Scottsdale Ins. Co. v. Bounds
| Decision Date | 08 March 2013 |
| Docket Number | Civil No. TJS-11-2912 |
| Parties | SCOTTSDALE INSURANCE CO., et al., Plaintiffs v. ERIC B. BOUNDS, et al., Defendants. |
| Court | U.S. District Court — District of Maryland |
This Memorandum Opinion and Order1 addresses Plaintiffs Scottsdale Insurance Co. ("Scottsdale") and National Casualty Company's ("NCC") Motion for Summary Judgment, ECF No. 46; Defendant Joshua W. Overbaugh's Response in Opposition to Plaintiffs' Motion for Summary Judgment, ECF No. 49; and, Plaintiffs' Reply to Defendant Overbaugh's Response, ECF No. 50. For the reasons stated herein, Plaintiffs' Motion for Summary Judgment is GRANTED. This Memorandum Opinion and Order disposes of ECF Nos. 46, 49, and 50.
In reviewing the evidence related to a motion for summary judgment, the Court considers the facts in the light most favorable to the non-moving party. Ricci v. DeStafano, 557 U.S. 557, 585 (2009); George & Co., LLC v. Imagination Entm't Ltd., 575 F.3d 383, 391-98 (4th Cir. 2009); Dean v. Martinez, 336 F. Supp. 2d 477, 480 (D. Md. 2004). Unless otherwise stated, the background provided here is comprised of undisputed facts. Where a factual dispute between the parties exists, the facts are considered in the light most favorable to the non-moving party.In October 2007, Defendant Bounds Trucking, Inc. d/b/a Coastal Roll-Off2 ("Coastal") "procured a Commercial Auto policy underwritten by NCC" (the "Auto Policy") and an "Excess Liability policy . . . underwritten by Scottsdale" (the "Excess Policy") (collectively, "the Policies"). Compl ¶ 10, ECF No. 1 at 2. The policies provided that "[i]n return for the payment of premium" and "[i]n consideration of the payment of premium," insurance would be provided as outlined in each policy. Id. 19, ¶¶ 20 & Ex. A, B. Coastal paid the initial premium due on the Policies, but failed to make any of the following nine monthly payments as required. Id. ¶¶ 11-12. The company through whom Coastal had contracted to make its payments notified Coastal that the Policies "were cancelled, effective December 6, 2007 due to Coastal's failure to pay its premiums." Id. ¶¶ 14, 18. The Policies were never reinstated after they were cancelled. Id. Ex A, B & D, ECF Nos. 1-2, 1-3 & 1-5.
On January 8, 2008, more than one month after the Policies were cancelled, Defendant Homesley (driving a truck that Coastal owned) was involved in an automobile accident ("the Accident") with Defendant Overbaugh ("Overbaugh"). Id. ¶¶ 23-25, 27. Overbaugh filed a lawsuit in the Circuit Court for Worcester County, Maryland against Homesley, Coastal and Bounds, who owned Coastal, (collectively, the "Underlying Defendants") on January 7, 20113 (the "Overbaugh Lawsuit"), and Scottsdale retained counsel "to defend Bounds, Coastal and Homesley from the Overbaugh Lawsuit." Id. ¶¶ 28-29. On October 12, 2011, Plaintiffs filed the instant action in this Court, seeking a declaration that the Policies were "cancelled effective December 6, 2007," and that Plaintiffs have "no duty to defend or indemnify Bounds, Coastal, or Homesley with respect to the Overbaugh Lawsuit" or "with respect to the Accident." Id.Overbaugh contends that summary judgment is not appropriate because material issues of fact remain in dispute. Specifically, Overbaugh contends (1) that Plaintiffs waived their rights to deny coverage by acting inconsistently with these rights, and (2) that Plaintiffs should be estopped from asserting these rights now, after Overbaugh relied to his detriment on Plaintiffs' actions and assurances that coverage existed. Plaintiffs contend that these facts are not material to the outcome of this case.
Summary judgment is properly granted when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see Meson v. GATX Tech. Servs. Corp., 507 F.3d 803, 806 (4th Cir. 2007) (citing Fed. R. Civ. P. 56(c)). The party moving for summary judgment bears the burden of demonstrating that no genuine dispute exists as to any material fact. Pulliam Inv. Co. v. Cameo Props., 810 F.2d 1282, 1286 (4th Cir. 1987). In reviewing a motion for summary judgment, the Court considers the evidence in the light most favorable to the non-moving party. Ricci, 577 U.S. at 585; George & Co., LLC, 575 F.3d at 391-92; Dean, 336 F. Supp. 2d at 480.
