Minnesota Lawyers Mutual Ins. v. Baylor & Jackson, PLLC
Filing
AMENDING ORDER/OPINION filed [999140294] amending and superseding Unpublished Authored Opinion [999138984-2]. Originating case number: 1:10-cv-02701-JKB Copies to all parties.. [12-1581]
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 1 of 44
Filed:
June 28, 2013
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-1581
(1:10-cv-02701-JKB)
MINNESOTA LAWYERS MUTUAL INSURANCE COMPANY,
Plaintiff - Appellee,
v.
BAYLOR & JACKSON, PLLC; BRYNEE K. BAYLOR; DAWN R. JACKSON;
RICHARD THOMAS; HENRY THOMAS; FREEDOM NY INC.; TEKNIC CORP.;
T.F.T.F. CAPITAL CORP.; HT FOOD PRODUCTS; RSG GROUP &
ASSOCIATES INC.,
Defendants - Appellants.
O R D E R
The Court amends its opinion filed June 27, 2013, as
follows:
On the cover sheet, opinion status section, line 2 -the spelling of the word “wrote” is corrected.
For the Court – By Direction
/s/ Patricia S. Connor
Clerk
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 2 of 44
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-1581
MINNESOTA LAWYERS MUTUAL INSURANCE COMPANY,
Plaintiff - Appellee,
v.
BAYLOR & JACKSON, PLLC; BRYNEE K. BAYLOR; DAWN R. JACKSON;
RICHARD THOMAS; HENRY THOMAS; FREEDOM NY INC.; TEKNIC CORP.;
T.F.T.F. CAPITAL CORP.; HT FOOD PRODUCTS; RSG GROUP &
ASSOCIATES INC.,
Defendants - Appellants.
Appeal from the United States District Court for the District of
Maryland, at Baltimore.
James K. Bredar, District Judge.
(1:10-cv-02701-JKB)
Argued:
March 19, 2013
Decided:
June 27, 2013
Before DUNCAN, FLOYD, and THACKER, Circuit Judges.
Affirmed by unpublished opinion. Judge Floyd wrote the majority
opinion, in which Judge Duncan joined.
Judge Thacker wrote a
dissenting opinion.
ARGUED: Joseph Michael Creed, JOSEPH, GREENWALD & LAAKE, PA,
Greenbelt, Maryland, for Appellants.
Paul Newman Farquharson,
SEMMES, BOWEN & SEMMES, Baltimore, Maryland, for Appellee.
ON
BRIEF: Cary J. Hansel, JOSEPH, GREENWALD & LAAKE, PA, Greenbelt,
Maryland, for Appellants. Gregory L. Arbogast, SEMMES, BOWEN &
SEMMES, Baltimore, Maryland, for Appellee.
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 3 of 44
Unpublished opinions are not binding precedent in this circuit.
2
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 4 of 44
FLOYD, Circuit Judge:
Appellants
are
Baylor
&
Jackson,
PLLC,
a
law
firm
in
Washington, D.C., and its two principals, Brynee Baylor and Dawn
Jackson (collectively, Baylor & Jackson).
In 2006, Baylor &
Jackson filed a response to a motion on behalf of its clients,
Henry
Thomas
Underlying
(Thomas)
and
Defendants),
Richard
owners
Thomas
and
(collectively,
operators
of
the
several
companies, averring that their adversary, William Robbins, was
not entitled to summary judgment in a certain Maryland statecourt case.
Baylor & Jackson failed to provide documentation,
as required by state procedural rules, to support its assertion
that genuine issues of material fact prevented judgment as a
matter of law, and the trial court ultimately granted judgment
to Robbins.
In 2009, the Maryland Court of Appeals affirmed the trial
court’s
Jackson’s
motion.
grant
failure
summary
to
judgment,
properly
support
reiterating
the
Baylor
opposition
to
&
the
Afraid that the Underlying Defendants would sue for
malpractice,
insurer,
of
Baylor
Appellee
&
Jackson
Minnesota
notified
Lawyers
(MLM) of the possibility of a claim.
its
Mutual
legal
malpractice
Insurance
Company
Shortly thereafter, the
Underlying Defendants filed the malpractice suit that Baylor &
Jackson had feared, and in turn, MLM provided coverage.
Within
a year, however, MLM communicated to Baylor & Jackson that it
3
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 5 of 44
would no longer defend or indemnify it in the action because it
allegedly
had
failed
to
provide
possibility of a claim.
timely
notification
of
the
Obviously, Baylor & Jackson disagreed
with MLM’s conclusion on this point, and the dispute we address
here was born.
declaratory
Each party petitioned the district court for a
judgment
in
its
favor,
and
on
cross-motions
summary judgment, the court ruled for MLM.
for
For the reasons
outlined below, we affirm.
I.
Four
lawsuits
are
in
play
here:
(1)
the
Underlying
Defendants’ litigation with the federal government for breach of
contract,
(2)
Robbins’s
Defendants
also
regarding,
litigation
among
with
other
the
Underlying
things,
breach
of
contract, (3) the Underlying Defendants’ litigation with Baylor
&
Jackson
for
legal
malpractice,
and
(4)
Baylor
&
Jackson’s
litigation with MLM for disclaiming coverage in the Underlying
Defendants’ malpractice action.
Below, we provide the relevant
facts from each suit.
A.
In
1999,
the
Underlying
Defendants
sued
the
federal
government for breach of contract, and although they ultimately
4
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 6 of 44
prevailed, they did not do so without the financial assistance
of Robbins, at that time a friend of Thomas.
Thomas and Robbins entered into several agreements related
to the funding of the litigation:
(1) On July 22, 1998, they
agreed that Thomas would repay Robbins $75,000 for every $25,000
he supplied as personal expense money, provided the litigation
was successful (3:1 Agreement); (2) on December 16, 1998, they
agreed that Robbins would finance the cost of the litigation;
(3) on November 11, 1999, they agreed that Robbins would pay the
legal
fees
associated
with
litigating
and/or
settling
the
government claims and that, for doing so, he would receive onesixth of the first $21 million obtained against the government
(Cooperation Agreement); (4) on May 1, 2001, Robbins agreed that
if Thomas provided an accounting that showed he had repaid all
of
the
out-of-pocket
expenses
that
Robbins
had
incurred,
he
would give Thomas a fifty-percent discount on Thomas’s repayment
of the attorneys’ fees (Private Legal Side Agreement); and (5)
on
May
20,
2002,
Thomas
promised
to
pay
Robbins
a
$600,000
consulting fee for his advice related to the litigation (May
2002 Contract).
Between December 16, 1998, and February 20, 2004, the legal
fees associated with the litigation totaled almost $1 million.
In February 2004, Thomas’s accountant prepared a report showing
the amount that Thomas owed Robbins.
5
The report erroneously
Appeal: 12-1581
Doc: 41
deducted
Filed: 06/28/2013
nearly
$200,000
consulting fee.
and
Pg: 7 of 44
failed
to
include
the
$600,000
Robbins objected to the figures and immediately
retained counsel.
B.
In
2005,
Robbins
sued
the
Underlying
Defendants
in
Baltimore City Circuit Court, alleging breach of the Cooperation
Agreement,
entitlement
to
declaratory
relief,
breach
of
fiduciary duty, breach of the 3:1 Agreement, and breach of the
May 2002 Contract.
