Whiting-Turner Contracting Co. v. Liberty Mut. Ins. Co.

• Decision Date: 13 December 2012
• Docket Number: Civil Action No. ELH–12–401.
• Parties: The WHITING–TURNER CONTRACTING COMPANY, Plaintiff, v. LIBERTY MUTUAL INSURANCE CO., Defendant.
• Court: U.S. District Court — District of Maryland

912 F.Supp.2d 321

The WHITING–TURNER CONTRACTING COMPANY, Plaintiff,

v.LIBERTY MUTUAL INSURANCE CO., Defendant.

Civil Action No. ELH–12–401.

United States District Court, D. Maryland.

Dec. 13, 2012.

Gary Carlson Duvall, Elizabeth M. Greenwald, Jennifer J. Coyne, Miles and Stockbridge PC, Towson, MD, for Plaintiff.

Patricia McHugh Lambert, Hodes Pessin and Katz PA, Towson, MD, Talley Hollings Scrogg Kovacs, Baltimore, MD, Defendant.

MEMORANDUM OPINION

ELLEN LIPTON HOLLANDER, District Judge.

The Whiting–Turner Contracting Company (“Whiting–Turner”), plaintiff, sued its purported insurer, Liberty Mutual Insurance Co. (“Liberty Mutual”), defendant, based on Liberty Mutual's belated decision to deny coverage to Whiting–Turner with respect to a lawsuit filed against Whiting–Turner in a Nevada state court (the “Nevada Suit”).¹ Liberty Mutual defended Whiting–Turner in the Nevada Suit until, over five years into the litigation, on the Friday before a scheduled Monday settlement conference, Liberty Mutual asserted that it was not obligated to cover Whiting–Turner for most of the claims in the suit. Whiting–Turner asserts that, as a result of Liberty-Mutual's “last-minute” change of position, Whiting–Turner was obliged to contribute substantial amounts of its own money to settle the Nevada Suit and avoid exposure to greater liability at trial.

Whiting–Turner levels five counts against Liberty Mutual. Count I seeks a declaratory judgment stating that Liberty Mutual is obligated under the applicable insurance agreements to reimburse Whiting–Turnerfor the full amount of Whiting–Turner's settlement payment in the Nevada Suit, plus interest, attorneys' fees, and costs. Count II asserts a claim for breach of contract on the same basis. In Count III, plaintiff asserts a cause of action for breach of an insurer's duty of good faith under Md.Code (2006 Repl.Vol., 2012 Supp.), § 3–1701 of the Courts & Judicial Proceedings Article (“C.J.”) and its companion provision, Md.Code (2011 Repl.Vol., 2012 Supp.), § 27–1001 of the Insurance Article (“Ins.”). Count IV alleges a nonstatutory cause of action for “bad faith,” and Count V presents a claim of promissory estoppel. ²

Liberty Mutual has filed a “Motion to Dismiss, or for a Stay of the Proceedings Pending Arbitration” (the “Motion”) (ECF 16). According to Liberty Mutual, it is not a proper party to this case because it is not a party to the insurance agreements at issue. Rather, Liberty Mutual claims that plaintiff's insurers under the applicable agreements are two different (albeit related) companies: Liberty Mutual Fire Insurance Company (“Liberty Fire”) and Liberty Insurance Company (“Liberty Insurance”). In the alternative, Liberty Mutual contends that a contractual provision of one of the insurance agreements obligates the parties to resolve their dispute in arbitration. And, if the Court were to reach the merits of the suit, Liberty Mutual maintains that each of the counts is fatally defective.

The Motion has been fully briefed,³ and no hearing is necessary to resolve it. See Local Rule 105.6. For the reasons that follow, it will be granted in part and denied in part.

Factual Background⁴

Whiting–Turner is a construction company with a national business. See Complaint ¶ 6. In 1998, it procured a Commercial General Liability insurance policy, designated as Policy No. RG2–631–004070–048 (the “CGL Policy” or the “Policy”). Id. ¶ 8.⁵ The CGL Policy is composed of a declarations page, a “Commercial General Liability Coverage Form” (“CGL Form”), and numerous endorsements.

In general, the CGL Policy provides that the insurer “will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies,” and will have “the right and duty to defend the insured against any ‘suit’ seeking those damages.” CGL Policy at A0000057. The detailed provisions of the CGL Policy are not relevant to resolution of the Motion, however.

Although Whiting–Turner alleges in its complaint that it “purchased” the CGL Policy “from Liberty Mutual,” Complaint ¶ 8, the Policy itself supports Liberty Mutual's claim that Liberty Fire is the actual insurer under the Policy. The top of both the declarations page and the CGL Form contains a “LIBERTY MUTUAL” logo (the text “LIBERTY MUTUAL” accompanied by an image of the Statue of Liberty). But, below the logo on the declarations page is the text “Liberty Mutual Fire Insurance Company–Boston,” CGL Policy at A000001, and below the logo on the CGL Form is the text “Fire Insurance Company, Boston, Massachusetts,” such that, when combined with the text of the logo, the CGL Form states: “Liberty Mutual Fire Insurance Company, Boston, Massachusetts.” Id. at A0000057. Moreover, at the end of each of the endorsements in the Policy, the following text appears: “This endorsement is executed by the company below designated by an entry in the box opposite its name.” E.g. id. at A0000017. Under that phrase are five checkboxes next to the names “Liberty Mutual Insurance Company,” “Liberty Mutual Fire Insurance Company,” “Liberty Insurance Corporation,” “LM Insurance Corporation,” and “The First Liberty Insurance Corporation.” Id. On each endorsement, an “X” appears only in the box next to “Liberty Mutual Fire Insurance Company,” i.e., Liberty Fire. Id.

