Court Opinion

ID: 1002685
Source: CourtListenerOpinion
Date Created: 2013-07-04 18:14:25.523584+00
Date Added: 2024-06-11T15:26:58.783599
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

ADVANCED ENVIRONMENTAL
TECHNOLOGY CORPORATION,
Plaintiff-Appellee,

and

B&D MAINTENANCE, INCORPORATED,
Plaintiff,

v.

RALPH B. BROWN; R. B. BROWN &
ASSOCIATES,
Defendants-Appellants,

and

TIDEWATER EQUIPMENT COMPANY,
                                    No. 99-2228
INCORPORATED,
Defendant-Appellee,

v.

ASSICURAZIONI GENERALI, S.P.A.;
UNITED NATIONAL INSURANCE
COMPANY; CERTAIN UNDERWRITERS AT
LLOYD'S, LONDON; C. A. M. A. T.;
GAN INCENDIE ACCIDENTS; YASUDA
FIRE & MARINE INSURANCE; RELIANCE
INSURANCE COMPANY, INCORPORATED;
EQUIPMENT INSURANCE MANAGERS,
INCORPORATED,
Third Party Defendants.
ADVANCED ENVIRONMENTAL
TECHNOLOGY CORPORATION; B&D
MAINTENANCE, INCORPORATED,
Plaintiffs-Appellants,

v.

TIDEWATER EQUIPMENT COMPANY,
INCORPORATED,
Defendant-Appellant,

RALPH B. BROWN; R. B. BROWN &
ASSOCIATES,
Defendants-Appellees,

v.
                                                No. 00-1047
ASSICURAZIONI GENERALI, S.P.A.;
UNITED NATIONAL INSURANCE
COMPANY,
Third Party Defendants-Appellants,

and

CERTAIN UNDERWRITERS AT LLOYD'S,
LONDON; C. A. M. A. T.; GAN
INCENDIE ACCIDENTS; YASUDA FIRE &
MARINE INSURANCE; RELIANCE
INSURANCE COMPANY, INCORPORATED;
EQUIPMENT INSURANCE MANAGERS,
INCORPORATED,
Third Party Defendants.

Appeals from the United States District Court
for the District of Maryland, at Baltimore.
Joseph H. Young, Senior District Judge.
(CA-94-1437-Y)

Argued: June 9, 2000

Decided: October 2, 2000

                   2
Before WIDENER and NIEMEYER, Circuit Judges, and
Irene M. KEELEY, United States District Judge for the
Northern District of West Virginia, sitting by designation.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: David J. McManus, Jr., Thomas Frank Corcoran, BAX-
TER, BAKER, SIDLE & CONN, P.A., Baltimore, Maryland, for
Appellants. Michael Joseph McManus, DRINKER, BIDDLE &
REATH, L.L.P., Washington, D.C., for Appellees. ON BRIEF: Ken-
neth E. Ryan, Brian A. Coleman, DRINKER, BIDDLE & REATH,
L.L.P., Washington, D.C., for Appellees.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

This action concerns a dispute among an insurance agent, who was
to have procured a liability policy containing basic pollution cover-
age, the insured and its subcontractor, who are specialists the agent
knew had contracted to remove and/or transport hazardous waste
from a contaminated site, and the insurance companies that denied
coverage after a spill due to a blanket pollution exclusion in the pol-
icy.

Ralph B. Brown and his agency, R. B. Brown & Associates, [col-
lectively known as "Brown"] appeal the following findings of the dis-
trict court: (1) no coverage existed under an insurance policy Brown

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procured for Advanced Environmental Technology Corporation
["AETC"]; (2) Brown made a negligent misrepresentation to AETC
in the certificate of insurance the agency issued on July 23, 1992; (3)
Brown was liable for failing to notify AETC and B&D Maintenance,
Incorporated ["B&D"] of the denial of coverage in a similar case
involving an identical insurance policy; (4) AETC was not contribu-
torily negligent; and (5) AETC and B&D did not fail to mitigate their
damages. AETC and the other parties with whom it aligned cross-
appeal the district court's failure to award pre-judgment interest. We
affirm the judgment of the district court in all respects.

I.

