United Services v. Riley

• Citation: 899 A.2d 819,393 Md. 55
• Decision Date: 01 June 2006
• Docket Number: No. 40, September Term, 2005.,40, September Term, 2005.
• Parties: UNITED SERVICES AUTOMOBILE ASSOCIATION v. Rita RILEY, et al.
• Court: Court of Special Appeals of Maryland

Page 819

899 A.2d 819

393 Md. 55

UNITED SERVICES AUTOMOBILE ASSOCIATION v. Rita RILEY, et al.

No. 40, September Term, 2005.

Court of Appeals of Maryland.

June 1, 2006.

COPYRIGHT MATERIAL OMITTED

Andrew Janquitto (Mudd, Harrison & Burch, L.L.P., on brief), Towson, for Petitioner.

Brian S. Brown (Saul E. Kerpelman & Associates, P.A., on brief), Baltimore, for Respondent.

David H. Topol, Laura A. Foggan, Anthony E. Orr, Wiley, Rein & Fielding, L.L.P., Washington, DC, brief of Amicus Curiae Complex Ins. Claims Litigation Ass'n in support of Petitioner.

Bruce M. Bender, Van Crack, Axelson, Williamowsky, Bender & Fishman, Rockville, brief of Amicus Curiae of the Maryland Trial Lawyers Ass'n in support of Respondent.

ARGUED BEFORE BELL, C.J., RAKER, WILNER, CATHELL, HARRELL, BATTAGLIA, and GREENE, JJ.

GREENE, J.

This matter originated with a complaint for declaratory relief filed by petitioner, United Services Automobile Association ("USAA"), in the Circuit Court for Baltimore City. The complaint named Kenny A. Hooper, Jr. and respondents in the instant case, Rita Towana Riley,¹ Jeremy Carpenter, Christian Carpenter, and Wendy Carpenter ("the Carpenters") as defendants. USAA sought a declaration of the limits of insurance coverage of four consecutive policies issued to Hooper² for the property he owned where the Carpenter children allegedly suffered lead exposure and related injuries. Respondents answered USAA's complaint and filed a counterclaim for declaratory relief. Subsequently, USAA filed a motion for summary judgment. The Circuit Court issued a Memorandum and Order granting USAA's motion for summary judgment in part.

The Circuit Court ultimately issued a Declaratory Judgment stating: (1) that the injuries allegedly suffered by the Carpenter children are confined to a single "occurrence," as "occurrence" is defined by the USAA policy; (2) that the Limit of Liability provision of the USAA policy unambiguously limited the recovery of damages because of injury of the Carpenter children to "an aggregate total of the policy limit of $300,000"; (3) that the Carpenter children cannot establish, as a factual matter, that any one of them suffered bodily injury within the meaning of the USAA policies during the terms of the first two policies and therefore, the maximum number of policies implicated is two; (4) that the Limit of Liability provision in the USAA policies is ambiguous and therefore does not limit USAA's responsibility under the two implicated USAA policies to $300,000 for all bodily injury to the Carpenter children; and (5) that to the extent that Hooper is found liable in the underlying tort case, USAA's indemnification obligation is limited to providing no more than $600,000 of liability coverage.

In a reported opinion, the Court of Special Appeals held that the Circuit Court erred in concluding that there was no genuine dispute of material fact as to whether the Carpenter children were injured during the first and second policy periods, and therefore reversed the judgment of the Circuit Court and remanded for further proceedings. Riley v. United Services Automobile Assoc., 161 Md.App. 573, 871 A.2d 599 (2005). The intermediate appellate court, although not required to reach the issue of whether the Circuit Court erred in declaring the amount of coverage USAA's policies provided, addressed the issue in order to provide some guidance to the court and parties on remand.

USAA presents two questions for our review, the first of which we recast:

I. Whether, with regard to the first two USAA policy periods, the Circuit Court erred in granting summary judgment as a result of the respondents' alleged failure to prove that the Carpenter children had suffered injuries, as defined by the policies, during the first two policy periods?³

II. Whether a limit-of-liability provision in each of four liability policies issued by the same insurer limits the insurer's liability coverage to a single per occurrence limit when bodily injury spans more than one policy period?

We answer the first question in the affirmative and the second question in the negative and affirm the judgment of the Court of Special Appeals.

