UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

MITCHELL, BEST & VISNIC, 

INCORPORATED,

Plaintiff-Appellant,

v.

TRAVELERS PROPERTY CASUALTY  No. 01-1911 CORPORATION; THE TRAVELERS

INDEMNITY COMPANY; THE TRAVELERS

INDEMNITY COMPANY OF ILLINOIS; THE

TRAVELERS INDEMNITY COMPANY OF

CONNECTICUT,

Defendants-Appellees. 

Appeal from the United States District Court

for the District of Maryland, at Greenbelt.

Alexander Williams, Jr., District Judge.

(CA-00-986)

Argued: February 26, 2002

Decided: May 16, 2002

Before NIEMEYER, Circuit Judge,

HAMILTON, Senior Circuit Judge, and

Raymond A. JACKSON, United States District Judge

for the Eastern District of Virginia, sitting by designation.

Affirmed by unpublished opinion. Judge Jackson wrote the opinion,

in which Judge Niemeyer concurred. Senior Judge Hamilton wrote an

opinion concurring in part and dissenting in part. 
COUNSEL

ARGUED: Mitchell J. Rotbert, Rockville, Maryland, for Appellant.

Kathleen Birrane, Baltimore, Maryland, for Appellees. ON BRIEF:

Lee H. Ogburn, Baltimore, Maryland, for Appellees. 

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c). 

OPINION

JACKSON, District Judge: 

Mitchell, Best & Visnic, Inc. ("MBV"), a builder and sales agent

of residential real estate and the plaintiff below, appeals the district

court’s order granting summary judgment to the defendant, Travelers

Property Casualty Corporation ("Travelers"), on MBV’s claim that

Travelers had a duty to defend it in another law suit under the terms

of a general liability insurance policy. We affirm. 

This court reviews de novo a district court’s order granting summary judgment and construes the facts in the light most favorable to

the nonmoving party. Scheduled Airlines Traffic Offices, Inc. v.

Objective, Inc., 180 F.3d 583, 590-91 (4th Cir. 1999). Summary judgment is appropriate when no genuine issue of material fact exists and

the moving party is entitled to judgment as a matter of law. Fed. R.

Civ. P. 56(c). Once the moving party discharges its burden by showing there is an absence of evidence to support the nonmoving party’s

case, Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986), the nonmoving party must come forward with specific facts showing there is a

genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 475 U.S. 574, 587 (1986). Summary judgment will be granted

unless a reasonable jury could return a verdict for the nonmoving

party on the evidence presented. See Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 247-48 (1986). 

2 MITCHELL, BEST & VISNIC v. TRAVELERS PROPERTY CASUALTY
The liability policy that MBV purchased from Travelers contains

the following relevant language: 

We 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. We will

have the right and duty to defend any "suit" seeking those

damages. 

* * *

This insurance applies to "bodily injury" and "property damage" only if: 

(1) The "bodily injury" or "property damage" is caused by

an "occurrence" that takes place in the "coverage territory;"

* * *

"Property damage" means: 

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be

deemed to occur at the time of the physical injury that

caused it; or 

b. Loss of use of tangible property that is not physically

injured. All such loss of use shall be deemed to occur at the

time of the "occurrence" that caused it. 

MBV became involved in a suit which involved the interpretation

of restrictive covenants in a subdivision where it was building several

homes; the issue was whether those homes were too big and therefore

violated the covenants. MBV argued in the case at bar that these

claims in the underlying suit had the potential, however remote, of

resulting in a tear down order, which it asserted would constitute an

"occurrence" that caused "property damage" under the policy. Travelers refused to defend MBV or cover its damages in this case. As a

result, MBV brought the instant suit seeking a declaratory judgment

MITCHELL, BEST & VISNIC v. TRAVELERS PROPERTY CASUALTY 3
that Travelers had a duty to defend and pay damages arising from the

underlying suit, arguing that a claim that amounted to "loss of enjoyment" in the underlying suit qualified as "property damage" under the

insurance contract. The district court granted summary judgment for

Travelers on the ground that the underlying suit did not state a claim

for "property damage" because loss of enjoyment is insufficient to

establish "property damage" which, under the insurance contract in

this case, requires physical injury to, or loss of use of, tangible property. Therefore, the district court held that the underlying suit did not

qualify for coverage under the policy. 

Under Maryland law, an insurance company has an affirmative

obligation to defend the insured when there exists a potential that a

claim in the underlying suit could be covered under the policy (the

"potentiality rule"). Warfield-Dorsey Co., Inc. v. Travelers Cas. &

Sur. Co. of Illinois, 66 F. Supp. 2d 681 D. Md. 1999). In the case at

bar, the district court, using Maryland law, applied the test in St. Paul

Fire & Marine Insurance Co. v. Pryseski, 292 Md. 187, 438 A.2d 282

(1981), to determine whether the insurer in this case had a duty to

defend its insured. That test asks the following two questions: 1) what

is the coverage and what are the defenses under the terms and requirements of the insurance policy? 2) do the allegations in the tort action

potentially bring the tort claim within the policy’s coverage? Id. The

first question deals with the language and requirements of the insurance policy, while the second question focuses on the allegations in

the underlying suit. Id. at 193. The district court found that MBV satisfied the second prong, but failed under the first prong because it

held that "property damage" under the terms of the contract did not

include any damages that could potentially spring from the underlying

suit, thereby relieving Travelers of its duty to defend. The district

court having correctly determined and applied the law to the facts of

this case, we see no need to repeat that process here. 