AETC is a company specializing in the removal and disposal of
hazardous waste. When it obtained a contract to remove transformers
from the roof of a Columbia, Maryland building, it sub-contracted
with B&D, a rigging and hauling company. B&D was to supply rig-
ging and cranes to move the transformers, which were filled with
PCB-contaminated oil, from the roof of the 5-story building to the
ground floor. AETC then was to remove the transformers from the
premises.

AETC required B&D to procure liability insurance for the job, and
specifically required B&D to maintain basic pollution coverage. The
parties agreed that B&D did not need to obtain cost-prohibitive "blan-
ket" coverage for all pollution-related events; nevertheless, B&D did
explain to Brown, its insurance agent, that it would need coverage for
moving the transformers for AETC at the Columbia job. Having pro-
vided similar insurance for B&D and other similar construction com-
pany "clients" for nearly 20 years, Ralph Brown assured B&D
representatives that he would obtain appropriate basic pollution liabil-
ity coverage.

At AETC's request, Brown then provided a certificate of insurance
for B&D's involvement on the Columbia job. The certificate, which
Brown gave to AETC on July 23, 1992, stated on its face that B&D
had coverage for "sudden and accidental" pollution losses. Unfortu-
nately, Brown failed to disclose that the policy contained a Paramount
Waste Disposal Operation Exclusion ["the Paramount Exclusion"],
which essentially eliminated the "sudden and accidental" pollution

                    4
losses coverage. Upon reviewing the certificate of insurance, and
believing that B&D possessed sufficient pollution coverage, AETC
did not request a copy of the complete insurance policy despite the
fact that the certificate also contained a disclaimer on its face that
warned the coverages were subject to exclusions contained within the
policy itself.

More than one year later, on September 30, 1993, B&D employees
were in the process of lowering transformers from the roof of the
Columbia building to the floor when a rigging winch hit a stationary
transformer on the rooftop. This caused 40 gallons of PCB-
contaminated oil to leak on the roof and through the access hole to
the floor 5 stories below. The accident resulted in a 47-day cleanup
operation by AETC that cost in excess of $400,000.

At AETC's request, B&D filed a claim under its policy with
Generali and United National Insurance Company ("the Insurers"),
which had been issued by Brown. In the face of Brown's post-spill
representations that such accidents would be covered under the pol-
icy, B&D also entered into a written agreement with AETC by which
AETC would be responsible for clean-up of the site, and B&D would
indemnify AETC for all associated costs.

Ultimately, the Insurers declined to cover the costs of the cleanup,
citing to the express terms of the Paramount Exclusion, which stated:

           Notwithstanding anything to the contrary contained in
          this policy, it is hereby agreed that this policy shall not
          apply to any liability arising out of: . . . b) seepage, pollution
          or contamination or any such similar liability in connection
          with any operation by, for or on behalf of the Assured or
          any contract with the Insured, for the sale, removal, disposal
          or dumping of any hazardous waste materials. . . .

II.

AETC sued B&D to recover the cleanup costs, and also sued
Brown for negligent misrepresentation and negligent failure to pro-
cure adequate insurance. B&D filed a third-party complaint against

                     5
the Insurers, seeking coverage for the cleanup costs. B&D also filed
cross-claims against Brown and AETC, while Brown filed a cross-
claim against the Insurers. At the onset of the litigation the Insurers
maintained that the B&D policy did not provide coverage, but they
eventually entered into a partial settlement with AETC and B&D, as
a result of which the Insurers stood in the shoes of AETC and B&D
against Brown for the remainder of the litigation. Brown continued to
pursue the cross-claim for coverage against the Insurers.

The Insurers, AETC and B&D decided to align themselves against
Brown after they determined that Brown (1) had issued a nearly iden-
tical certificate of insurance to another client engaged in business sim-
ilar to that of B&D; (2) had known in the early summer of 1993 that
the Insurers denied coverage under the Paramount Exclusion to that
subcontractor for a similar accident involving a PCB oil spill during
the moving of some drums; and (3) had failed to advise either B&D
or AETC of the likelihood that coverage under B&D's policy would
not extend to B&D's activities on the Columbia job. 1

The aligned parties moved for summary judgment on Brown's
cross-claim for coverage, arguing that the Paramount Exclusion pre-
cluded coverage to B&D for the spill. Brown filed a cross-motion for
summary judgment on this issue. The trial court found, as a matter of
law, that the B&D policy did not cover the spill, concluding that B&D
was engaged in "removal" of hazardous waste, an activity excluded
in the Paramount Exclusion.