If the moving party demonstrates that there is no evidence to support the non-moving party's case, the burden shifts to the non-moving party to identify specific facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). To satisfy this burden, the non-moving party "must produce competent evidence on each element of his or her claim." Miskin v. Baxter Healthcare Corp., 107 F. Supp. 2d 669, 671 (D. Md. 1999). Although the Court "must draw all reasonable inferences in favor of the non-moving party," that party "may not create a genuine issue of material fact through mere speculation, or building oneinference upon another." Id. (citing Anderson, 477 U.S. at 255; Runnenbaum v. NationsBank, 123 F.3d 156, 163 (4th Cir. 1997); Sylvia Dev. Corp. v. Calvert Cnty., 48 F.3d 810, 817-18 (4th Cir. 1995)). Indeed, the existence of only a "scintilla of evidence" is not enough to defeat summary judgment. Anderson, 477 U.S. at 251. Instead, the admissible evidentiary materials submitted must show facts from which the finder of fact could reasonably find in favor of the non-moving party. Id.
Under the Declaratory Judgment Act, a district court "may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a). The Declaratory Judgment Act is "an enabling Act, which confers a discretion on the courts rather than an absolute right upon the litigant." Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995). In general, a district court should entertain a declaratory judgment action "when the judgment will serve a useful purpose in clarifying and settling the legal relations in issue, and . . . when it will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding." Penn-America Ins. Co. v. Coffey, 368 F.3d 409 (2004) (internal quotation omitted). When a related state court proceeding is pending, however, a court must consider four factors (the "Nautilus factors") in determining whether to proceed with the declaratory judgment action in federal court:
(1) whether the state has a strong interest in having the issues decided in its courts; (2) whether the state courts could resolve the issues more efficiently than the federal courts; (3) whether the presence of "overlapping issues of fact or law" might create unnecessary "entanglement" between the state and federal courts; and (4) whether the federal action is mere "procedural fencing," in the sense that the action is merely the product of forum-shopping.
Coffey, 368 F.3d at 412 (citing United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 493-94 (4th Cir. 1998) (quoting Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 377 (4th Cir. 1994))).
As to the first Nautilus factor, this Court finds that the State's interest is "not particularly significant" because the state law issues involved in this case are "unlikely to break new ground." Coffey, 368 F.3d at 414. Similarly, the second factor does not suggest that this matter would be more efficiently resolved in State court, as Plaintiffs are not a party to the pending action, and dismissing this case in deference to the State "would not seem to advance any cause of efficiency." Id. The third Nautilus factor causes no concern, as the only issues at stake in this declaratory judgment action are whether the Policies were cancelled prior to the Accident, and whether Plaintiffs have a duty to defend and indemnify the Underlying Defendants in the Overbaugh Lawsuit. These issues would not be decided in the State court action, so there is no risk of creating an unnecessary "entanglement" by deciding them. Finally, as to the fourth factor, there is no indication that Plaintiffs have engaged in forum-shopping.
In consideration of the Nautilus factors, the Court finds that entertaining this action is appropriate and "will serve a useful purpose in clarifying and settling the legal relations in issue." Id. at 412.
Subject matter jurisdiction in this case is predicated on the diverse citizenship of the parties. A federal court sitting in diversity must apply the choice of law rules applicable in the forum state. Klaxon v. Stentor Electric Mfg. Co., Inc., 313 U.S. 487, 496-97 (1941). In the absence of a choice of law provision in a contract, Maryland generally follows the doctrine of lex loci contractus when determining which state's substantive law to apply to the interpretation of acontract for insurance. Francis v. Allstate Ins. Co., --- F.3d ----, 2013 WL 829141 (4th Cir. Mar. 7, 2013); Am. Motorists Ins. Co. v. ARTRA Group, Inc., 338 Md. 560, 659 A.2d 1295, 1301 (1995). Under the lex loci principle, the law of the place where the contract was made governs. Rouse Co. v. Fed. Ins. Co., 991 F. Supp. 460, 462 (D. Md. 1998). "[A] contract is 'made' where the last act necessary for its formation is performed." Id. For an insurance policy, the last act necessary for formation of the contract is the delivery of the policy and payment of premiums. Id.; Commercial Union Ins. Co. v. Porter Hayden Co., 97 Md. App. 442, 630 A.2d 261 (1993) ().
There are two insurance contracts between Plaintiffs and Coastal in dispute, an "Auto Policy" and an "Excess Policy." Each of these Policies were signed, paid for (at least initially), delivered, and cancelled in Maryland....
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