Accordingly, we affirm the district court’s order based on its reasoning as articulated in its Memorandum Opinion of November 27,

2000, granting summary judgment for the Defendant. 

AFFIRMED

4 MITCHELL, BEST & VISNIC v. TRAVELERS PROPERTY CASUALTY
HAMILTON, Senior Circuit Judge, concurring in part and dissenting

in part: 

I agree with the majority that Travelers Property Casualty Corporation (Travelers) had no duty to defend some of the claims asserted

against Mitchell, Best, and Visnic, Incorporated (MBV) in the three

related lawsuits which involved disputes concerning restrictive covenants related to land located in Potomac Hunt Acres (Ardnave), a subdivision owned by the Livingston Family Limited Partnership

(Livingston) in Montgomery County, Maryland. However, I believe

Travelers had a duty to defend some of the claims asserted against

MBV and, therefore, I concur in part and dissent in part. 

I

MBV was Livingston’s sales agent in Ardnave and built several

custom homes on lots purchased there. Ardnave was part of a larger

tract of land formerly owned by the Federal Deposit Insurance Corporation (FDIC). In 1993, the FDIC conveyed one portion of the tract

to Livingston and the remainder of the tract to Kodor Associates Limited Partnership (Kodor). As part of that transaction, Livingston and

Kodor executed a declaration of covenants (the Original Covenants)

that was recorded among the land records of Montgomery County in

1993. In 1998, Livingston and Kodor executed a release of declaration of covenants and, simultaneously, a second declaration of covenants (the Revised Covenants) all of which were also recorded among

the land records of Montgomery County. In 1998, Kodor purchased

a lot in Ardnave for $595,000. The issues in the litigation that ensued

concerned the validity, enforceability, and the interpretation of the

Original Covenants, the release, and the Revised Covenants, as well

as whether MBV had induced Kodor to revise the Original Covenants

by making material misrepresentations regarding MBV’s intent to

keep Kodor advised of the nature of the houses being built in Ardnave

and whether Livingston was selling lots in Ardnave that were subject

to a separate set of covenants, drafted by Livingston (the Livingston

Covenants), that were less restrictive than either the Original Covenants or the Revised Covenants. 

II

As recognized by the majority, subject to certain express definitions, exclusions, and conditions, the policy at issue in this case states:

MITCHELL, BEST & VISNIC v. TRAVELERS PROPERTY CASUALTY 5
We 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. We will

have the right and duty to defend any "suit" seeking those

damages. 

(J.A. 34). This insurance applies to "bodily injury" and "property

damage" only if the bodily injury or property damage is caused by an

"occurrence" that takes place in the "coverage territory." Id. The policy defines "property damage" as: 

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use

shall be deemed to occur at the time of the physical

injury that caused it; or 

b. Loss of use of tangible property that is not physically

injured. All such loss of use shall be deemed to occur

at the time of the "occurrence" that caused it. 

(J.A. 44). 

In my opinion, there are two claims that were asserted against

MBV that Travelers had a duty to defend. The first claim is a counterclaim that was asserted against MBV. The counterclaim centers on

Kodor’s allegation that MBV’s misrepresentations resulted in Kodor

paying more for its lot in 1998 than the lot was worth and that, under

the Revised/Livingston Covenants, a house built on its lot would have

unsightly or obstructed views. The simple reason why this claim

involves the "loss of use of tangible property" is because the view

from the lot constitutes a use of tangible property. The view being lost

means that there is a loss of use. Travelers suggests that there was

only a loss of the ability to enforce a restrictive covenant, not a loss

of use. However, the "intangible" covenant does not affect, much less

diminish, the fact that Kodor alleges a loss of use of its tangible property. 

The second claim involves a cross-claim (the Kamba/Hackney

Cross-Claim) that was asserted against MBV. Kamba and Hackney

6 MITCHELL, BEST & VISNIC v. TRAVELERS PROPERTY CASUALTY
had purchased a lot in Ardnave and contracted with MBV to build a

home on that lot. The Kamba/Hackney Cross-Claim alleged, among

other things: (1) that, if the covenants were construed in the manner

requested by Kodor, MBV had misrepresented the kind of structures

that could be built on the Kamba/Hackney lot, (2) that, as a result of

these misrepresentations, the Kamba/Hackney residence might have

to be reconfigured or deconstructed, and (3) that, as a result of MBV’s

misrepresentations, Kamba/Hackney would be harmed in that they

could not build certain structures on their property, namely, a pool

house. 

The allegations of harm in the Kamba/Hackney Cross-Claim fit the

definition of "loss of use of tangible property" as defined in the subject policy. If the covenants are construed in the manner requested by

Kodor, Kamba/Hackney cannot build a pool house and, therefore,

have a loss of use. Also, if the covenants are construed in the manner

requested by Kodor, Kamba/Hackney cannot use their house in its

current form (a loss of use and/or views) because it may have to be

reconfigured to conform to the covenants. 

III

In summary, although I agree with the majority that Travelers had

no duty to defend some of the claims asserted against MBV, I am of

the opinion that Travelers had a duty to defend: (1) the Kodor counterclaim that centered on Kodor’s allegation that MBV’s misrepresentations resulted in Kodor paying more for its Ardnave lot in 1998 than

the lot was worth and that, under the Revised/Livingston Covenants,

a house built on its lot would have unsightly or obstructed views; and

(2) the Kamba/Hackney Cross-Claim. Accordingly, I concur in the

court’s opinion in part and dissent from it in part.

MITCHELL, BEST & VISNIC v. TRAVELERS PROPERTY CASUALTY 7