursuant to Article VI, § 7, the Executive Committee is also authorized to employ and discharge the Club Manager. Article VI, § 1 dictates the Executive Committee's composition:
There shall be an Executive Committee of the Board of Governors of the [Club] consisting of the Commodore as Chairman, the Treasurer, the Secretary and the Immediate Past Commodore, all serving as ex-officio voting members. The additional voting members shall be the Vice-Commodore, Director of Clubhouse Operations, Director of Yacht Basin Operations, the Director of Buildings, Grounds and Utilities, the Director of Food Services and the Communications Coordinator.
Weiss served as the Commodore, Barnes was the Vice-Commodore, and Fine held the position of Director of Clubhouse Operations. Fine was also the Club's Insurance Chairman. It appears from the Constitution and By-Laws that the Officers provided their services to the Club on a volunteer basis.
On June 24, 1994, PIIC issued a "Non-Profit Directors and Officers Liability Insurance Policy" to the Club, Policy Number PHDO 101371 (the "Policy"). The Policy Declaration Page listed the Club as the "Named Insured" and its directors and officers as the "Insured." Thus, both the Club and the Officers were protected in accordance with the terms of the Policy, which ran from June 4, 1994 to June 4, 1995, and had a $2,000,000.00 limit of liability for each loss.2 The Club made all required premium payments in a timely manner. The Policy stated, in relevant part:
INSURING AGREEMENTS
A. [PIIC] will pay on behalf of the Insured any Loss in an amount not exceeding the Limit of Liability in excess of the applicable Retention set forth in the Declarations which the Insured shall be legally obligated to pay as damages for any civil claim or claims first made against the Insured arising out of a Wrongful Act, provided that the claim is first made during the policy period and written notice of said claim is received by [PIIC] during the policy period.
B. [PIIC] will pay on behalf of the Organization any Loss in an amount not exceeding the Limit of Liability in excess of the applicable Retention set forth in the Declarations which the Organization shall be legally obligated to pay as indemnification of any Insured with respect to any claim arising out of a Wrongful Act of any Insured when such claim is first made during the policy period and written notice of said claim is received by [PIIC] during the policy period.
* * *
B. "Organization" shall mean:
(1) the Parent Organization, and
(2) any Subsidiary of the Parent Organization.
E. "Wrongful Act" shall mean any actual or alleged
1. act;
2. error;
3. omission;
4. misstatement;
5. misleading statements;
6. neglect or breach of duty;
not excluded hereunder, committed by one or more Insureds while acting within the scope and discharge of their duty(ies) with the Organization....
F. "Loss" shall mean amounts paid by the Insured, or paid by the Organization but only with respect to Coverage B, which the Insured is legally liable to pay as damages, settlement of claims or in satisfaction of awards or judgments, including costs, charges and expenses, provided, however that Loss shall not include:
VI. NOTIFICATION
A. If during the Policy Period ... any Claim is made against any Insured, the Organization and the Insured shall, as a condition precedent to their rights for compensation under this Policy, give to [PIIC] notice in writing as soon as practicable of any such Claim, but in no event later than sixty (60) days after such Claim is first made.
B. If during the Policy Period ... the Insured or the Organization first become aware of a specific Wrongful Act, and if the Insured or the Organization shall, during such period, give written notice to [PIIC] as soon as practicable of:
It is undisputed that, under the Policy, the Club is the "Parent Organization" and the Officers are the "Insured." Various endorsements were executed and made a part of the Policy. One endorsement, the "Volunteers Endorsement," stated: "In consideration of the premium paid, it is agreed that the Directors and Officers shall be deemed to include volunteers."
On May 20, 1994, Thomas E. Bock was discharged from his position as Club Manager. Thereafter, on October 24, 1994, Bock initiated suit against appellees for wrongful discharge, seeking compensatory relief and punitive damages of $4,000,000.00. The following circumstances surrounding Bock's discharge are derived from his amended complaint, filed on January 5, 1995, and are relevant here.
Bock alleged that he sustained an injury to his leg during the course of his employment. Thereafter, he filed a claim with the Workers' Compensation Commission. Subsequently, he underwent several surgical procedures that were paid by the Club's workers' compensation insurance carrier. In the spring of 1994, appellees were allegedly advised that the Club's workers' compensation insurance premiums would increase substantially unless Bock were discharged. About the same time, Bock's attorney and the Club's workers' compensation insurer "became involved in a protracted argument over whether or not a vocational rehabilitation nurse could follow [Bock] around when he went to see his physicians." Bock's lawyer and Bock evidently refused to permit the nurse to do so. Bock alleged that the Officers subsequently held a meeting and decided to terminate his employment "solely because of his filing for workers [sic] compensation benefits and the expenses associated with the claim."
On or about November 17, 1994, appellees notified PIIC of Bock's wrongful discharge suit, in order to activate coverage under the Policy. By letter dated December 13, 1994, PIIC denied coverage for the suit. Although PIIC cited a number of Policy provisions in its letter, the only one material here is § III(A)(2), which states:
III. EXCLUSIONS
A. [PIIC] shall not be liable to make payment for Loss in connection with any claim against any Insured or Organization, arising out of, directly or indirectly resulting from or in consequence of, or in any way involving:
(Emphasis added).
On March 20, 1995,...
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