The Court then conducted a bench trial on the aligned parties'
claims against Brown for negligent misrepresentation and failure to
procure adequate insurance. At the conclusion of the bench trial, the
Court ruled in favor of AETC, B&D and the Insurers, holding that (1)
Brown had negligently misrepresented the coverage available when
his agency issued the certificate of insurance for B&D to AETC in
July 1992; (2) Brown was liable for failing to advise B&D and AETC
_________________________________________________________________
1 In that earlier case, In re: United Indus. Servs., Inc., No. 95-2481, slip
op. (4th Cir. April 17, 1996) ["United Industrial"], another per curiam
panel of this Court ultimately determined that the policy's Paramount
Exclusion foreclosed coverage for the PCB oil spill.

                    6
of the denial of coverage in the United Industrial case2; (3) AETC
was not contributorily negligent for failing to request and review a
copy of the B&D policy; and (4) AETC and B&D were entitled to an
award of cleanup costs in the amount of $434,154.63. The Court,
however, did not award prejudgment interest on those damages.

Brown appealed the district court's order. The prevailing parties
then cross-appealed, seeking prejudgment interest on their damages.

III.

This Court reviews de novo a district court's grant or denial of a
motion for summary judgment, Shaw v. Stroud, 13 F.3d 791, 798 (4th
Cir. 1994), a district court's ruling regarding its interpretation of a
certificate of insurance, Taylor v. Kinsella, 742 F.2d 709, 711 (2d Cir.
1984), and a district court's conclusions of law, Salve Regina v. Rus-
sell, 499 U.S. 425, 431 (1991); Felty v. Graves-Humphreys Co., 818
F.2d 1126, 1127 (4th Cir. 1987). It reviews a district court's factual
findings for clear error. C.B. Fleet Co., Inc. , 131 F.3d 430, 436 (4th
Cir. 1997) (citing Anderson, 470 U.S. 564, 573-74 (1985)). Finally,
in cases where a district court holds that the prevailing party is not
entitled to prejudgment interest as a matter of law, this Court reviews
the decision not to award prejudgment interest for abuse of discretion.
Crystal v. West & Callahan, Inc., 614 A.2d 560, 572 (Md. 1992).

A.

Brown alleges that the district court erroneously determined that
there was no coverage under the B&D policy. According to Brown,
the policy language contained within the Paramount Exclusion creates
an "arguable ambiguity" which necessitates interpretation of the
Exclusion's language.3 In support of this contention, Brown maintains
_________________________________________________________________
2 Although unpublished opinions are not binding precedent in this cir-
cuit, see Local Rule 36(c), the district court relied upon United Industrial
because it involved both the same parties and the exact exclusionary
insurance policy language. We do not disagree with this reasoning; the
facts in issue in United Industrial are"on all fours" with those in this
case.
3 The parties agree that Texas law governs interpretation of this insur-
ance contract. Texas law permits interpretation of contract provisions
only if their terms are ambiguous. See National Union Fire Ins. Co. v.
CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995).

                    7
that, under the doctrine of ejusdem generis, this "moving" of trans-
formers from rooftop to floor is sufficiently dissimilar to "sale,
removal, disposal or dumping" of hazardous waste to make the Para-
mount Exclusion inapplicable to B&D's activities.

This is a distinction without a difference. The Paramount Exclusion
clearly and unambiguously excludes coverage for"seepage, pollution
or contamination or any such similar liability in connection with any
operation by, for or on behalf of the Assured or any contract with the
Insured, for the sale, removal, disposal or dumping of any hazardous
waste materials." This is exactly the type of work Brown knew B&D
intended to perform for AETC at the Columbia, Maryland site.
Accordingly, we agree with the aligned parties that we need not inter-
pret whether B&D's activities constitute "moving" rather than the "re-
moving" of hazardous waste and, absent an ambiguity in the
Paramount Exclusion, Brown's argument that coverage exists for
AETC and B&D under the policy necessarily fails.

