Court Opinion

ID: 1007506
Source: CourtListenerOpinion
Date Created: 2013-07-04 19:26:33.990508+00
Date Added: 2024-06-11T15:27:48.180400
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

MITCHELL, BEST & VISNIC,               
INCORPORATED,
                Plaintiff-Appellant,
                 v.
TRAVELERS PROPERTY CASUALTY
CORPORATION; THE TRAVELERS                       No. 01-1911
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Affirmed by unpublished opinion.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.
2    MITCHELL, BEST & VISNIC v. TRAVELERS PROPERTY CASUALTY
                             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Unpublished opinions are not binding precedent in this circuit.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 sum-
mary 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 judg-
ment 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 show-
ing there is an absence of evidence to support the nonmoving party’s
case, Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986), the nonmov-
ing 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).
     MITCHELL, BEST & VISNIC v. TRAVELERS PROPERTY CASUALTY           3
   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 dam-
    age" 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 result-
    ing 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. Travel-
ers refused to defend MBV or cover its damages in this case. As a
result, MBV brought the instant suit seeking a declaratory judgment
4     MITCHELL, BEST & VISNIC v. TRAVELERS PROPERTY CASUALTY
that Travelers had a duty to defend and pay damages arising from the
underlying suit, arguing that a claim that amounted to "loss of enjoy-
ment" 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 prop-
erty. 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 require-
ments 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 insur-
ance policy, while the second question focuses on the allegations in
the underlying suit. Id. at 193. The district court found that MBV sat-
isfied 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 rea-
soning as articulated in its Memorandum Opinion of November 27,
2000, granting summary judgment for the Defendant.

                                                            AFFIRMED
      MITCHELL, BEST & VISNIC v. TRAVELERS PROPERTY CASUALTY             5
HAMILTON, Senior Circuit Judge, concurring in part and dissenting
in part:

   I agree with the majority that Travelers Property Casualty Corpora-
tion (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 cove-
nants related to land located in Potomac Hunt Acres (Ardnave), a sub-
division 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 Corpo-
ration (FDIC). In 1993, the FDIC conveyed one portion of the tract
to Livingston and the remainder of the tract to Kodor Associates Lim-
ited 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 declara-
tion of covenants and, simultaneously, a second declaration of cove-
nants (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 Cove-
nants or the Revised Covenants.

                                    II

   As recognized by the majority, subject to certain express defini-
tions, exclusions, and conditions, the policy at issue in this case states:
6     MITCHELL, BEST & VISNIC v. TRAVELERS PROPERTY CASUALTY
    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 pol-
icy defines "property damage" as:

    a. Physical injury to tangible property, including all result-
       ing 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 counter-
claim 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 prop-
erty.

  The second claim involves a cross-claim (the Kamba/Hackney
Cross-Claim) that was asserted against MBV. Kamba and Hackney
     MITCHELL, BEST & VISNIC v. TRAVELERS PROPERTY CASUALTY          7
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 sub-
ject 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 coun-
terclaim that centered on Kodor’s allegation that MBV’s misrepresen-
tations 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.