Baylor & Jackson entered the case in 2006.
On July 27, 2006, Robbins moved for summary judgment on the
following claims: (1) breach of the Cooperation Agreement, (2)
breach of fiduciary duty, (3) breach of the 3:1 Agreement, and
(4) breach of the May 2002 Contract.
filed
their
opposition
to
the
The Underlying Defendants
motion,
and
Robbins
replied.
Following a motions hearing, on August 22, 2006, the Baltimore
City
Circuit
awarded
$199,995
Court
$1,844,913
for
breach
granted
for
of
summary
breach
the
of
3:1
breach of the May 2002 Contract.
breach,
it
granted
judgment
to
judgment
the
to
Robbins.
Cooperation
Agreement,
and
It
Agreement,
$600,000
for
Regarding the fiduciary duty
Robbins
but
awarded
only
attorneys’ fees for his pursuit of the claim.
The import of Thomas’s litigation with Robbins lies in some
of the reasons that the circuit court granted summary judgment.
6
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 8 of 44
Obviously, the court concluded that no genuine issue of material
fact precluded judgment as a matter of law.
arrive
failed
at
that
to
conclusion
adequately
in
part
support
because
the
But it was able to
Baylor
Underlying
&
Jackson
Defendants’
opposition to Robbins’s motion.
For example, attempting to demonstrate that an issue of
material fact existed regarding the Cooperation Agreement, the
Underlying Defendants claimed the Agreement was invalid because
“it was not signed by the original designated Fund Manager.”
Robbins v. Thomas, No. 24-C-05-006855, slip op. at 6 (Balt. City
Cir. Ct. Aug. 22, 2006).
But the circuit court refused to
credit this assertion, stating, “Since Thomas submitted neither
an affidavit nor a sworn statement to support this contention,
this Court finds no basis upon which to accept his argument.”
Id.
the
Correspondence that MLM submitted to the district court in
present
action
provides
additional
details
regarding
state court’s response to Thomas’s unsubstantiated allegation:
Baylor & Jackson filed a timely opposition to the
motion for summary judgment which argued, at least in
part, that summary judgment could not be granted as a
matter of law because genuine disputes of material
fact existed. In an attempt to present those material
facts to the court, Baylor & Jackson attached an
affidavit from Mr. Thomas. However, the affidavit was
unexecuted and had been attached in that form in
error. At the hearing on August 17, 2006, the
Honorable Joseph H.H. Kaplan refused to either allow
Mr. Thomas to execute the affidavit or testify to the
contents of the affidavit despite Mr. Thomas’[s]
presence at the hearing.
7
the
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 9 of 44
Minn. Lawyers Mut. Ins. Co. v. Baylor & Jackson, PLLC, 852 F.
Supp.
2d
647,
651
n.2
(D.
Md.
2012)
(quoting
correspondence
between counsel for MLM and Baylor & Jackson).
And at the
conclusion of its discussion of the Cooperation Agreement, the
court
again
referred
Thomas’s opposition:
his
Response,
Documents,
to
the
lack
of
support
accompanying
“Although Thomas disputes various items in
this
Court
affidavits,
and
cannot
accept
as
facts.
testimony
sworn
them
in
the
record
contradict the assertions made in Thomas’s Response.”
Robbins,
No. 24-C-05-006855, slip op. at 8.
On
appeal,
the
Court
of
Special
Appeals
of
Maryland
affirmed the circuit court’s grant of summary judgment in part
and reversed and remanded in part.
slip
op.
at
(unreported).
20-21
(Md.
Relevant
Ct.
here,
Thomas v. Robbins, No. 944,
Spec.
the
App.
court
July
observed
8,
2009)
that
the
Underlying Defendants’ opposition to summary judgment “was not
supported
by
affidavits,
deposition
testimony,
interrogatory
answers, or any sworn evidence as required by Maryland Rule 2–
501,” id. at 7, and that such failure “was a proper ground upon
which the trial court could conclude that no dispute of material
fact existed,” id. at 11.
Specifically addressing the trial
court’s grant of summary judgment as to Robbins’s claims for
8
Appeal: 12-1581
breach
Doc: 41
of
Filed: 06/28/2013
fiduciary
duty,
Pg: 10 of 44
breach
of
the
3:1
Agreement,
and
breach of the May 2002 Contract, the court stated:
In granting summary judgment on Counts III [breach of
fiduciary duty] and IV [breach of 3:1 Agreement] and
the Consolidated Count [breach of May 2002 Contract],
the trial court did not expressly restate its
determination that appellants had failed to place
disputed material facts before the court by way of
sworn evidence. Normally, we “are confined to the
basis relied upon by that court and may not otherwise
explain its conclusion by introducing new legal
theories.” It is evident, however, that appellants’
failure to comply with Maryland Rule 2–501 severely
undermined their opposition to summary judgment on all
the
counts.
Consequently,
we
shall
conduct
our
analysis of whether appellee was entitled to judgment
as a matter of law on the basis of the facts as
alleged in appellee’s motion for summary judgment.
Id. at 11–12 (footnote omitted) (citation omitted).
Ultimately, the court affirmed the trial court’s judgment,
with the exception of its award of attorneys’ fees on the breach
of fiduciary duty claim.
As to that matter, it reversed and
remanded the case for recalculation of the judgment.
C.
The third suit involved a legal malpractice action that the
Underlying
Defendants
instituted
in
2009
against
Baylor
&
Jackson for its failure to properly support the opposition to
summary judgment in the Robbins action.
As noted above, MLM
initially covered Baylor & Jackson under the legal malpractice
insurance
policy
that
it
had
provided
9
them,
but
later,
it
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
reversed course.
Pg: 11 of 44
It was then that the fourth suit, and the one
we address here, commenced.
The legal malpractice policy that MLM provided to Baylor &
Jackson promised the following:
WE will pay all sums up to the limit of OUR liability,
which the INSURED may be legally obligated to pay as
DAMAGES due to any CLAIM:
(1)
arising out of any act, error or omission of the
INSURED or a person for whose acts the INSURED is
legally responsible; and
(2)
resulting from the rendering or failing to render
PROFESSIONAL
SERVICES
while
engaged
in
the
private practice of law or from rendering or
failing to render PROFESSIONAL SERVICES as a PART
TIME EMPLOYED ATTORNEY OF A GOVERNMENTAL BODY,
SUBDIVISION OR AGENCY.
The policy also gave MLM “the exclusive right to investigate,
negotiate
and
defend
CLAIMS
seeking
DAMAGES
against
the
INSURED.”
MLM first contracted with Baylor & Jackson in 2003.
The policy had a term of one year, and Baylor & Jackson renewed
yearly until 2010.
As noted above, the issue in this case is whether Baylor &
Jackson provided timely notification to MLM of the possibility
of a malpractice claim.
Baylor & Jackson first contacted MLM on
July 9, 2009, when it received the Court of Special Appeals’
opinion.
2009.
Thomas brought his malpractice claim on August 11,
MLM contends that Baylor & Jackson should have contacted
the insurance company in 2006, when the circuit court issued its
10
Appeal: 12-1581
Doc: 41
opinion.
“first
Filed: 06/28/2013
Pg: 12 of 44
It was then, MLM maintains, that Baylor & Jackson
became
aware
of
facts
which
could
have
reasonably
supported the claim asserted against it by Mr. Thomas.”
