CX Reinsurance Company Limited v. Camden Management Services, LLC et al

Filing 38

MEMORANDUM. Signed by Judge William M Nickerson on 10/30/14. (jnls, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

CX Reinsurance Company
Limited, f/k/a CNA
Reinsurance Company Limited
v.
Camden Management Services,
LLC, et al.
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Civil Action No. WMN-14-180

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MEMORANDUM
Before the Court is CX Reinsurance’s Motion for Judgment on
the Pleadings.

ECF No. 34.

Defendants have failed to respond

within the time allowed by the Rules and as such the motion is
ripe for review.

Upon a review of the papers, facts, and

applicable law, the Court determines that no hearing is
necessary, Local Rule 105.6, and the motion will be granted.
In 2012, Carolyn Russell filed suit in the Baltimore City
Circuit Court (Underlying Suit) on behalf of her children Hakil,
Rakeen, and Tanaya Hamilton (collectively “The Hamiltons”) to
recover for lead-based injuries incurred during their time as
tenants in various rental properties in Baltimore.

The suit was

brought against the owners of 17 North Port Street, 2022
Jefferson Street, and 401 North Ellwood Avenue, along with the
management company for 17 North Port Street, Camden Management
(Camden), and its employee, Kathy Smith (Ms. Smith).

In

relevant part, the complaint alleges that exposure to the

conditions for 17 North Port Street occurred from 1991-1998 for
Tanaya Hamilton, 1992-1998 for Hakil Hamilton, and 1996-2002 for
Rakeen Hamilton.
CX-Reinsurance (CX-Re) is the insurer for Camden and Ms.
Smith.

CX-Re brings suit requesting a declaratory judgment that

it has no duty to defend or indemnify Camden and Ms. Smith in
the Underlying Suit in state court.

Camden, Ms. Smith, and the

defendant property owners have not filed a response of any kind
in this matter.

The Hamiltons filed an Answer that contested

CX-Re’s legal conclusions but failed to address the factual
allegations as required by Fed. R. Civ. P. 8(b)(1)(B).

ECF No.

8. On May 23, 2014, CX-Re moved for Clerk’s Entry of Default as
to all Defendants.

ECF Nos. 21-25.

Default was granted against

all Defendants, including the Hamiltons.

ECF Nos. 26-30.

Upon

direction of the Court, CX-Re then filed this motion for
judgment on the pleadings.

In reviewing the motion, the Court

noted that the property in question – 17 North Port – was not
identified in the policy submitted for the Court’s review.
No. 35.

ECF

CX-Re satisfactorily provided confirmation of 17 North

Port’s coverage under the policy by affidavit supported by
documentation.

ECF No. 37.

Fed. R. Civ. P. 12(c) allows a party to move for judgment
on the pleadings “after the pleadings are closed, but early
enough not to delay trial.”

The standard for a Rule 12(c)
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motion on the pleadings is identical to the standard for summary
judgment motions when the moving party seeks affirmative relief
on the basis of the pleadings and not merely a dismissal of
claims brought against it.

Geoghegan v. Grant, 2011 WL 673779,

*3 (D. Md. Feb. 17, 2011).

Because the Court’s inquiry is

directed towards a final judgment on the merits, the Court will
only grant a judgment on the pleadings if “there is no genuine
dispute of material fact and . . . the moving party is entitled
to judgment as a matter of law.”

Fed. R. Civ. P. 56(c), Celotex

Corp. v. Catrett, 477 U.S. 317, 322 (1986).

This action is

particularly appropriate for review under a 12(c) motion, as
“motions on the pleadings can be used to obtain declaratory
judgments where the parties’ only dispute is the proper
interpretation of contractual terms.”
at *3.

Geoghegan, 2011 WL 673779

Because the defendants have failed to deny the

allegations in CX-Re’s complaint, they shall be accepted as
true.

Fed. R. Civ. P. 8(b)(6).

These facts and all reasonable

inferences will be drawn in the non-moving party’s favor.

Felty

v. Graves-Humphreys Co., 818 F.2d 1126, 1128 (4th Cir. 1987).
Finally, CX-Re included in its motion copies of the underlying
complaint and the relevant insurance policy.
3.

ECF Nos. 34-2, 34-

The Court will include these documents in its consideration.

Although extrinsic evidence is not usually considered in a 12(c)
motion, a court may consider the evidence “if it was integral to
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and explicitly relied on in the complaint.”

Am. Chiropractic

Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir.
2004) (internal quotations omitted).
At issue is whether CX-Re is obligated to defend Camden and
Ms. Smith against the Hamiltons’ claims in the pending action in
Baltimore City Circuit Court.

In determining whether CX-Re has

a duty to defend, the Court analyzes “(1) what is the coverage
and what are the defenses under the terms and requirements of
the insurance policy? (2) do the allegations of the tort action
potentially bring the tort claim within the policy’s coverage?”
St. Paul Fire & Marine Ins. Co. v. Pryseski, 438 A.2d 282, 285
(Md. 1981).

Here, the Court narrows its focus to the relevant

portions of the insurance policy establishing coverage for tort
actions against the insured and the particular exceptions for
lead paint injuries.
The insurance agreement between CX-Re, Camden, and Smith
provides broad coverage to defend suits and pay damages for
“bodily injury” that “is caused by an occurrence that takes
place in the ‘coverage territory’ and . . . occurs during the
policy period.”

