Sallie v. Tax Sale Investors, Inc.

• Decision Date: 30 December 2002
• Docket Number: No. 2673,2673
• Citation: 149 Md. App. 141,814 A.2d 572
• Parties: Elbert SALLIE, et al., v. TAX SALE INVESTORS, INC., et al.
• Court: Court of Special Appeals of Maryland

814 A.2d 572

149 Md. App. 141

Elbert SALLIE, et al., v.TAX SALE INVESTORS, INC., et al.

No. 2673, Sept. Term, 2001.

Court of Special Appeals of Maryland.

December 30, 2002.

Andrew D. Freeman(Joshua N. Auerbach and Brown, Goldstein & Levy, LLP, on the brief), Baltimore, for appellants.

Hugh E. Donovan(Donovan & Broderick, P.C., on the brief), Rockville, for appellees.

HOLLANDER, JAMES R. EYLER, KRAUSER, JJ.

JAMES R. EYLER, Judge.

This is an insurance coverage dispute.The basic issue is whether the insurance policy issued by appellee, The Hartford Insurance Company("Hartford"), to Tax Sale Investors, Inc.("TSI"), provides coverage for a judgment obtained by appellants, Elbert Sallie and Diana Marshall("Sallie"), on a wrongful eviction claim, against TSI.¹The policy designated an office location for TSI, but the eviction occurred on other property owned by TSI.Appellants contend that the policy, a "Spectrum Policy" insuring "Business Liability" and expressly including claims for wrongful eviction, covered the claim against TSI because the wrongful eviction was initiated at the office location designated in the policy, even though the eviction occurred on other property.Appellee argues that TSI's policy was of a more limited nature and did not cover the wrongful eviction claim, because the eviction did not occur at the location designated in the policy.Appellee's argument relies primarily on the language contained in two endorsements to the policy, which appellee suggests clearly and unambiguously indicate the limited nature of the policy and preclude coverage for appellants' claim.On the other hand, appellants argue that (1) the endorsements are not valid and can not be relied on by appellee, and (2) assuming the endorsements are enforceable, the language should be interpreted to provide coverage when viewed in the context of the entire policy and in light of the circumstances surrounding the execution of the policy.On cross-motions for summary judgment, the Circuit Court for Baltimore City granted appellee's motion on the ground that the policy unambiguously excluded coverage.

We hold that the endorsements are enforceable and that the language contained in the endorsements is ambiguous.In addition to the ambiguity as to the policy's coverage, there remains a fact question as to whether the eviction arose out of operations covered by the policy.Regardless of whether we classify appellee's policy as a premises liability policy or a business liability policy, our review of relevant case law suggests that coverage for the wrongful eviction may exist if there is a sufficient connection between the wrongful eviction and, in the words of the endorsements, the operation of, or operations incidental to, the designated premises.Accordingly, we must vacate the summary judgment entered in favor of appellee and remand to the circuit court for further proceedings.

Factual Background

Appellants were tenants in an apartment located at 4800 Claybury Avenue in Baltimore City.In June, 1996, TSI acquired the property by tax sale, and on August 16, 1996, evicted appellants.

Appellants filed suit in the United States District Court for the District of Maryland against TSI, John W. Anderson, Sheriff of Baltimore City, and Nicholas A. Piscatelli, an officer and stockholder in TSI.Appellants alleged, in essence, that TSI acquired title to the property at a tax sale, pursuant to Md.Code,Tax-Property sections 14-808, et seq., as it then appeared, and evicted appellants as tenants without prior notice to them.Appellants asserted that they were deprived of due process of law in violation of the Fourteenth AmendmentandArticle 24 of the Maryland Declaration of Rights.Appellants also asserted a violation of section 8-203(e) and (f) of the Maryland Code's Real Property article based on TSI's treatment of their security deposit.²

Ultimately, the federal court entered judgments in favor of appellants and against TSI only.On June 10, 1999, a judgment was entered in the amount of $115,030.00 for compensatory and punitive damages, and on December 13, 1999, a judgment was entered in the amount of $108,089.81 for attorney's fees and expenses.Appellants recorded both judgments in the Circuit Court for Baltimore City.

At the time of the eviction, TSI was named as an insured in a policy issued by appellee, but appellee denied coverage.After recording the judgments in circuit court, appellants served a writ of garnishment on appellee, seeking the proceeds of its insurance policy.Appellants also filed a motion for declaratory judgment, seeking a declaration that appellee's policy provided coverage for the judgments.The parties filed cross motions for summary judgment.In an opinion and order dated February 22, 2002, the circuit court denied appellants' motion and granted appellee's motion, concluding that the language in the "Limitation of Coverage—Real Estate Operations" endorsement and the language in the "Limitation of Liability Coverage to Designated Premises" endorsement clearly and unambiguously did not extend coverage to the property on which the wrongful eviction occurred.