Facts

Hooper owned a house located at 1803 West Mosher Street ("the property"), into which the Carpenter children moved in June 1990. At the time they moved into the property, Wendy Carpenter was 2 ½ years old; Christian Carpenter was approximately 1½ years old; and Jeremy Carpenter was 4 months old. While residing at the property, the children were raised by their grandmother, Annie Riley Barksdale. At a deposition, Ms. Barksdale stated that she observed problems with the paint in the property, including paint chipping around the window areas in the living room, kitchen, and middle bedroom on the second floor, and paint dust in the bath tub. Ms. Barksdale also witnessed the children gnawing on the window sills in the bedroom. Harriet Peartree, who is Ms. Barksdale's sister, also testified to the condition of the paint at the property, stating that the paint surface was uneven and fragile on the window sills and door frames. While she never witnessed such an occurrence, on multiple occasions, the children told her that "one of the kids is eating the paint" which she believed occurred in either Ms. Barksdale's bedroom or the middle bedroom.

In April 1993, Wendy Carpenter first tested for elevated blood lead levels and her level was 19 micrograms per deciliter ("μg/dL")⁴, which increased to 23 μg/dL in September 1993. In May 1993, Christian Carpenter's initial blood lead level was 23 μg/dL, which increased in June 1993 to 24 μg/dL, and in September 1993 to 28 μg/dL. Jeremy Carpenter's initial blood lead level was 29 μg/dL in April 1993, and after a series of increases and decreases,⁵ declined to 18/19 μg/dL by December 1993. The Carpenter children moved out of the property in the Fall of 1993.

During the respondents' tenancy at the property, USAA insured Hooper under a series of homeowner's policies. The first policy began on July 28, 1990 and was renewed on July 28, 1991. In March of 1992, some changes were made to the policy and a new policy was issued that covered March 1, 1992, until March 1, 1993. That policy was then renewed from March 1, 1993, until March 1, 1994. The USAA policies defined "bodily injury" as "bodily harm, sickness or disease, including required care, loss of services and death that results." "Occurrence" was defined as

an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in:

a. bodily injury; or

b. property damage.

Personal liability was addressed by the USAA policies as follows:

SECTION II — LIABILITY COVERAGES

Coverage E — Personal Liability

[If] a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage caused by an occurrence to which this coverage applies, we will:

1. pay up to our limit of liability for the damages for which the insured is legally liable; and

2. provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent. We may investigate and settle any claim or suit that we decide is inappropriate. Our duty to settle or defend ends when the amount we pay for damages resulting from the occurrence equals our limit of liability.

* * * *

SECTION II — CONDITIONS

1. Limit of Liability. Our total liability under Coverage E for all damages resulting from any one occurrence will not be more than the limit of liability for Coverage E as shown in the Declarations. This limit is the same regardless of the number of insureds, claims made or persons injured. All bodily injury and property damage resulting from any one accident or from continuous or repeated exposure to substantially the same general harmful conditions shall be considered to be the result of one occurrence.

Each of the policies provided $300,000 of liability coverage.

Respondents filed a cause of action against Hooper alleging that he negligently exposed the Carpenter children to lead paint during their tenancy which resulted in brain damage to the Carpenter children. During the discovery process, a dispute arose as to the applicability of Hooper's insurance policies for the property, and USAA filed a complaint for declaratory relief on October 12, 2001, naming as defendants Riley, the Carpenters, and Hooper to resolve the insurance issue. USAA asked the Circuit Court to issue a declaration limiting insurance coverage to $300,000. Respondents claimed that Hooper was insured for $3,600,000 for their injuries under the series of policies.

USAA filed a Motion for Summary Judgment alleging that respondents could not prove that any bodily injuries were sustained before March 1, 1992, during the first and second policy periods. The Circuit Court issued a Memorandum and Order, granting summary judgment in part:

The court determines, for the reasons stated by [USAA] in its memoranda, that the language of the policy defining an "occurrence" unambiguously confines [respondents'] exposure to a single occurrence. Similarly, the policy's "Limit of Liability" unambiguously limits the recovery of [the Carpenter children] to an aggregate total of the policy limit of $300,000. Accordingly, the total coverage for [the Carpenter children's] exposure under a single policy is $300,000.

The remaining issue of whether a single policy limit of $300,000 is available for the four policy periods or whether the limit is available in each of the four policy periods is ambiguous under the terms of the policies and, for that reason, cannot be resolved by this Court on summary judgment as a matter of law. However, as a factual matter, on the record before the Court, the [Carpenter children] cannot establish that any one of them suffered a bodily injury within the meaning of the policies during the term of the first two policies,...