ECF No. 34-3 at 12.

The policy then outlines a

coverage limitation for lead contamination injuries, proscribing
the insurance as not applying to “‘bodily injury’ . . . arising
out of the ingestion, inhalation, absorption of, or exposure to
lead, lead-paint, or other lead-based products of any kind, form
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or nature whatsoever.”

Id. at 7.

The policy finally

articulates an exception to the ban on lead-related coverage for
the defense of lead-injury suits if the “occurrence” that caused
the injury “is not before the beginning of the Policy Period”
and if the elevated lead level “is first diagnosed by a State
licensed physician . . . during the policy period.”

Id. at 8.

Combining these sections, it is apparent that the CX-Re policy
will cover lead paint injuries when the elevated lead level
occurs during the policy period and is diagnosed by a doctor.
CX-Re styles this qualified coverage as “an exemption to an
exclusion.”
In regards to whether the scope of this exemption to an
exclusion applies to the Underlying Suit, CX-Re argues that
defendants have failed to carry their burden and to demonstrate
that the Hamiltons’ claim falls within that exemption.

There is

a three-part burden-shifting scheme employed when determining
whether an action is covered within the scope of the insurance
policy.

First, the insured must demonstrate that the claim is

covered under the policy’s insuring agreement.

Alpha Const. &

Eng’g Corp. v. The Ins. Co. of the State of Penn., 402 Fed.
App’x 818, 831 (4th Cir. 2010).

Then, the insurance company

must show that the policy excludes coverage for the loss.

ACE

Am. Ins. Co. v. Ascend One Corp., 570 F. Supp. 2d 789, 798 (D.
Md. 2008).

Finally, if the insurance company has demonstrated
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that the action is excluded, then the burden shifts to the
insured to prove the applicability of the exception to
exclusion.

Bao v. Liberty Mut. Fire Ins. Co., 535 F. Supp. 2d

532, 535 (D. Md. 2008).
CX-Re has conceded the first step, that the underlying
action in this case is covered broadly under the policy since
the action is a “suit” seeking damages for “bodily injury” that
allegedly took place “within the coverage territory.”
34-1 at 11.

ECF No.

CX-Re then points to the lead policy as excluding

the claim from this broad coverage, and argues that the only way
for the claim to continue under coverage is for defendants to
demonstrate that the claims arose from poisoning first diagnosed
during the policy period.

CX-Re argues that defendants have

failed to provide information pertinent to the exemption to the
exclusion and the Court agrees.
The injuries alleged by Tanaya and Hakil Hamilton fall
outside of the scope of coverage because their time of exposure
to the dangerous conditions began and ended before the CX-Re
policy even began.

The coverage for actions arising from lead

paint injuries applies only if the “occurrence” is not before
the beginning of the Policy Period shown.

ECF No. 34-3 at 8.

An “occurrence” is an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.
Id. at 23.

A plain reading of these provisions would indicate
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that the policy is not meant to cover occurrences where the
continuous or repeated exposure ended before the policy period.
The policy at issue covered 1999 through 2000.

The state court

complaint alleges that the exposure occurred when Tanaya and
Hakil resided at 17 North Port St. between 1992 and 1998.

The

injury-causing exposure ended before the policy even took
effect.

As such, being exposed to lead from 1992-1998

constitutes a prior occurrence not eligible for covered under a
1999-2000 policy.
In their reply to the amended complaint, the Hamiltons rely
on Maryland Cas. Co. v. Hanson, 902 A.2d 152 (Md. 2006) to
support the contention that “each elevated (blood level)
indicates a bodily injury” thus requiring CX-Re to defend Camden
and Ms. Smith.

This argument ignores, however, that in Hanson,

the injuries were incurred while residing at a lead-contaminated
property and the dates of coverage under the policies were
synchronous.

Here, Defendants have not provided any evidence of

a history of CX-Re insuring Camden and Ms. Smith during the time
that they were exposed to lead at 17 North Port St.
The injuries sustained by Rakeen do fall within the policy
period, while he lived at 17 North Port St. between 1996 and
2002.

Neither the Underlying Action nor the responsive answer,

however, suggest that there is a documented instance during the
policy period of an elevated blood level of more than ten
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micrograms of lead per deciliter.

In order for the exemption to

the lead policy exclusion to apply, the occurrence has to be
during the policy period and the bodily injury must be of a
specific type.

A qualifying “bodily injury” is a “lead level in

blood, bone, or body tissue in excess of the ‘safe level’ [and]
is first diagnosed by a State licensed physician.”
8.

ECF 34-3 at

The ‘safe level’ is defined as ten micrograms of lead or

less present in the blood.

There is nothing to support a

conclusion that any measurements of Rakeen’s blood were taken by
a licensed physician during the policy period, or that there
were measurements in excess of ten micrograms.
Since there are no disputed facts and Plaintiff is entitled
to judgment as a matter of law, the Court grants Plaintiff’s
Motion for Judgment on the Pleadings.

A separate order will

follow.

______________/s/__________________
William M. Nickerson
Senior United States District Judge

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