Upon
notifying
Baylor
&
Jackson
that
MLM
would
not
represent it, MLM filed an action in the United States District
Court
for
judgment
the
that
District
it
had
of
“no
Maryland,
contractual
seeking
a
obligation,
declaratory
under
its
insurance policy, to defend and/or indemnify Baylor & Jackson,
Baylor, and/or Jackson . . . in the case of Thomas v. Baylor,
Case
No.
seeking
24-C-09-005000.”
a
declaratory
Baylor
judgment
&
that
Jackson
(1)
counterclaimed,
“Baylor
&
Jackson
provided timely notice to MLM of the possibility of a claim
against it,” (2) “MLM did not suffer any actual prejudice as a
result of Baylor & Jackson’s alleged delay in providing notice,”
(3) “MLM is estopped from denying coverage,” and (4) “MLM is
obligated to cover Baylor & Jackson’s settlement with the Thomas
Defendants in the amount of $850,000.”
summary judgment.
Both parties moved for
Reasoning that Baylor & Jackson failed to
provide timely notice to MLM of the possibility a claim and that
MLM did not need to show actual prejudice, the district court
granted MLM’s motion and denied Baylor & Jackson’s motion.
11
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 13 of 44
II.
“We review the grant of summary judgment de novo, asking
whether,
[Baylor
viewing
&
the
Jackson],
facts
there
in
is
the
no
light
genuine
most
favorable
dispute
as
to
to
any
material fact and [MLM] is entitled to judgment as a matter of
law.”
Lansdowne
on
the
Potomac
Homeowners
Ass’n,
Inc.
v.
OpenBand at Lansdowne, LLC., No. 12-1925, 2013 WL 1364274, *4
(4th Cir. Apr. 5, 2013).
Because we sit in diversity in this
case, we apply Maryland law.
See 28 U.S.C. § 1652.
Baylor & Jackson assert that the district court erred in
determining that MLM had no obligation to provide it coverage
because (1) it timely reported the possibility of a claim to MLM
and (2) even if it did not, MLM failed to show that it suffered
actual prejudice as a result.
A.
The policy that MLM provided to Appellants includes the
following stipulations regarding notice of claims:
A CLAIM is covered only if made during the POLICY
PERIOD or extended reporting period and reported to
US:
(1)
during the POLICY PERIOD;
(2)
within 60
PERIOD; or
(3)
during the extended reporting period.
days
after
12
the
end
of
the
POLICY
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 14 of 44
The act, error or omission giving rise to the CLAIM
must have occurred:
(1)
during the POLICY PERIOD; or
(2)
prior to the POLICY PERIOD and on or after the
PRIOR ACTS RETROACTIVE DATE, if the INSURED had
no knowledge of facts which could reasonably
support a claim at the effective date of this
policy.
A CLAIM is deemed made when:
(1)
a demand is communicated to the
DAMAGES or PROFESSIONAL SERVICES;
(2)
a lawsuit is
DAMAGES; or
(3)
an act, error or omission by any INSURED occurs
which has not resulted in a demand for DAMAGES
but which an INSURED knows or reasonably should
know, would support such a demand.
served
upon
the
INSURED
INSURED
for
seeking
We will not provide coverage for any CLAIM arising out
of the same, related or continuing PROFESSIONAL
SERVICES which resulted in a CLAIM prior to the first
policy issued to the INSURED by US.
. . . .
“CLAIM(S)” means:
(1)
A demand communicated to the INSURED for DAMAGES
or PROFESSIONAL SERVICES;
(2)
A
lawsuit
DAMAGES; or
(3)
An act, error or omission by any INSURED which
has not resulted in a demand for DAMAGES but
which an INSURED knows or reasonably should know,
would support such a demand.
served
upon
. . . .
13
the
INSURED
seeking
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 15 of 44
“POLICY PERIOD” means the period from the effective
date of this policy to the expiration date or earlier
termination date of this policy. POLICY PERIOD does
not include any extended reporting period.
B.
First, Baylor & Jackson avers that it timely reported the
possibility
policy,
a
of
a
claim
claim
is
to
MLM.
As
noted
deemed
made
when
at
above,
least
per
MLM’s
of
three
one
circumstances occurs:
(1)
a demand is communicated to the
DAMAGES or PROFESSIONAL SERVICES;
(2)
a lawsuit is
DAMAGES; or
(3)
an act, error or omission by any INSURED occurs
which has not resulted in a demand for DAMAGES
but which an INSURED knows or reasonably should
know, would support such a demand.
served
upon
the
INSURED
INSURED
for
seeking
And for a claim to qualify for coverage, it must have occurred
during the policy period or within a certain time prior to the
policy period, provided that the insured “had no knowledge of
facts which could reasonably support a claim” at the time the
policy took effect.
Because
Baylor
&
Jackson
first
contracted
with
MLM
for
coverage in 2003 and then renewed its coverage each year until
2010, the operative question is whether via the Baltimore City
Circuit
Court’s
2006
opinion
granting
summary
judgment
to
Robbins, Baylor & Jackson “kn[ew] or reasonably should [have]
14
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 16 of 44
know[n]” that it had committed “an act, error or omission” that
“would
support . . . a
demand”
for
damages.
If
the
opinion
provided such notice, Baylor & Jackson was obligated to report
the possibility of a claim to MLM in 2006.
If not, and its
first notice of a potential demand for damages came in 2009,
when the Court of Special Appeals affirmed the circuit court,
then the contact it made with MLM in 2009 was timely.
In Maryland, an insured’s obligation to notify his insurer
of a potential claim “accrues when the [insured has knowledge
of]
circumstances . . .
[that]
would . . . suggest[]
reasonable person the possibility of a claim.”
to
a
Commercial Union
Ins. Co. v. Porter Hayden Co., 698 A.2d 1167, 1194 (Md. Ct.
Spec. App. 1997).
We believe that Baylor & Jackson had such
knowledge when the circuit court issued its decision on August
22, 2006.
First,
the
specifics
of
opposing
motions
judgment are outlined clearly in Maryland’s Rules.
for
summary
Rule 2-501
states,
A response to a written motion for summary
judgment shall be in writing and shall (1) identify
with particularity each material fact as to which it
is contended that there is a genuine dispute and (2)
as to each such fact, identify and attach the relevant
portion of the specific document, discovery response,
transcript of testimony (by page and line), or other
statement under oath that demonstrates the dispute. A
response asserting the existence of a material fact or
controverting any fact contained in the record shall
15
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
be supported by an
statement under oath.
Md. R. Ct. 2-501(b).
Pg: 17 of 44
affidavit
or
other
written
Moreover, as to affidavits, the Rules
provide that they “shall be made upon personal knowledge, shall
set forth such facts as would be admissible in evidence, and
shall
show
affirmatively
that
the
testify to the matters stated.”
affiant
is
Id. 2-501(c).
competent
to
We think it safe
to assume that any reasonable lawyer practicing in Maryland has
knowledge
of
these
rules.
In
fact,
we
cannot
countenance
otherwise.
Assuming, then, that Baylor & Jackson was aware of these
rules, we can accurately term its attempt to oppose Robbins’s
motion with an unexecuted affidavit as rather lax.
Indeed, it
should have registered no surprise when, at the motions hearing,
the circuit court refused to credit the affidavit, allow Baylor
& Jackson to execute it on the spot, or hear live testimony from
Thomas.
