Professional Documents
Culture Documents
Unpublished
Unpublished
No. 10-1473
Appeal from the United States District Court for the District of
Maryland, at Baltimore.
William D. Quarles, Jr., District
Judge. (1:09-cv-02754-WDQ)
Argued:
Decided:
and
Kevin
Myers,
CPA
(Myers)
contend
that
their
work
as
insurance
agents
and
that
it
was
thus
not
J.A. 40.
Because these
liability
policy,
we
conclude
district
CAMICO
courts
Insurance
Furthermore,
because
grant
and
any
of
remand
summary
for
determination
that
CAMICO
We therefore reverse
judgment
further
as
to
in
favor
of
proceedings.
whether
CAMICO
Insurance has a duty to indemnify TGM and Myers must await the
resolution of the underlying actions, we reverse the district
courts award of summary judgment in favor of CAMICO Insurance
on its Counterclaim.
2
I.
A.
reported
2007,
CAMICO
Accountants
Insurance
issued
Professional
J.A. 20.
Liability
claims
made
Insurance
and
Policy
July 1, 2007 to July 1, 2008, insured TGM for claims arising out
of professional accounting services. 1
1.
The Company will pay those sums that an
Insured becomes legally obligated to pay as Damages
because of a Claim arising out of an Insureds
negligent act, error or omission in rendering or
failing to render Professional Services performed
after the Retroactive Date and before the end of the
Policy Period . . . .
J.A. 21.
the Policy, CAMICO Insurance has the right and duty to defend
and settle Claims alleging Damages potentially covered by this
Policy, even if the Claim is groundless, false or fraudulent.
J.A. 21.
1
The
Policy
also
defines
Professional
Services
as
any
or
commissions,
if
any,
or
other
benefits
pertinent
to
this
matter,
the
Policy
from
J.A. 26.
includes
in
or
an
of
such
the
B.
1. Ruark Action
In April 2009, Thomas R. Ruark (Ruark), Baja Holdings,
Inc.
(Baja
Holdings),
Baja
Holdings,
Inc.
Defined
Benefit
for
negligence
provision
of
Ruark
Myers,
v.
and
professional
Case
negligent
misrepresentation
accounting
No.
and
tax
22-C-09-000708
in
the
services.
(Cir.
Ct.
See
Wicomico
by
Baja
a
Defined
life
Benefit
insurance
Plan,
policy
and
which
would
annuities
be
written
13.
represented
Further,
that
this
according
arrangement
Baja
Holdings
to
would
the
complaint,
comply
wholly
with
by
J.A.
Myers
Internal
invested
some
$14
million
in
life
The Ruark
Ruark
Companies
also
filed
suit
against
Hartford
employer,
Insurance
Alternatives,
Inc.
(Insurance
turn,
Insurance
Alternatives
filed
third-party
it
incurs
in
connection
with
the
Hartford
Action.
The
Insurance
Alternatives
Third-Party
Action
[Baja
Holdings]
412(i)
Plan
were
tax
deductible
expenditures
J.A. 91, 6.
3. Fowler Action
Similar to the Ruark Action, Caleb Fowler and his company,
Arbitration & Mediation, Inc. (A&M), filed a complaint (the
Fowler Action) against TGM and Myers alleging causes of action
for negligence and negligent misrepresentation.
See Fowler v.
[Defined
Benefit
Plan],
funded
entirely
by
two
life
J.A. 101,
without
including
forms
required
for
listed
As a
accounting
fees
and
expenses,
7
and
will
likely
face
that
TGM
and
Myers
would
receive
substantial
Fowler
(collectively
the
underlying
actions).
CAMICO
arisen
products.
the
because
J.A. 163.
Special
Mr.