The policy in question was issued by appellee to TSI, effective January 14, 1994.The policy was renewed on January 14, 1995, and again on January 14, 1996, and was in force on August 16, 1996, the date of the eviction.The "Limitation of Coverage Real Estate Operations" endorsement was part of the policy when originally issued, and the "Limitation of Liability Coverage to Designated Premises" endorsement was added on November 9, 1995, effective January 14, 1995.

Additional relevant facts will be set forth as necessary.

Issues Presented and Parties' Contentions

The principal question before us is whether the policy in question covers the wrongful eviction claims by appellants that resulted in judgments.Appellants contend that (1)appellee should be estopped from relying on the endorsement in the original policy because it did not expressly rely upon it until long after this litigation had commenced, (2) the endorsement added in 1995 is void because proper notice was not given of the change, and (3) there is coverage under the basic policy provisions, and coverage is not excluded under either endorsement.Appellants assert that the policy unambiguously provides coverage, or if ambiguous, that it should be construed against the insurer to provide coverage as a matter of law, or at the very least, that there is sufficient ambiguity to create an issue of fact.With respect to the existence of an ambiguity, appellants rely on evidence of representations made by appellee's agent, in addition to the language in the policy and related documents.

Appellee contends that (1) under the terms of the endorsements, the policy unambiguously excludes coverage, (2) proper notice was given of the 1995 endorsement, and (3) coverage was not created by any representations or other acts by appellee.With respect to (3), appellee asserts that the evidence relied upon by appellants is not legally sufficient to create coverage, but if it were, there would be a factual dispute that could not be resolved on summary judgment.

Discussion

Before reaching the coverage issue, we must determine whether appellee may rely on either endorsement.First, appellants argue that because the "Limitation of Coverage—Real Estate Operations" endorsement in the original policy was not expressly relied upon until after years of litigation, appellee is estopped from now relying on it.Second, appellants contend that the "Limitation of Liability Coverage to Designated Premises" endorsement should be declared void as a matter of law because appellee failed to provide adequate notice of the change effected by the endorsement.For the reasons explained below, we find both of appellants' arguments unpersuasive, and therefore consider the scope of the policy's coverage, including the language of both endorsements.

Estoppel

Appellants' estoppel argument must be rejected based on "the rule in Maryland that `waiver or estoppel may occur only when it does not create new coverage; an extension of coverage may only be created by a new contract.'"Allstate Ins. Co. v. Reliance Ins. Co.,141 Md.App. 506, 515, 786 A.2d 27(2001)(quotingUnited Capitol Ins. Co. v. Kapiloff,155 F.3d 488, 497(4th Cir.1998)(citingPrudential Ins. Co. v. Brookman,167 Md. 616, 620, 175 A. 838(1938))).

This Court, relying on a crucial distinction highlighted by the Court of Appeals in St. Paul Fire & Marine Ins. Co. v. Molloy,291 Md. 139, 146 n. 4, 433 A.2d 1135(1981), in dicta, has explained that

defenses founded upon lack of basic coverage [as opposed to] those arising from the failure of the claimant to satisfy some `technical' condition subsequent... may not be waived merely by the company's failure to specify them in its initial response to the claim, for the effect of that would be to expand the policy to create a risk not intended to be undertaken by the company.

Ins. Co. of North America v. Coffman,52 Md.App. 732, 743, 451 A.2d 952(1982)(citingMolloyandNeuman v. Traveler's Indemnity Co.,271 Md. 636, 319 A.2d 522(1974)).

In Coffman, the insurer failed to mention the additional defense that coverage would be excluded under a certain section of the policy exclusions until it submitted its motion for summary judgment.Id. at 740, 451 A.2d 952.This Court held that the doctrine of waiver or estoppel could not be applied because the condition contained in the exclusionary provision was "not merely a prerequisite to consideration of a claim ... [but] rather, an exclusion from coverage," and coverage could not be established by waiver or estoppel.Id. at 743, 451 A.2d 952.In addition, in Washington Metropolitan Area Transit Authority v. Bullock,68 Md.App. 20, 39-40, 509 A.2d 1217(1986), this Court held that "[t]he mere failure of the adjustor to raise the defense therefore cannot, by...