Of course, the events at the hearing foreshadowed the
court’s ultimate grant of summary judgment to Robbins, but they
also
highlight
the
role
that
Baylor
&
Jackson’s
failure
to
adequately represent Thomas played in the court’s decision.
If
Baylor
to
&
Jackson
left
the
hearing
with
any
confusion
as
whether its representation was acceptable, the circuit court’s
opinion should have provided clarity.
Indeed, we think that
upon receipt of the opinion, “a reasonable [lawyer],” especially
16
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 18 of 44
one who had been present at the summary judgment motion hearing,
would
have
claim.”
opinion
considered
“the
possibility
of
a
[malpractice]
Commercial Union Ins. Co., 698 A.2d at 1194.
from
the
Maryland
Court
of
Special
Appeals
The 2009
may
have
further solidified this possibility, but it hardly provided the
first inkling that Baylor & Jackson had committed an omission
that would support a demand for damages.
Thus, we conclude that
the district court properly held that Baylor & Jackson failed to
timely notify MLM of the possibility of a claim.
Baylor & Jackson makes much of the fact that the circuit
court’s decision was based on “numerous alternative grounds,”
while the Court of Special Appeals decision “rested squarely on
the alleged lack of an affidavit.”
It contends that “[b]ecause
the Circuit Court made it clear that . . . the Thomas Defendants
would
have
lost
the
case
irrespective
of
whether
Baylor
&
Jackson submitted an affidavit, there was no reason for the firm
to
expect
that
malpractice.”
Baylor
&
its
But
Jackson
clients
as
has
the
a
would
district
misplaced
bring
court
focus.
an
action
aptly
The
for
recognized,
issue
is
not
whether its failure provided the only reason for the circuit
court’s judgment, but rather whether it provided any reason for
the
judgment.
believe
that
Obviously,
Baylor
&
it
did.
Jackson
17
had
And
because
adequate
it
notice
did,
we
of
the
Appeal: 12-1581
Doc: 41
possibility
Filed: 06/28/2013
of
a
malpractice
Pg: 19 of 44
claim
such
that
it
should
have
contacted MLM.
C.
Next, Baylor & Jackson avers that even if its notice was
untimely, MLM was still obligated to provide coverage because it
did
not
Baylor
suffer
&
actual
Jackson
prejudice
correctly
from
the
recognizes
untimely
that
notice.
Maryland
law
sometimes requires insurers to demonstrate actual prejudice:
An insurer may disclaim coverage on a liability
insurance policy on the ground that the insured or a
person claiming the benefits of the policy through the
insured has breached the policy by failing to
cooperate with the insurer or by not giving the
insurer
required
notice
only
if
the
insurer
establishes by a preponderance of the evidence that
the lack of cooperation or notice has resulted in
actual prejudice to the insurer.
Md.
Code
Ann.,
Ins.
§ 19-110.
But
as
the
district
court
recognized, the circumstances under which insurers are required
to provide such demonstration depends on the language of the
policy at issue.
110
is
The district court concluded that section 19-
inapplicable
to
the
policy
MLM
provided
Jackson, but we decline to reach the issue.
our
decision
to
a
determination
demonstrated actual prejudice.
of
to
Baylor
&
Instead, we confine
whether
MLM
sufficiently
If it did, we may affirm the
district court’s judgment on that basis, without determining the
applicability of section 19-110 to MLM’s policy.
18
Appeal: 12-1581
Doc: 41
As
noted
Filed: 06/28/2013
above,
Pg: 20 of 44
section 19-110
requires
that
an
insurer
establish actual prejudice by a preponderance of the evidence.
A preponderance of the evidence is “superior evidentiary weight
that, though not sufficient to free the mind wholly from all
reasonable
doubt,
is
still
sufficient
to
incline
a
fair
and
impartial mind to one side of the issue rather than the other.”
Black’s Law Dictionary 1301 (9th ed. 2009).
We think that MLM
made such a showing.
We note first that MLM’s 2006 policy states, “WE have the
exclusive
seeking
right
to
DAMAGES
investigate,
against
provides coverage.”
the
negotiate
INSURED
and
for
defend
which
the
CLAIMS
policy
Thus, MLM had not only agreed to “pay all
sums up to the limit of [its] liability, which the INSURED may
be legally obligated to pay,” it had also obligated itself to
“investigate, negotiate and defend” such claims.
Baylor
&
Jackson
failed,
potential
claim
court’s
hindered
duties.
By the time Baylor & Jackson contacted MLM, Maryland’s
Special
a
circuit
failure
MLM’s
that
the
to
of
MLM
receiving
opinion,
Court
notify
upon
Thus, when
ability
Appeals
had
to
already
court’s grant of summary judgment.
options.
fulfill
existed,
its
affirmed
such
contractual
the
circuit
At that point, MLM had few
In its brief, MLM maintains that Baylor & Jackson’s
untimely notice was prejudicial because it “prevented [MLM] from
advising Baylor & Jackson to file a motion for reconsideration,
19
Appeal: 12-1581
Doc: 41
assisting
Filed: 06/28/2013
&
crafting
Baylor
Pg: 21 of 44
Jackson
in
motion, and/or assisting in the appeal.”
arguments
We agree.
for
that
See Prince
George’s Cnty. v. Local Gov’t Ins. Trust, 879 A.2d 81, 97 (Md.
2005) (“The case for finding prejudice as a matter of law is
strongest
for
primary
insurers
who
receive
notice
after
a
judgment because the late notice deprives the primary insurers
of
their
right
to
control
settlement of claims.”).
the
investigation,
defense,
and
Contrary to the suggestion that MLM’s
proffer of what it could have done is “speculative” and lacking
in concreteness as to allegations of “actual harm,” ante, at 37,
we are unsure what additional proof of actual harm MLM could
offer.
harm
By the time MLM received notice of a possible claim, the
supporting
the
malpractice
judgment
was
irreversible.
Thus, in spite of the allegation that “MLM had the opportunity
to mitigate the potential malpractice claim before it was even
filed,”
id.,
such
an
opportunity
seems
purely
theoretical.
MLM’s real mitigation opportunity came and went during the time
that Baylor & Jackson knew about the possibility of a claim and
remained silent.
And because Baylor & Jackson remained silent,
MLM can speak only to how it could have helped.
That MLM was
denied its true mitigation opportunity is proof enough of actual
harm.
We decline to levy a more stringent requirement under
these facts.Accordingly, we affirm the district court’s grant of
summary judgment to MLM.
20
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 22 of 44
III.
In sum, we affirm the district court’s grant of summary
judgment to MLM, holding that (1) Baylor & Jackson failed to
provide MLM with timely notice of a potential claim and (2) MLM
demonstrated
actual
prejudice
such
that
if
section 19-110
applies, MLM’s disclaimer of coverage comported with Maryland
law.
AFFIRMED
21
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 23 of 44
THACKER, Circuit Judge, dissenting:
The
majority
concludes
that
even
if
Maryland
law
required the insurer, Minnesota Lawyers Mutual Insurance Company
(“MLM”), to demonstrate actual prejudice in order to disclaim
coverage of a malpractice claim untimely noticed by Baylor &
Jackson, MLM has done so such that it may properly disclaim
coverage.
With respect, I cannot join the majority opinion.