Myers
sold
defective
insurance
Exclusion
Endorsement
and
Product
Liability
turn,
on
September
14,
2009,
TGM
and
Myers
filed
On
to
jurisdiction.
federal
district
court
based
on
diversity
In
response,
counterclaim
and
TGM
and
for
Myers
partial
moved
summary
to
dismiss
judgment,
seeking
the
a
that
CAMICO
Insurance
was
liable
for
TGMs
and
Myerss
to
all
Insurance
counts
argued
in
that
TGMs
the
and
Myerss
underlying
complaint.
actions
all
CAMICO
related
to
Id.
March
25,
2010,
the
district
court
denied
TGMs
and
the
claims
asserted
in
the
underlying
actions
were
in
annuity products.
Id.
Id. at *6.
II.
We
first
consider
TGM
and
Myerss
argument
that
the
Overstreet
v. Kentucky Life Ins. Co., 950 F.2d 931, 938 (4th Cir. 1991).
Summary
judgment
is
appropriate
where
the
pleadings,
motion
Confectionery
direct
was
entry
denied
Union
&
of
by
Indus.
judgment
the
in
district
Intl
favor
of
the
court.
Pension
Fund
party
Bakery
v.
&
Ralphs
Grocery Co., 118 F.3d 1018, 1020 (4th Cir. 1997) (citing Monahan
v. Cnty. of Chesterfield, 95 F.3d 1263, 1265 (4th Cir. 1996)).
Maryland law governs our analysis in this matter because
this is a diversity action in which the Policy was issued to TGM
in Maryland.
jurisdiction
must
apply
the
choice-of-law
principles
of
the
Traylor v. Grafton,
273 Md. 649, 660, 332 A.2d 651, 659 (1975) (citations omitted);
see also Roy v. Nw. Natl Life Ins. Co., 974 F. Supp. 508, 512
(D. Md. 1997) (In insurance contract cases, Maryland courts
generally follow the rule of lex locus contractu, which requires
that the construction and validity of a contract be determined
by the law of the state where the contract is made.) (citing
Sting Sec., Inc. v. First Mercury Syndicate, Inc., 791 F. Supp.
555, 558 (D. Md. 1992)).
Maryland courts construe an insurers duty to defend its
insured very broadly:
Our cases hold that the obligation of an insurer to
defend its insured under the provisions of a contract
of insurance is determined by the allegations in the
tort action. Thus, if the plaintiff in the tort suit
alleges a claim covered by the policy, the insurer has
a duty to defend.
Even if a tort plaintiff does not
allege facts which clearly bring the claim within the
policy coverage, the insurer still must defend if
there is a potentiality that the claim could be
covered by the policy.
Lloyd E. Mitchell, Inc. v. Maryland Cas. Co., 324 Md. 44, 62
n.4,
595
A.2d
Transamerica
Ins.
469,
Co.,
478
n.4
276
Md.
11
(1991)
396,
(citing
507,
347
Brohawn
A.2d
842,
v.
850
even
remote
one,
that
the
If there is a
plaintiffs
claims
12
A.
In addressing the first prong of the Pryseski inquiry, we
focus
on
the
language
of
the
insurance
policy.
When
Clendenin
Bros., Inc. v. U.S. Fire Ins. Co., 390 Md. 449, 458, 889 A.2d
387,
393
(2006)
(citations
omitted).
In
determining
the
arising
omission
Services.
in
out
of
rendering
J.A. 21.
an
or
Insureds
failing
negligent
to
render
act,
error
or
Professional
J.A. 26.
includes
an
insurance
agent
or
broker
exclusion.
different
versions
of
13
exclusionary
language
that
create
inconsistencies
in
the
scope
of
the
limitation
of
coverage.
As guidance for interpreting an ambiguity in an insurance
policy, we observe that the Maryland Court of Appeals has held
that:
Maryland does not follow the rule, adopted in many
jurisdictions, that an insurance policy is to be
construed most strongly against the insurer.
Rather,
following the rule applicable to the construction of
contracts generally, we hold that the intention of the
parties is to be ascertained if reasonably possible
from the policy as a whole.
In the event of an
ambiguity, however, extrinsic and parol evidence may
be considered.
If no extrinsic or parol evidence is
introduced . . . it will be construed against the
insurer as the drafter of the instrument.
