Schlossberg v. B.F. Saul Ins. Agency of Md., Inc.
| Decision Date | 08 December 2015 |
| Docket Number | Case No.: GJH–13–3076 |
| Parties | Roger Schlossberg, Plaintiff, v. B.F. Saul Insurance Agency of Md., Inc., et al., Defendants. |
| Court | U.S. District Court — District of Maryland |
148 F.Supp.3d 462
Roger Schlossberg, Plaintiff,
v.
B.F. Saul Insurance Agency of Md., Inc., et al., Defendants.
Case No.: GJH–13–3076
United States District Court, D. Maryland, Southern Division.
Signed December 8, 2015
Roger Schlossberg, Schlossberg and Associates, Hagerstown, MD, Alfred L. Scanlan, Jr., Timothy P. Kilgore, Jackson & Campbell, PC, Washington, DC, for Plaintiff.
John Tremain May, Raphael Joshua Cohen, Jordan Coyne LLP, Fairfax, VA, for Defendants.
MEMORANDUM OPINION
GEORGE J. HAZEL, United States District Judge
The question presented by this case is whether an insurance broker may be deemed negligent when an insured's policy excludes coverage that the insured never requested but later needed. In this professional negligence action. Plaintiff, Roger Schlossberg, Chapter 7 Trustee of DTM Corporation (“DTM”), alleges that Defendants B.F. Saul Insurance Agency of MD. Inc. (“B.F. Saul”) and David Schwarz (collectively, “Defendants”), failed to secure adequate insurance coverage for DTM's activities and failed to explain a change in coverage in a renewal policy. This Memorandum Opinion and accompanying Order address Defendants' Motion for Summary Judgment. ECF No. 67. The Court has fully considered the Parties' submissions and deems a hearing unnecessary. See Loc. R. 105.6 (D. Md.). For the reasons stated herein. Defendants Motion is GRANTED , and Plaintiff's Complaint is dismissed with prejudice.1
I. BACKGROUND
Prior to filing for bankruptcy. DTM provided security guards and related services to its clients, the vast majority of which were governmental entities, including the United States Department of Defense (“DOD”).2 See ECF No. 3 at ¶ 7; ECF No. 67 at 46-49, 50-53.3 B.F. Saul assisted DTM in obtaining a complete line of insurance coverage for its business, and Mr. Schwartz. B.F. Saul's Assistant Vice President,
was the individual principally responsible for communicating with DTM. See ECF No. 72-6 at 3-4. B.F. Saul, at DTM's request, procured a Commercial General Liability Policy (“GL Policy”) from Arch Insurance Company (“Arch”) beginning in 2003 with a policy limit of $1 million for “each occurrence” and an aggregate limit of $5 million. See ECF No. 67 at 46-53, 136. Beginning in 2005. DTM began purchasing an Umbrella Policy from Arch Specialty Insurance Company (“Arch Specialty”). See ECF No. 72-7. Every year, in order to obtain these policies. DTM was required to complete relevant policy applications. Jeanette Moody. DTM's comptroller, filled out the relevant insurance applications for DTM and received input from different departments at DTM. such as accounting and operations, to enable her to complete the application with the relevant payroll and operational information. ECF No. 67 at 57-58, 78. In particular, Ms. Moody would generally discuss the insurance applications with DTM's Chief Operating Officer (“COO”). Margo Briggs, specifically concerning the risks associated with the tasks performed by DTM employees. Id. at 84, 86-92.
Every year, the GL Policy application included a question that required DTM to itemize its annual payroll into subcategories in accordance with the services performed by DTM's security guards. Id. at 48, 107-111.4 One subcategory was labeled “Burglar/Fire Alarms” and included a notation stating: “separate alarm application must be completed if this coverage is desired.” See id. On DTM's 2003 GL Policy application, that portion of the application was filled in with the notation “N/A.” Id. at 48. In each year subsequent to the 2003 GL policy application, the “Burglar/Fire Alarm” portion of the application was left blank. Id. at 107-111; see also ECF No. 72-16 at 10.
Because DTM did not provide any information indicating that it needed insurance coverage for any activity involving alarm systems, each policy which Defendants obtained on behalf of DTM contained an alarm exclusion. The alarm exclusion in the GL Policy from 2004 through 2008 read: “This insurance does not apply to liability arising out of. or caused or contributed to by the sale, leasing, rental, installation, maintenance or service of any alarm, alarm device, alarm component or alarm system.” See ECF No. 67 at 112. 162. DTM's first Umbrella Policy, obtained in 2005, similarly included an alarm exclusion which excluded coverage for liability “arising out of or caused or contributed to by the ownership, maintenance, operation, use or installation of any alarm, alarm device, alarm component or alarm system.” Id. at 113.