In
my
view,
the
district
Maryland law in two crucial respects.
court
erroneously
applied
First, the district court
incorrectly concluded that Maryland Code Ann., Insurance § 19110
did
not
apply
to
require
MLM
to
prove
it
prejudiced by Baylor & Jackson’s untimely notice.
central question addressed by the district court.
was
actually
This was the
Only in a
cursory footnote did the district court predict that even if the
statute applied to require MLM to show prejudice, it could have
“easily” done so.
Minn. Lawyers Mut. Ins. Co. v. Baylor &
Jackson, PLLC, 852 F. Supp. 2d 647, 662 n.8 (D. Md. 2012).
is
on
Because
this
slender
I
conclude
reed
that
that
the
the
majority
district
decision
court
It
rests.
erroneously
interpreted Maryland insurance law, both with respect to whether
the
actual
prejudice
requirement
applies
and
ultimately satisfied, I respectfully dissent.
22
whether
it
was
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 24 of 44
I.
The relevant facts are largely undisputed.
In March
2006, Dawn Jackson of Baylor & Jackson initiated representation
of certain defendants in a contract action in Maryland state
court (the “Underlying Litigation”).
When the plaintiffs in the
Underlying Litigation moved for summary judgment on July 27,
2006,
Baylor
unsupported
&
Jackson
responded
allegations
where
on
August
disputed
11,
material
2006,
with
facts
were
available and not presented and were required pursuant to the
Maryland rules of civil procedure to support their position.
The trial court promptly granted summary judgment against the
firm’s
clients
Maryland
Court
on
August
of
Special
22,
2006.
Appeals
See
ante
affirmed
on
at
5-7.
July
The
8,
2009,
relying in large part on Baylor & Jackson’s conspicuous failure
to present material facts sufficient to defeat summary judgment.
Id. at 7 (observing that the underlying defendants’ opposition
to
summary
deposition
judgment
testimony,
“‘was
not
interrogatory
supported
answers,
by
or
affidavits,
any
sworn
evidence as required by Maryland Rule 2–501’” (quoting Thomas v.
Robbins, No. 944, slip op. at 20-21 (Md. Ct. Spec. App. July 8,
2009) (unreported))).
On the same day the appeals court issued its decision,
July 8, 2009, Baylor & Jackson notified its malpractice carrier,
MLM, of the potential for a claim.
23
The firm’s former clients
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 25 of 44
then filed a malpractice action against the firm over a month
later, on August 11, 2009.
True to its word, MLM defended
Baylor & Jackson for over a year, until it abruptly disclaimed
coverage
on
October
1,
2010.
At
the
time
MLM
disclaimed,
mediation in the malpractice case had been scheduled just two
weeks later on October 11, 2010, with trial scheduled to start
December 6, 2010.
MLM
filed
this
declaratory
action
on
September
29,
2010, in the United States District Court for the District of
Maryland.
On cross motions for summary judgment, the district
court granted judgment to MLM.
See Minn. Lawyers Mut. Ins. Co.
v. Baylor & Jackson, PLLC, 852 F. Supp. 2d 647 (D. Md. 2012).
This appeal followed.
II.
A.
The Untimely Notice of a Claim
As
below,
Baylor
&
Jackson
vigorously
disputes
the
date on which its malpractice claim was deemed “made” under the
terms of its policy with MLM. 1
1
In the firm’s view, the claim was
The relevant policy language provides as follows:
A CLAIM is deemed made when:
(1) a demand is communicated to the INSURED for DAMAGES or
PROFESSIONAL SERVICES;
(Continued)
24
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 26 of 44
not made until the Maryland appeals court issued its decision on
July 8, 2009.
Using that date as a reference, its claim to the
insurer would have been timely under the policy then in force.
Like the district court and the majority here, I agree that a
claim was “made” in this case when Baylor & Jackson filed an
unsupported
response
August 11, 2006.
or
reasonably
devoid
of
to
the
motion
See ante at 13-16.
should
sufficient
[have]
for
judgment
on
That is, the firm “kn[ew]
know[n]”
material
summary
facts,
that
where
filing
such
available, “would support” a demand for damages.
a
response
facts
J.A. 275.
were
MLM
suggests that Baylor & Jackson should have known on August 22,
2006, the date on which the state trial court granted summary
judgment, though use of this latter date makes no difference:
either way, the claim was made while the 2006 policy governed.
Because I agree that the claim was made on August 11, 2006, the
2006 policy applies.
(2) a lawsuit is served upon the INSURED seeking DAMAGES;
or
(3) an act, error or omission by any INSURED occurs which
has not resulted in a demand for DAMAGES but which an
INSURED knows or reasonably should know, would support
such a demand.
J.A. 275.
Citations to the “J.A.” refer to the Joint Appendix
filed by the parties in this appeal.
25
Appeal: 12-1581
Doc: 41
The
Filed: 06/28/2013
2006
August 1, 2007.
covered
only
if
policy
was
Pg: 27 of 44
effective
August
1,
2006,
to
Under the terms of the policy, a claim is
made
and
reported
during
the
policy
period,
within 60 days after the end of the policy period, or during the
extended reporting period. 2
Although the claim was “made” during
the period, that is, on August 11, 2006, it was not reported
until July 8, 2009.
Accordingly, Baylor & Jackson’s notice was
untimely.
B.
Maryland’s Prejudice Requirement
As below, Baylor & Jackson alternatively argues that
even
if
its
notice
of
the
claim
was
untimely,
Maryland
law
requires MLM to prove it was actually prejudiced by the untimely
notice before it may lawfully disclaim coverage.
Ann., Ins. § 19-110.
See Md. Code
MLM responds that § 19-110 does not apply
such that they need make no showing of actual prejudice in order
to disclaim.
Addressing this central question, the district
court concluded the statute did not apply, thus relieving MLM
from its need to show actual prejudice by a preponderance of the
evidence.
The
majority
assumes
2
without
deciding
that
the
The policy at issue is a “claims-made”-type policy, to be
distinguished from an “occurrence”-type policy.
See Sherwood
Brands, Inc. v. Great Am. Ins. Co., 13 A.3d 1268, 1277-78 (Md.
2011) (explaining the difference between occurrence and claimsmade policies).
26
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 28 of 44
statute applies because, in their view, MLM established actual
prejudice in either event.
See ante at 17-18.
Because I do not
agree that actual prejudice was shown, I must first determine
whether the statute applies before reaching the latter question.
1.
Section 19-110: Disclaimers of Coverage on Liability Policies
Section 19-110 regulates the circumstances in which an
insurer may disclaim coverage on a liability insurance policy in
Maryland.
It states as follows:
An insurer may disclaim coverage on a liability
insurance policy on the ground that the insured or a
person claiming the benefits of the policy through the
insured has breached the policy by failing to
cooperate with the insurer or by not giving the
insurer
required
notice
only
if
the
insurer
establishes by a preponderance of the evidence that
the lack of cooperation or notice has resulted in
actual prejudice to the insurer.
Md. Code Ann., Ins. § 19-110.
The statute was most recently
interpreted in Sherwood Brands, Inc. v. Great American Insurance
Co., 13 A.3d 1268 (Md. 2011).
The district court relied on
Sherwood Brands and T.H.E. Insurance Co. v. P.T.P. Inc., 628
A.2d 223 (Md. 1993), in determining that the statute did not
apply.
