Court Opinion

ID: 3194397
Source: CourtListenerOpinion
Date Created: 2016-04-14 19:00:53.997234+00
Date Added: 2024-06-11T14:36:19.819477
License: Public Domain

PUBLISHED

                     UNITED STATES COURT OF APPEALS
                         FOR THE FOURTH CIRCUIT

                               No. 15-1559

ST. PAUL MERCURY INSURANCE COMPANY,

                  Plaintiff - Appellee,

            v.

AMERICAN BANK HOLDINGS, INC.,

                  Defendant - Appellant,

            and

AMIEL CUETO,

                  Defendant.

-------------------------
UNITED POLICYHOLDERS,

                  Amicus Supporting Appellant.

Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Roger W. Titus, Senior District Judge.
(8:09-cv-00961-RWT)

Argued:    January 27, 2016                  Decided:   April 14, 2016

Before TRAXLER, Chief Judge, and WILKINSON and NIEMEYER, Circuit
Judges.

Affirmed    by    published opinion.   Judge Niemeyer wrote the
opinion,    in    which Chief Judge Traxler and Judge Wilkinson
joined.
ARGUED: Albert Joseph Mezzanotte, Jr., WHITEFORD, TAYLOR &
PRESTON, L.L.P., Baltimore, Maryland, for Appellant.      Thomas
James Judge, Jr., LOSS, JUDGE & WARD, LLP, Washington, D.C., for
Appellee.   ON BRIEF: Dwight W. Stone, II, WHITEFORD, TAYLOR &
PRESTON, L.L.P., Baltimore, Maryland, for Appellant.    Brent H.
Olson, LOSS, JUDGE & WARD, LLP, Washington, D.C., for Appellee.
Lorelie S. Masters, Christopher R. Healy, PERKINS COIE LLP,
Washington, D.C.; Amy Bach, Dan Wade, UNITED POLICYHOLDERS, San
Francisco, California, for Amicus Curiae.

                               2
NIEMEYER, Circuit Judge:

      On June 18, 2008, American Bank Holdings, Inc., was served

with a complaint and summons that issued from a state court in

Belleville,        Illinois.         Because     of       an    internal      oversight,

however, American Bank did not respond to the summons, and the

court,   on     July      23,   2008,    entered      a    $98.5    million      default

judgment against it.              Some eight months after receipt of the

summons,      on   February       25,   2009,    American        Bank   notified       its

insurance company          -- St. Paul Mercury Insurance Company -- of

the lawsuit, and St. Paul Insurance denied coverage due to the

late notice.         American Bank was thereafter able to have the

default judgment vacated and the lawsuit dismissed, but at an

expense of some $1.8 million.

      In this action, which St. Paul Insurance filed to obtain a

declaratory judgment that it had no duty to pay for American

Bank’s     defense,       American      Bank    filed      a    counterclaim     for    a

declaratory judgment that it was indeed owed reimbursement for

its defense and for damages based on the amount of attorneys

fees and costs incurred both in the underlying action and in

this action.

      On the parties’ cross motions for summary judgment, the

district court entered judgment for St. Paul Insurance.                            Among

other things, the court concluded that because American Bank did

not   provide       St.    Paul    Insurance       with        notice   “as    soon    as

                                           3
practicable,” as required by the terms of its insurance policy,

and because the late notice caused St. Paul Insurance prejudice,

St. Paul Insurance was within its right to deny coverage.                                    We

affirm.

                                               I

      On    June       11,    2008,    Amiel     Cueto,    a   disbarred          lawyer    and

convicted felon who was acting pro se, filed an action in the

St. Clair County Circuit Court in Belleville, Illinois, against

American        Bank    and    10     other    defendants,       alleging         that     they

fraudulently failed to fund his $8 million sale of real property

to Lester J. Petty and Associates, Inc., causing the deal to

collapse.        The complaint sought both compensatory and punitive

damages.         Both    American       Bank     and     St.   Paul    Insurance         agree,

however,        that    American      Bank,    as    a    holding     company,       did    not

engage     in    any    lending       business      as   alleged      and    that,    in    any

event, it conducted no business in Illinois.                           Indeed, American

Bank, based in Maryland, asserts that it had nothing to do with

the   Illinois         transaction       and       suggests     that        the    suit     was

frivolous, if not fraudulent.