The district court in this case correctly found, as a matter of law,
that the policy issued to B&D did not provide coverage for the PCB
contamination at the Columbia site.

B.

Brown next alleges that the district court erroneously determined
that the certificate of insurance provided to AETC on behalf of B&D
contained a negligent misrepresentation regarding the coverage avail-
able to B&D. It found Brown liable to AETC and B&D for this negli-
gent misrepresentation.

In Maryland, the elements of the tort of negligent misrepresentation
include: (1) the defendant, owing a duty of care to the plaintiff, negli-
gently asserts a false statement of material fact; (2) the defendant
intends that his statement will be acted upon; (3) the defendant has
knowledge that the plaintiff will probably rely on the statement; (4)
the plaintiff justifiably relies on the statement; and (5) the plaintiff
suffers damages as a proximate result of the defendant's negligence.
See Sheets v. Brethren Mut. Ins. Co., 679 A.2d 540, 551 (Md. 1990);
Gross v. Sussex, 630 A.2d 1156, 1162 (Md. 1993). Unlike fraud, an
intent to deceive need not be shown. Gross, 630 A.2d at 1156.

                     8
The evidence at trial established that Brown issued a misleading
certificate of insurance to AETC on behalf of B&D. This certificate
indicated that B&D had coverage for "sudden and accidental" pollu-
tion spills, although Brown well knew that B&D would be engaging
in the "removal" of waste and that the policy actually had a Para-
mount Exclusion for losses associated with such removal activities.

Brown's contentions -- that AETC had a duty to request and
review the policy, and that the disclaimer on the face of the certificate
protects Brown from liability -- are unavailing. Maryland law does
not require AETC to request and review the policy referenced in a
certificate of insurance, especially if there is no reason to doubt the
certificate's accuracy. No case law exists in support of Brown's prop-
osition.

Brown suggests that Twelve Knotts Ltd. Partnership v. Fireman's
Fund Ins. Co., 589 A.2d 105 (Md. App. 1991), establishes such a
duty; however, the beneficiary in Twelve Knotts actually received a
copy of the policy, but neglected to review it. Here, AETC did not
receive a copy of the B&D policy, and had no reason to request it
given the statements contained in the certificate of insurance. Thus,
Twelve Knotts is distinguishable from this case.

Having concluded that Brown is liable to AETC for negligent mis-
representation, we need not address whether the district court erred in
finding Brown liable for failing to notify AETC and B&D of the
denial of coverage in the United Industrial case, because AETC and
B&D have resolved their disputes and are in privity with one another.

C.

Brown's last assignment of error challenges the district court's rul-
ing that the aligned parties did not fail to mitigate their damages.
According to Brown, because he presented uncontroverted expert tes-
timony that AETC and B&D had failed to mitigate their damages, and
that those damages were excessive, this Court should remand the case
so the district court can reconsider the propriety of the damages
award.

                     9
During the bench trial, however, the district court, after ample
opportunity to weigh the credibility of Brown's expert in light of the
rest of the evidence in the case, held that the aligned parties were enti-
tled to reimbursement of the full amount of the cleanup costs.
Brown's expert did not testify that the cleanup performed was inap-
propriate; rather, he stated that the associated costs were unreasonable
and too high, and could have been lowered by selecting a different
method of cleanup.

Our review of the record below establishes that the trial court's
decision to award judgment in the amount of full reimbursement costs
was not clearly erroneous. The court disagreed that an alternative and
less expensive cleanup method was required. Such a ruling does not
warrant remand.

D.

Finally, the appellees raise as error in their cross-appeal the district
court's refusal to award pre-judgment interest. Although AETC and
B&D requested an award of pre-judgment interest on their verdict, the
trial court found that their claims sounded in tort rather than in con-
tract and did not award it. Because they claimed under both breach
of contract and tort theories, and the trial court ruled in their favor
solely on the tort claims without considering their breach of contract
claim, AETC and B&D maintain that their claims still may be consid-
ered as having been grounded in contract. Thus, they argue they are
entitled to pre-judgment interest on their award as a matter of law.

The district court did not exceed its discretion in concluding that
the claims on which the plaintiffs obtained relief sounded in tort
rather than in contract. The judgment of the district court is accord-
ingly

AFFIRMED.

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