Contrary to the district court’s reasoning, however,
Sherwood Brands makes clear that the statute applies in this
case to require MLM establish actual prejudice before it can
properly disclaim coverage.
27
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 29 of 44
In Sherwood Brands, 13 A.3d at 1270, Great American
had issued to Sherwood, a manufacturing company, a series of
annual
policies
providing
liability
insurance.
The
relevant
policy term was effective May 1, 2007, to May 1, 2008.
December
11,
2007,
Massachusetts
asserting
other
of
complaints.
against
Against
contract,
filed
with
Discrimination
wrongful
a
termination,
He
also
filed
a
state
court
on
March
28,
Id.
its
subsidiaries,
the
and
1272.
and
asserting
On
claim
at
Sherwood
Id.
employee
Massachusetts
in
theories.
former
Commission
breach
complaint
a
Id.
many
related
2008,
similar
Both the agency proceeding and the Massachusetts
state court proceeding were filed and served on Sherwood during
the pendency of the 2007–08 policy.
Id.
Sherwood did not
notify Great American of the claim until October 27, 2008, a
date conceded to be after the end of the policy period.
1271–72.
Id. at
Great American denied coverage because the notice was
untimely.
Id. at 1272.
During the subsequent coverage suit,
the
court
summary
trial
granted
judgment
to
Great
American,
concluding the untimely notice justified the disclaimer and the
insurer was not required to demonstrate prejudice resulting from
Sherwood’s late notice.
Id. at 1273-74.
The Maryland Court of
Appeals vacated the trial court’s judgment and held that § 19110
applied
to
the
policy
and,
28
therefore,
the
insurer
was
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 30 of 44
required to show it was actually prejudiced by Sherwood’s late
notice before disclaiming coverage.
Id. at 1270.
Sherwood Brands began its discussion by engaging in a
historical
Maryland.
exploration
This
of
included
the
development
several
key
cases
of
§
and
19-110
in
legislative
amendments to the state code which shaped Maryland’s noticeprejudice jurisprudence, as well as an explanation of the types
of policies implicated by § 19-110. 3
than
simply
join
most
See id. at 1277-79.
jurisdictions
by
concluding
Rather
that
the
prejudice requirement does not apply to “reporting-type” claimsmade
policies,
the
court
recognized
that
Maryland’s
statute,
§ 19-110, softens the harsh result (a forfeiture) that would
follow from the late notice of an insurance claim.
See Sherwood
Brands, 13 A.3d at 1277 (“Although the policy may speak of the
notice provision in terms of ‘condition precedent,’ . . . .
nonetheless what is involved is a forfeiture, for the carrier
seeks, on account of a breach of that provision, to deny the
insured the very thing paid for. . . .
Thus viewed, it becomes
unreasonable to read the provision unrealistically or to find
that the carrier may forfeit the coverage, even though there is
no likelihood that it was prejudiced by the breach.” (internal
3
In 1996, the Legislature recodified former § 482 to
Maryland Code (1997, 2006 Repl. Vol.), Insurance Article § 19–
110.
29
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
quotation marks omitted)).
Pg: 31 of 44
In view of these principles, the
court concluded that § 19-110’s prejudice requirement may apply
to a reporting-type claims-made policy. 4
See id. at 1284-85
(footnotes omitted).
Sherwood Brands turned next to the text and policies
underlying § 19-110, explaining as follows:
Section 19–110 begins by stating that “[a]n insurer
may disclaim coverage . . . on the ground that the
insured . . . has breached the policy . . . .”
Accordingly, in order for § 19–110 to be in play, the
insured must breach the insurance policy “by failing
to cooperate with the insurer or by not giving the
insurer required notice.” See House, 315 Md. at 355,
554 A.2d at 417 (stating that, because the statute
requires the insured to have “breached the policy,”
the
statute
only “potentially
applies
to
‘any’
liability insurer or policy”) (emphasis in original).
Central to whether § 19–110 applies to require Great
American to show that it was prejudiced by Sherwood’s
late-delivered notice is determining whether, in
giving Great American notice more than ninety days
after the expiration date of the 2007–08 Policy,
Sherwood “breached the policy.”
If the notice
provisions of the 2007–08 Policy are “conditions
precedent” to coverage, then Sherwood does not “breach
the policy” by failing to obey the notice provisions;
the nonoccurrence of a condition precedent does not
constitute a breach, it merely relieves the other
party from performing under the contract/policy.
On
the other hand, if the notice provisions are deemed
4
This conclusion directly conflicts with the common law of
many states. See Sherwood Brands, 13 A.3d at 1282-83. Notably,
the court also explicitly acknowledged that two decisions of the
United States District Court for the District of Maryland and
one unpublished decision of our court erroneously applied
Maryland law by concluding that reporting-type claims-made
policies are not subject to the actual prejudice requirement of
§19-110. See id. We should not compound those errors here.
30
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 32 of 44
covenants, Sherwood’s failure to give Great American
notice no later than ninety days after the expiration
date of the 2007–08 Policy would constitute a “breach
of the policy,” such that § 19–110 would apply to
require Great American to show that it was prejudiced
by Sherwood’s late-delivered notice.
Id. at 1286 (emphasis in original and citation omitted).
court
further
expressly
explained
denotes
the
that
even
notice
if
the
requirement
policy
as
a
The
language
“condition
precedent” to coverage, “the purpose and effect” of § 19–110
“mandates that the notice provisions of the Policy be treated as
covenants, not conditions.”
Id. at 1286-87.
The court concluded as follows:
We hold that § 19–110 does not apply, as was the case
in T.H.E., to claims-made policies in which the act
triggering coverage -- usually notice of a claim or
suit being filed against and served upon an insured
under third-party liability policies -- does not occur
until after the expiration of the liability policy, as
this non-occurrence of the condition precedent to
coverage is not a “breach of the policy,” as required
by the statute. On the other hand, we hold that § 19–
110 does apply, as is the case at present, to claimsmade policies in which the act triggering coverage
occurs during the policy period, but the insured does
not
comply
strictly
with
the
policy’s
notice
provisions. In the latter situation, § 19–110 mandates
that notice provisions be treated as covenants, such
that failure to abide by them constitutes a breach of
the policy sufficient for the statute to require the
disclaiming insurer to prove prejudice.
Id. at 1288 (emphasis supplied).
latter scenario.
31
In this case, we face the
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 33 of 44
2.
Application of § 19-110 and Sherwood Brands
In view of Sherwood Brands, the key question we must
ask in order to determine if § 19-110 applies is when did the
act
triggering
coverage
occur?
If
it
occurred
after
the
expiration of the liability policy, as was the case in T.H.E.,
there is simply no policy which the insured can breach when it
fails to notify the insurer of the claim.
Since there’s no
policy, there’s no breach, and the express terms of § 19-110 do
not apply.
On the other hand, if the act triggering coverage
occurred during the policy term, but where the insured fails to
notify the insurer according to the policy’s requirements, the
notice requirement is a covenant that is breached, allowing the
insurer
to
prejudice.
disclaim
coverage
only
if
it
can
show
actual
In this case, we look to the policy language to
determine when the act triggering coverage occurred.
The policy
states:
A CLAIM is deemed made when:
(1)
a demand is communicated to the
DAMAGES or PROFESSIONAL SERVICES;
(2)
a lawsuit is
DAMAGES; or
served
upon
the
INSURED
INSURED
for
seeking
(3) an act, error or omission by any INSURED occurs which
has not resulted in a demand for DAMAGES but which an
INSURED knows or reasonably should know, would support
such a demand.