      The complaint against American Bank and the summons were

served on June 18, 2008, on CT Corporation as the agent of

American Bank for receiving service of process in Maryland.                                 The

next day, CT Corp. transmitted the papers to American Bank’s

office in Greenbelt, Maryland, addressed to American Bank’s CFO,

                                               4
in     accordance   with     the    standing       instructions        that   it     had

received from American Bank.             As of that time, however, American

Bank’s CFO had left the employ of American Bank.                       An officer of

an American Bank subsidiary subsequently came across the papers

and forwarded them to American Bank’s local lawyer in late July

2008.     But the lawyer claimed that he never received them.                        When

American    Bank    failed    to       respond    to   the    Cueto     suit,      Cueto

obtained a default judgment on July 23, 2008, in the amount of

$7,390,855.10       in     compensatory          damages,      $66,517,695.90         in

punitive damages, and $24,636,183.65 in attorneys fees, for a

total of $98,544,734.65.

        More than six months later, Cueto began efforts to collect

on the default judgment in Maryland and elsewhere, sending the

relevant court papers to American Bank. American Bank received

them    around   February     13,      2009,     and   thereafter      notified      its

insurance    broker,      providing       the    broker      with   copies      of   the

papers.     The broker in turn notified St. Paul Insurance by email

on February 25, 2009.            This was the first point at which St.

Paul    Insurance   had    any     knowledge      of   the    Cueto    lawsuit,      the

default judgment, or the collection efforts.                   St. Paul Insurance

acknowledged     receiving       the    papers    on   February       26,   2009,    and

explained that it “retain[ed] the right to raise any and all

coverage issues and to assert appropriate coverage defenses that

may apply during the course of our investigation.”

                                           5
     American Bank’s general counsel Erik Bolog called St. Paul

Insurance’s claims counsel, Christopher Nelson, the next day, on

February   27,      2009.     During   the   telephone      call,   Bolog   asked

Nelson   “if   we    were    covered   for   this,”   and    Nelson   responded

“yes.”     During      the   ensuing   investigation     of    the    claim   and

coverage for it, Nelson prepared draft letters dated March 13

and March 16, 2009, stating St. Paul Insurance’s position and

confirming that the Cueto complaint “involve[d] a Lending Act,”

for which the policy provides coverage, but “reserv[ing] the

right to deny coverage due to late notice.”                 On April 15, 2009,

St. Paul Insurance formally notified American Bank that St. Paul

Insurance was denying coverage due to a lack of timely notice.

The letter stated:

     I have reviewed the Lawsuit and the Policy in order to
     determine whether coverage is afforded.    As we have
     discussed, I regret to inform you that [St. Paul
     Insurance] must decline coverage for this matter.   As
     you know, the Policy provides:

           The Insureds shall, as a condition precedent
           to their rights under this Policy, give to
           the Insurer written notice of any Claim made
           against the Insureds as soon as practicable,
           but in no event later than: (a) sixty (60)
           days after expiration of the Policy Year in
           which the Claim was first made . . . .

                                  *     *    *

     Clearly, notice was not given to [St. Paul Insurance]
     within the time provided for in the Policy and [St.
     Paul Insurance] therefore must decline coverage on
     this basis.    In addition to the Bank’s failure to
     comply with the Policy’s condition precedent to

                                        6
     coverage,   the  Bank’s   action,                 or         inaction,       has
     prejudiced [St. Paul Insurance].

     Before even notifying St. Paul Insurance of the Cueto suit,

American Bank retained the law firm of Bryan Cave in St. Louis,

Missouri, which filed unsuccessful motions in the Illinois state

court   to    vacate      the     default   judgment        and    dismiss       the    Cueto

lawsuit.      After American Bank then retained the Chicago firm of

Sidley Austin to oversee appeals, an Illinois state appellate

court     held     that     the     trial    court     did        not    have     personal

jurisdiction over American Bank and accordingly dismissed the

Cueto     suit,    a   ruling       that    Cueto     did     not       appeal    further.

American Bank estimated that it spent approximately $1.8 million

in its efforts to resist enforcement of the default judgment and

have the Cueto lawsuit dismissed.

     During the course of the proceedings in Illinois, on June

1, 2009, Cueto sent a demand letter to American Bank, seeking a

settlement of his claims in exchange for payment of $10 million.

American Bank passed the letter on to St. Paul Insurance and

demanded that St. Paul Insurance settle the claim for an amount

“within      the   policy       limits.”        St.   Paul        Insurance,      however,

repeated its denial of coverage.                  American Bank never accepted

Cueto’s settlement, instead pursuing its efforts to have the

default judgment overturned in court.

                                            7
       St. Paul Insurance commenced this action for a declaratory

judgment that it had no duty to provide coverage to American

Bank   because     American    Bank    failed     to    provide     it   with   timely

notice of the Cueto suit, as required by the policy.                            By an

amended complaint, it also contended that American Bank breached

its duty under the policy to defend the Cueto suit upon being

served   with     it.    American      Bank     filed    a   counterclaim       for    a

declaratory       judgment    that    it    indeed     had   coverage     under     the

policy and for damages for reimbursement of its attorneys fees

and costs.      In its counterclaim, American Bank advanced theories

of coverage based on waiver and estoppel.                    It also asserted a

statutory claim under Maryland law for a lack of good faith in

denying insurance coverage.