Cheney v. Bell Nat. Life Ins. Co., 315 Md. 761, 766-67, 556 A.2d
1135, 1138 (1989)(citations omitted); see also Pryseski, 292 Md.
at
193,
438
A.2d
at
285.
Accordingly,
under
Maryland
law,
matter,
Exclusion
any
should
ambiguity
be
in
resolved
the
against
Special
CAMICO
Endorsement
Insurance,
the
agree
with
TGMs
and
Myerss
assertion
that
because
his/her
capacity
as
an
[insurance]
agent
or
broker,
the
Endorsement
the
concern
introductory
the
paragraph
scope
of
of
the
the
endorsement.
Special
Exclusion
to[.]
J.A.
40
This
Policy
(emphasis
does
not
added).
provide
later
insurance
phrase
for
any
in
rendering
or
failure
to
render
services
as
an
Finally,
clause
notably
not
contain
the
Thus, the
broader
in
or
arising
out
of
language
in
the
Special
Exclusion
product.
A.2d
at
686,
and
CSX
Transportation
concerned
the
at
301,
exclusion
at
708
A.2d
issue
at
here
300.
is
As
whether
such,
the
the
focus
acts,
of
errors,
the
or
Instead, we must
phrase
arising
out
of
is
used
frequently
To be sure,
in
insurance
meaning
Contractual
that
language
applies
cannot
be
to
every
construed
insurance
in
policy.
vacuum.
Philadelphia Indem. Ins. Co. v. Md. Yacht Club, Inc., 129 Md.
16
App. 455, 469, 742 A.2d 79, 86 (1999) (citing Finci v. Am. Cas.
Co., 323 Md. 358, 369-70, 593 A.2d 1069, 1075 (1991)) (internal
quotation omitted).
Additionally, CAMICO Insurance asserts that merely acting
as
an
agent
or
broker
is
itself
law,
which
sets
sufficient
to
invoke
the
forth
three
factors
to
determine
Green v. H
& R Block, Inc., 355 Md. 488, 503, 735 A.2d 1039, 1048 (1999) 2
(citations omitted).
See Ace
Am. Ins. Co. v. Ascend One Corp., 570 F. Supp. 2d 789, 798 (D.
Md. 2008) (Under Maryland law, the burden rests on the insurer
to establish the applicability of a particular exclusion from
coverage.) (citing Warfield-Dorsey Co., Inc. v. Travelers Cas.
& Sur. Co. of Illinois, 66 F. Supp. 2d 681, 685 (D. Md. 1999)).
CAMICO Insurance has not proven the principal-agent factors.
Thus, in answer to the first part of our inquiry under
Pryseski,
we
conclude
that
the
language
of
the
Special
B.
Under
the
next
prong
of
the
Pryseski
inquiry,
we
must
The
W. World
Ins. Co., Inc. v. Harford Mut. Ins. Co., 784 F.2d 558, 562, (4th
Cir. 1986) (citing Brohawn, 276 Md. 396, 347 A.2d 842).
The fact that the pleadings state a cause of action
that is not covered by the policy does not excuse
insurer if another ground for recovery is stated that
is covered . . . . Accordingly, the insurer is
obligated to provide a defense against the allegations
of covered as well as the noncovered claims. Doubts
as to whether an allegation indicates the possibility
of coverage should be resolved in the insureds favor.
Utica Mut. Ins. Co. v. Miller, 130 Md. App. 373, 383, 746 A.2d
935, 940-41 (2000) (quoting John Alan Appleman, Insurance Law &
Practice,
4684.01
(Rev.
ed.
18
1979)
at
102-06)
(internal
Court
must
analyze
each
of
the
complaints
filed
against TGM and Myers and compare the allegations to the scope
of
the
Policys
coverage
to
determine
if
TGM
and
Myers
are
1.
The
Ruark
Action
contained
specific
assertions
regarding
tax
advice.