32
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 34 of 44
J.A. 275.
Neither of the first two options apply here.
the
act
Indeed,
triggering
MLM
reasonably
itself
should
coverage
in
contends
have
this
that
known
case
Baylor
that
their
is
&
Instead,
subsection
Jackson
failure
(3).
knew
to
or
supply
evidence in opposition to a motion for summary judgment would
support a demand for damages.
That date, as suggested by MLM,
is either the date on which Baylor & Jackson filed their summary
judgment
response,
August
11,
2006,
or
when
granted summary judgment, August 22, 2006.
the
trial
court
Whichever the date,
both clearly fall within the policy term for the 2006 Policy,
which was effective August 1, 2006, to August 1, 2007.
Because
the act triggering coverage in this case occurred during the
relevant policy term, the notice provision of the policy is a
covenant, not a condition precedent, and thus § 19-110 applies.
See Sherwood Brands, 13 A.3d at 1288 (“[W]e hold that § 19–110
does apply, as is the case at present, to claims-made policies
in which the act triggering coverage occurs during the policy
period,
but
the
insured
does
not
comply
strictly
with
the
policy’s notice provisions.”). 5
5
In holding otherwise, the district court simply stated
that the policy at issue here is more like the one in T.H.E.,
and emphasized the fact that the policy language in this case
makes the notice requirement a condition for coverage.
But as
Sherwood Brands makes clear, Maryland law does not care how the
(Continued)
33
Appeal: 12-1581
Doc: 41
MLM
Filed: 06/28/2013
must
Pg: 35 of 44
therefore
establish
it
was
actually
prejudiced by the untimely notice in order to properly disclaim
coverage.
3.
Proof of Actual Prejudice
a.
Burden on the Insurer
MLM
has
not
demonstrated
actual
prejudice
by
a
preponderance of the evidence as required by § 19-110, offering
only speculation as to what it would have done had notice been
timely.
“The
prejudice.”
insurer
bears
the
burden
of
proof
to
show
Prince George’s Cnty v. Local Gov’t Ins. Trust, 879
A.2d 81, 97 (Md. 2005) (citing Md. Code Ann., Ins. § 19-110
(insurer must establish actual prejudice “by a preponderance of
the
evidence”));
Sherwood
Brands,
Inc.
v.
Hartford
Acc.
and
Indem. Co., 698 A.2d 1078, 1083 (Md. 1997) (under § 19-110, “the
notice provision is couched when determining whether the
provision is a covenant or condition precedent; what matters is
when the act triggering coverage occurred.
If the act
triggering coverage (i.e., when the claim is “made”) occurred
during the policy period, the statutory prejudice requirement
applies.
If the act triggering coverage falls outside of the
policy term, the prejudice requirement does not apply because
there was never a policy to be breached. The district court did
not address this pivotal distinction.
34
Appeal: 12-1581
Doc: 41
insurer
Filed: 06/28/2013
must
establish
by
a
Pg: 36 of 44
preponderance
of
affirmative
evidence that the delay in giving notice has resulted in actual
prejudice to the insurer” (emphasis supplied)).
b.
More Than Mere Speculation Necessary
Critically, § 19-110 requires an insurer to prove that
it suffered actual harm:
“The requirement of ‘actual prejudice’
means that an insurer may not disclaim coverage on the basis of
prejudice that is only possible, theoretical, conjectural, or
hypothetical.”
(Md. 1996).
Gen. Acc. Ins. Co. v. Scott, 669 A.2d 773, 779
“Nor is it enough to surmise harm that may have
occurred by virtue of the passage of time; prejudice cannot be
presumed from the length of the delay.” Id.
An insurer may
properly disclaim coverage on the basis of untimely notice only
if it can prove that -- as a matter of fact -- it actually
suffered prejudice in its ability to investigate, settle, or
defend the claim.
See Sherwood Brands, 13 A.3d at 1287.
Naturally,
the
potential
for
prejudice
due
to
late
notice is greatest where “the insurer has been deprived of all
opportunity
to
defend”
the
claim
made
against
the
insured.
Prince George’s Cnty, 879 A.2d at 98 (internal quotation marks
omitted).
In fact, Maryland’s highest court has concluded that
an insurer is prejudiced as a matter of law when the insured
fails to notify the insurer of the incident, claim, and lawsuit
35
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 37 of 44
until after an adverse judgment has been entered against the
insured.
George’s
See id. at 100.
County
for
this
Indeed, the majority quotes Prince
principle,
stating
“‘The
case
for
finding prejudice as a matter of law is strongest for primary
insurers who receive notice after a judgment because the late
notice deprives the primary insurers of their right to control
the investigation, defense, and settlement of claims.’”
19 (quoting Prince George’s Cnty, 879 A.2d at 97).
However,
the
proposition
does
not
support
Ante at
True enough.
the
majority’s
conclusion in view of the facts of this case.
In
Prince
George’s
County,
the
Maryland
court
was
speaking to the malpractice judgment entered against the insured
-- not about underlying conduct by the insured giving rise to
the
lawsuit
against
it.
Indeed,
in
this
case,
the
insured
notified MLM several weeks before it was sued by its former
clients.
This is not the case of an insured who failed to
notify its insurer until after a malpractice judgment is entered
against it (the insured).
c.
Actual Harm
Regardless,
as
Maryland
case
prejudice is all about harm to the insurer.
Cnty,
879
A.2d
at
95
(“If
the
insured
law
articulates,
See Prince George’s
violates
the
notice
provision without harming the interests of the insurer -- i.e.
36
Appeal: 12-1581
without
Doc: 41
Filed: 06/28/2013
prejudice
coverage.”).
--
Thus,
then
the
Pg: 38 of 44
there
question
is
is
no
not
reason
how
MLM
to
deny
could
have
helped Baylor & Jackson had notice been timely, but how was MLM
actually harmed by its inability to do so as a result of the
untimely notice.
In my view, MLM has not established by a preponderance
of
the
evidence
that
it
Jackson’s untimely notice.
was
actually
harmed
by
Baylor
&
The 2006 Policy term was in force
August 1, 2006, to August 1, 2007, and included an additional
60-day extension period.
The date on which the insured reported
the “claim” to the insurer was August 11, 2009, the same day the
appeals
court
decision
affirmed
against the firm’s clients.
a
malpractice
forthcoming.
defense
to
suit
the
summary
judgment
granted
Thus, MLM knew as of that date that
against
Baylor
&
Jackson
might
be
Indeed, once the suit was brought, MLM provided a
Baylor
&
disclaiming coverage.
Jackson
for
more
than
a
year
before
This denial of coverage took place just
weeks before a scheduled mediation conference on October 11,
2010, and only three months before trial.
It is telling that
there is no suggestion from MLM that it disclaimed coverage at
that time because they found themselves somehow harmed by the
37
Appeal: 12-1581
Doc: 41
late notice. 6
Filed: 06/28/2013
Pg: 39 of 44
MLM simply asserted (at the time) that it was
disclaiming pursuant to the terms of the Policy requiring timely
notice.
See J.A. 339.