In any event, during the period of coverage under the CGL Policy, Whiting–Turner entered into a contract to act as the general contractor for the construction of an office building in Las Vegas, Nevada. Complaint ¶¶ 13–14. Construction was completed in September 1999. Id. ¶ 15. In September 2005, the owner of the building filed the Nevada Suit against Whiting–Turner, as well as several of Whiting–Turner's subcontractors and the building's architect, alleging that the building “suffered extensive property damage as a result of alleged negligence, defects and deficiencies in the planning, development, design, construction and administration” of the construction project. Id. ¶ 16.

Whiting–Turner asserts that it “immediately placed Liberty Mutual on notice” of the Nevada Suit, and that, “[w]ithout issuing any reservation of rights, Liberty Mutual undertook Whiting–Turner's defense and assigned a Nevada law firm of Liberty Mutual's choosing to serve as Whiting–Turner's defense counsel” in the Nevada Suit. Id. ¶¶ 17–18. According to plaintiff, throughout the litigation Liberty Mutual “exercised control over the direction of Whiting–Turner's defense,” “communicated directly with Whiting–Turner's counsel, often to the exclusion of Whiting–Turner,” and paid all invoiced defense costs directly to Whiting–Turner's defense counsel. Id. ¶¶ 20–21.

Plaintiff maintains that, from the inception of the Nevada Suit in 2005 until 2007, Liberty Mutual gave no indication whatsoever that there was any dispute as to coverage. Id. ¶ 22. Then, in February 2007, Karen Borrego, the Senior Technical Claims Specialist for Liberty Mutual who was assigned to the claim arising from the Nevada Suit, sent to Whiting–Turner a reservation of rights letter. She stated that, “ ‘upon review of [Liberty Mutual's] file, [she] realized that a [c]overage position letter had not been sent.’ ” Id. ¶ 23 (quoting letter; some alterations added). Although the February 2007 letter took note of several exclusions in the CGL Policy, the letter affirmatively stated: “ ‘[O]ur policy would apply to damage to Whiting–Turner's own non-defective work, and to damage to or arising out of work performed by subcontractors.’ ” Id. ¶ 26 (quoting letter; emphasis in complaint). According to Whiting–Turner, the damage alleged in the Nevada Suit “consisted entirely of damage to or arising out of work performed by Whiting–Turner's subcontractors.” Id. ¶ 27. Therefore, Whiting–Turner continued to believe there was no dispute as to coverage. Id.⁶

Whiting–Turner maintains that in mid–2009, while the Nevada Suit was still ongoing, it began to negotiate a “liability buyout” with Liberty Mutual, such that “Liberty Mutual would assume all present and future obligations arising under certain insurance policies, including the Policy.” Id. ¶ 28. Whiting–Turner asserts that Liberty Mutual prepared a “Claim Report” identifying all open claims under the policies that Liberty Mutual proposed to assume under the buyout. Id. ¶ 30. The coverage claim associated with the Nevada Suit was included in the Claim Report. Id. ¶ 29. According to Whiting–Turner, Liberty Mutual agreed, under the buyout, to assume full liability for all claims arising under the subject policies, in exchange for Whiting–Turner's payment of a buyout cost. Id. ¶ 33. Whiting–Turner paid the sum of $1,431,885 as a buyout cost to Liberty Mutual, and “understood that Liberty Mutual was thereafter assuming liability for the claims on the Claim Report.” Id. ¶ 36.

In its complaint, Whiting–Turner alleges that “the buyout was consummated by a Loss Portfolio Transfer Policy prepared by Liberty Mutual, with an effective date of October 1, 2009.” Id. ¶ 35. However, Whiting–Turner did not include a copy of the alleged Loss Portfolio Transfer Policy with its complaint. As Exhibit B to the Motion (ECF 17), Liberty Mutual has submitted a document entitled “Loss Portfolio Transfer Insurance Policy,” with Policy No. EK7–M31–004070–359, which it contends is the “Loss Portfolio Transfer Policy” to which Whiting–Turner refers. Exhibit B is authenticated by a “Policy Certification Form,” dated February 28, 2012, see ECF 17 at 2, by which Patricia Faunce, a Manager for Commercial Markets with “UW Support Operations [-] CMSO Consolidate Operations” in Lewiston, Maine, certified that Exhibit B is “a true copy of the original policy issued.” ⁷

Whiting–Turner does not agree that this document is the authentic “Loss Portfolio Transfer Policy.” Indeed, Whiting–Turner maintains that it never received or reviewed the document submitted as Exhibit B by Liberty Mutual until ...