When DTM sought a renewal of its prior policies in 2007, however, the new Umbrella Policy, effective from August 8. 2007 through August 8, 2008. was issued by Arch, rather than Arch Specialty, and it contained a differently worded alarm exclusion. See ECF No. 72-12 at 7. That exclusion provided that coverage did not apply to “[a]ny ‘bodily injury’ or ‘property damage’ arising out of or caused or contributed to by the ownership, maintenance, operation. monitoring , use or installation
of any alarm, alarm device, alarm component or alarm system.” ECF No. 67 at 114 (emphasis added).
Through B.F. Saul. DTM sought and obtained renewal of the 2007-2008 policies, and DTM's 2008-2009 Umbrella Policy contained the same alarm exclusion barring claims related to alarm monitoring. Mr. Schwartz sent a letter to Ms. Moody on September 19, 2008, when the renewal policy was procured, in which he enclosed the 2008-2009 GL and Umbrella Policies. See id. at 115. In relevant part, the letter stated: “With regard to the General/Professional Liability policy, among the exclusions are included [sic] work with Canines and Alarm Systems. If this is a concern, please let us know immediately.” Id. Ms. Moody, upon receipt of the letter, had no concerns as to the scope of coverage. In her deposition, she testified: “I wouldn't know why [Mr. Schwartz] would say that. I mean, I know we don't have—we didn't know why that would be in the letter. canines and alarm systems”' Id. at 80. She further stated that she did not recall anyone at DTM ever mentioning that they did any sort of work with alarms.5 Id. at 81. Similarly, Ms. Briggs. when asked whether she recalled the cover letter that accompanied the 2008-2009 policies, responded as follows:
[Ms. Briggs:] I just remember some discussion that we didn't do canines and we didn't do alarm systems. That's all I remember that year, was a question to me for operation. And we didn't.
Q: So there was no concern at DTM about an exclusion for alarm systems?
[Ms. Briggs:] No.
Q: Did that include monitoring systems?
[Ms. Briggs:] That include [sic] monitoring, too. We wasn't monitoring.
Id. at 104.6
DTM's lack of alarm monitoring coverage only became a concern when. on January
5, 2009, an incident occurred at DOD's Fort Washington Facility at which DTM guards were employed. DTM guards were responsible for monitoring the facility's alarm system. but failed to follow proper procedures when a heat sensor alarm was activated. See id. at 117. DOD later asserted a claim against DTM. alleging that the DTM guards' failure to properly respond to the heat sensor alarm caused $3.6 million in damage to specialized computer equipment at the facility. See id at 119; ECF No. 3 at ¶ 21: ECF No. 22 at ¶ 21. Previously, when DTM entered the contract with DOD to provide guard services at the Fort Washington Facility, the guards were provided “post orders” which indicated that DTM guards were required to, among other things, “[m]onitor[ ] the [Fort Washington facility] Alarm System in accordance with established procedures, to include, alarm response, notification., and logging/documenting any/all alarms, trouble, and/or maintenance issues.” See ECF No. 67 at 129. The post orders were never provided to Mr. Schwartz or any other B.F. Saul employee, and Ms. Moody was unaware of them. See id. at 71-72.
DTM requested coverage for the incident at Fort Washington under its 2008-2009 GL and Umbrella Policies. Id. at 116. Arch accepted coverage under the GL Policy, but denied coverage under the Umbrella Policy based on the alarm exclusion under that policy. specifically, its language limiting liability for damages related to alarm “monitoring.” Id. at 122-23, 126-27. Arch, pursuant to the coverage under the GL Policy, provided a defense to DTM for DOD's claims, and DTM subsequently requested and received alarm monitoring coverage with a corresponding increase in its insurance premium. Id. at 132-34, 245-48.
Because of the incident, DOD threatened to withhold payments under its contract with DTM to satisfy its damages. See ECF No. 72-4 at 11; ECF No. 72-15 at 2. It is unclear. however. whether DOD ever did, in fact, withhold any payments or, if it did, if such withholding was because of the Fort Washington claim or for other reasons.7 Moreover, Ms. Briggs stated that. although DOD was “getting ready” to withhold a certain amount of money under its contract with DTM in settlement of the Fort Washington claim. DOD did not actually do so. ECF No. 72-4 at 11. Ms. Briggs further explained that DOD was frequently late in making payments, that DTM had to obtain a payment...
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