MLM’s only argument on this issue does not address the
harm or prejudice to itself, but only to how it might have
assisted Baylor & Jackson had notice been timely, namely, that
MLM was unable to assist the firm in possible “mitigation and
remediation efforts.”
this
out,
MLM
Appellee’s Br. 38.
asserts,
“[h]ad
Baylor
&
Attempting to flesh
Jackson
given
timely
notice of the malpractice to MLM, MLM could have advised Baylor
&
Jackson
to
admit
fault
[in
a
motion
for
reconsideration],
argue that the error was through no fault of Baylor & Jackson’s
clients,
and
argue
that
Baylor
prejudice the opposing side.”
&
Jackson’s
error
did
not
Id. at 38-39 (emphasis supplied).
MLM suggests, “[s]uch an argument that an attorney’s conduct
constitutes excusable neglect has persuaded previous courts to
forgive the mistake and permit a refiling,” but notably cites to
no cases and makes no mention of its own actual injury.
70.
J.A.
This contention is speculation at best and again does not
address the issue of actual harm caused to MLM by the late
6
See Sherwood Brands, Inc. v. Hartford Acc. and Indem. Co.,
698 A.2d 1078, 1083 (Md. 1997) (observing that delay in giving
notice apparently played no material role in insurer’s decision
not to defend where insurer did not raise prospect of prejudice
until coverage suit).
38
Appeal: 12-1581
Doc: 41
notice.
Filed: 06/28/2013
Pg: 40 of 44
MLM has offered no other grounds for its contention
that it suffered actual prejudice.
The district court accepted the insurer’s argument in
a footnote, stating,
Even if MLM were required to show prejudice, it could
have easily done so by showing it had been excluded
from
the
post-summary-judgment
and
appellate
proceedings in the Robbins v. Thomas case; those were
the only opportunities MLM could have had to fashion a
request for relief. Whether it would have been
successful with such a request is immaterial to the
prejudice flowing from the lack of notice that would
have enabled it to participate meaningfully in the
litigation.
Minn. Lawyers Mut. Ins. Co. v. Baylor & Jackson, PLLC, 852 F.
Supp.
2d
647,
662
n.8
(D.
Md.
2012).
I
am
not
as
easily
persuaded as the district court, for I do not see how the above
possibilities establish actual harm as a matter of fact by a
preponderance of the evidence.
The suppositions proffered by
the district court, even if reasonable, are still speculative,
and do not speak to any harm MLM actually suffered.
The
notice
majority
“hindered
MLM’s
reasons
that
ability
Baylor
to
&
fulfill
Jackson’s
its
late
contractual
duties,” observing that by the time the appeals court issued its
opinion, “MLM had few options” by the time it received notice.
Ante
at
18.
mitigate
the
To
the
potential
contrary,
MLM
malpractice
had
claim
the
opportunity
before
it
was
to
even
filed, as it received notice of a possible claim over a month
39
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
before litigation commenced.
Pg: 41 of 44
And even thereafter, MLM defended
the case for over a year before abruptly disclaiming coverage
just as the pretrial practice reached its zenith.
Even giving
MLM the benefit of the doubt, it is far from clear that the
untimely notice left them with “few options.”
Id.
Instead, the majority rests its analysis on MLM’s mere
assertion
that
the
untimely
notice
“‘prevented
[MLM]
from
advising Baylor & Jackson to file a motion for reconsideration,
assisting
motion,
Baylor
and/or
&
Jackson
assisting
Appellee’s Br. 38).
in
in
crafting
the
arguments
appeal.’”
for
Id.
that
(quoting
But as explained above, even if we assume
MLM knew of the malpractice immediately, advised the firm to
file the motion for reconsideration, and otherwise assisted in
the
appeal,
MLM
has
presented
no
facts
showing
how
it
was
actually harmed by its inability to take these discreet steps.
The speculative nature of MLM’s claims of prejudice
stands
in
stark
contrast
to
those
Maryland
cases
where
an
insured notified its insurer of a claim so late that it had
little
or
influence
no
the
opportunity
litigation
to
participate
against
the
in
insured.
or
otherwise
See
Prince
George’s Cnty., 879 A.2d at 100 (insurer actually prejudiced
where insured “failed to notify insurer of the incident, claim,
and lawsuit until after an adverse judgment was entered” against
the insured); see id. at 94-96 (citing cases).
40
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 42 of 44
But even in a case far closer than presented by this
appeal, a Maryland appeals court did not find actual prejudice.
In General Accident Insurance Co. v. Scott, 669 A.2d 773, 775–77
(Md.
Ct.
Spec.
App.
1996),
cert.
denied,
673
A.2d
707
(Md.
1996), the insured did not notify the insurer of a claim until
29 months after the accident giving rise to the claim.
The
insurer contended that it was prejudiced by the delay because it
could not fully investigate the underlying facts, evaluate its
potential exposure, participate in the decision as to whether to
submit
the
case
to
arbitration,
high/low parameters.
Id. at 779.
Appeals
that
concluded
the
and
decide
whether
to
set
The Maryland Court of Special
insurer’s
allegations
were
insufficient to show that it suffered actual prejudice because
“conclusory
allegations
that
result
would
from
about
any
difficulties
delay
in
and
inconveniences
notification
are
not
sufficient” to create a material dispute of fact with respect to
the issue of prejudice.
Id. (emphasis in original).
I submit
that the case before us presents far fewer persuasive claims of
prejudice than in Scott, a case where no actual prejudice was
found
to
have
even
been
alleged,
much
less
proven
to
a
preponderance of the evidence.
Had MLM been actually prejudiced by the late notice, I
would
have
expected
it
to
have
41
presented
facts
before
the
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Pg: 43 of 44
district court indicating as much.
It did not there and has not
here.
Perhaps
recognizing
that
it
failed
to
prove
actual
prejudice, MLM asks us, alternatively (and tellingly), to remand
the case to give it another chance.
See Appellee’s Br. 37 (“If
this Court, however, determines that Section 19-110 does apply
to the Policy, it should remand this case to the District Court
for a determination as to whether MLM has established actual
prejudice.
While the District Court noted in a footnote that
MLM would easily be able to show actual prejudice, it did not
actually reach that issue and it did not make a full factual
finding in its Opinion.” (emphasis supplied)).
This argument
leaves the distinct impression that MLM is well-aware of the
absence of actual prejudice. 7
III.
At bottom, the purpose of a notice requirement in an
insurance policy is to protect the insurer “by affording the
insurer the opportunity to acquire full information about the
circumstances of the case, assess its rights and liabilities,
and take early control of the proceedings.”
7
Prince George’s
MLM has not articulated any sound basis for remand.
It
filed this action for a declaratory judgment and has the burden
of proof. MLM has simply failed to present any facts to satisfy
its burden.
42
Appeal: 12-1581
Doc: 41
Filed: 06/28/2013
Cnty, 879 A.2d at 95.
Pg: 44 of 44
But under Maryland law, if the insurer is
not actually harmed by the untimely notice, “then there is no
reason to deny coverage.”
Id.
The notice clause should not be
used by the insurer as a “technical escape-hatch by which to
deny
coverage
quotation
allowed
to
in
the
marks
and
so
easily
absence
citation
subvert
of
prejudice.”
Id.
omitted).
MLM
the
policy
public
(internal
should
not
be
embodied
in
Maryland’s considered legislative judgment without showing how
it was actually harmed by the untimely notice.
would reverse the judgment of the district court.
43
As a result, I
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?