Acting
on
Myerss
advice,
Ruark
and
Baja
audited
based
Ruark
and
disallowed
deductions
on
the
Baja
returns for Ruark and did not include required forms for the
listed transaction.
The
Ruark
Action
professional
fees
in
advice they
provided
alleged
that
connection
with
but
to
failed
19
TGM
the
and
Myers
accounting
disclose
that
received
and
they
tax
would
receive
substantial
However,
the
Ruark
commissions
Action
on
did
the
not
life
identify
insurance
TGM
or
sales.
Myers
as
on
insurance
them
to
agents
perform
or
any
brokers.
duties
In
on
fact,
their
the
behalf
Ruark
as
Action
Plaintiffs
412(i) Concept.
that
the
Myers
with
arrangement
concurred
various
with
would
those
comply
proposals
to
implement
the
tax
representations
regulations,
in
his
and
advisory
capacity.
2.
The
Insurance
Alternatives
Third-Party
Action
also
3.
The Fowler Action also included allegations that TGM and
Myers provided negligent accounting and tax services:
Myers and TGM had duties (a) to act with care and
skill of reasonably competent accountants and tax
advisors in advising Plaintiffs with respect to the
implementation of the 412(i) Concept, the formation of
A&M DBP, and the selection of the A&M Policy to fund
the A&M DBP; (b) to inform Plaintiffs of the risks
involved with the 412(i) Concept; and (c) to inform
Plaintiffs of all facts material to the transaction.
J.A. 108, 45.
Plaintiffs
with
their
to
file
2004
and
the
required
2005
tax
listed
returns;
transaction
[and].
accountants
Alternatives
and
and
tax
Third-Party
contribution
from
advisors.
Action,
TGM
and
which
Myers,
Only
seeks
the
Insurance
indemnification
contained
fleeting
21
agent.
all
the
of
underlying
Endorsement.
Actions
that
actions
within
the
Special
Exclusion
acted
as
an
insurance
agent
or
broker.
it
would
not
change
the
fact
that
the
underlying
W. World
Myers.
Accordingly,
we
reverse
the
district
courts
that
CAMICO
Insurance
must
provide
them
with
III.
TGM and Myers also argue on appeal that the district court
erred
by
granting
summary
judgment
22
on
CAMICO
Insurances
Counterclaim
indemnify.
obligated
seeking
declaration
that
it
had
no
duty
to
defend
more
cases
than
it
will
be
required
to
at
The
225,
695
A.2d
at
570
(citation
omitted).
duty
to
fact
concerning
coverage.)
Supp.
2d
concerning
(quoting
538,
541
the
alleged
USAA
(D.
indemnification
Cas.
Md.
is
occurrence
Ins.
2002)).
Co.
v.
the
Mummert,
Thus,
inappropriate
23
with
when
policy
213
F.
declaration
related
to
issues to be litigated.
Fire Ins. Co., 338 Md. 131, 149, 656 A.2d 779, 788 (1995).
The issue of whether Myers acted as Hartford Insurances
agent or broker is not independent and separable from the issues
to be decided in the underlying actions.
the
underlying
substandard
actions
accounting
is
and
that
tax
Myers
and
advice.
TGM
rendered
Nevertheless,
the
although
CAMICO
Insurance
is
obligated
to
in
the
complaints,
the
ultimate
findings
of
fact,
for
any
damages
awarded
24
to
the
plaintiffs
in
the
indemnification
would
be
premature
at
this
time;
such
court
erred
Insurance
by
on
determination
granting
its
of
summary
judgment
Counterclaim.
CAMICO
in
favor
Similarly,
Insurances
duty
of
of
CAMICO
because
the
indemnification
IV.
In sum, because there is a potentiality of coverage, we
hold that CAMICO Insurance has a duty to defend TGM and Myers.
We therefore reverse the district courts ruling to the contrary
and
direct
it
to
grant
TGM
and
Myerss
motion
for
partial
Further,
summary
judgment
in
favor
of
CAMICO
Insurance
on
its
Counterclaim.
REVERSED AND REMANDED
26