       On the parties’ cross motions for summary judgment, the

district court granted judgment to St. Paul Insurance and denied

American Bank’s motion.              It concluded that American Bank had

provided late notice of Cueto’s suit and that St. Paul Insurance

had suffered prejudice as a result.                     It also concluded that

American Bank breached its duty timely to defend the suit, also

resulting    in    prejudice    to    St.      Paul    Insurance.        Finally,     it

rejected American Bank’s claims of coverage based on waiver and

estoppel and its claim based on St. Paul Insurance’s lack of

good faith in denying coverage.

                                           8
      From    the    district        court’s       judgment,      American       Bank    filed

this appeal, contending (1) that it provided timely notice to

St.   Paul    Insurance;        (2)    that     it   complied          with    its     duty   to

defend;      and    (3)   that       material      factual       disputes       remain    with

respect      to     its   waiver,        estoppel,         and     bad        faith    claims,

precluding the entry of summary judgment against it.

                                              II

      American Bank contends first that, contrary to the district

court’s     holding,      it    provided      St.    Paul    Insurance          with    timely

notice of the suit because it provided St. Paul Insurance with

notice within days of when it first learned of the suit around

February 13, 2009.             As American Bank argues, its “obligation to

notify St. Paul was not triggered until it had actual knowledge

of the Cueto action, shortly after February 12, 2009.                                 Measured

from that time, [its] notice was not late.”                             (Emphasis added).

It argues further that the policy does not support the district

court’s ruling that “constructive notice via service of process

on    the     insured’s         registered         agent     [on        June     18,     2008]

constitute[d]       actual      notice    for       purposes      of     triggering      [its]

obligation to notify St. Paul of a claim.”                         Finally, it reasons

that “common sense dictates that there can be no obligation to

notify      St.    Paul   of     a    claim     until      the    insured        has    actual

knowledge of it.”

                                              9
     In   making       this     lack-of-actual-notice             argument,    American

Bank fails to provide textual support based on the terms of the

St. Paul Insurance policy.               Indeed, the term “actual knowledge”

is foreign to the notice provision contained in the policy.                           The

policy provision reads:

     The Insureds shall, as a condition precedent to their
     rights under this Policy, give to the Insurer written
     notice of any Claim made against the Insureds as soon
     as practicable, but in no event later than: (a) sixty
     (60) days after expiration of the Policy Year in which
     the Claim was first made . . . .

(Emphasis added).        The term “Claim” as used in the provision is

defined   to    include,       as    relevant     here,      “a     civil   proceeding

against any Insured commenced by the service of a complaint or

similar pleading.”            (Emphasis added).         Thus, according to the

policy,   the   requirement         to   give    notice      is    triggered    not    by

“actual knowledge” of a claim, but by “service of a complaint”

upon the insured.        The two, however, are effectively the same in

the circumstances presented in this case.

     Here,     there    is     no   dispute     that   the   Cueto     complaint      was

served on CT Corp. on June 18, 2008, and that CT Corp. was

American Bank’s designated resident agent for receiving service

of   process.          Under     Maryland       law,   every       corporation     must

designate a resident agent to receive service of process.                             See

Md. Code Ann., Corps. & Ass’ns § 2-108(a)(2).                      Maryland law also

provides that “[s]ervice of process on the resident agent . . .

                                           10
constitutes       effective      service          of   process      .     .    .     on    the

corporation.”        Id. § 1-401(a).              Thus, service on CT Corp. on

June 18, 2008, effected service on American Bank, triggering

American Bank’s duty to notify St. Paul Insurance “as soon as

practicable” thereafter.

      While the insurance policy does not use the term “actual

knowledge” to trigger the notice requirement, American Bank was

nonetheless       also   imputed,    as       a    matter    of     law,      with    actual

knowledge as of June 18, 2008, under established principles of

Maryland agency law.            Because a corporation is a fiction that

can   have    knowledge    only    through         its    agents,    knowledge        of   an

agent acquired within the scope of the agency relationship is

imputable to the corporation.                 See Plitt v. Kellam, 160 A.2d

615, 619 n.4 (Md. 1960) (“The knowledge [of the agent that is]

imputed      to   the    principal       is       considered       actual       knowledge”

(emphasis     added));    see     also    Martin         Marietta    Corp.      v.    Gould,

Inc., 70 F.3d 768, 773 (4th Cir. 1995) (“Thus, under the rule of

imputation the principal is chargeable with the knowledge the

agent has acquired, whether the agent communicates it or not”

(applying Maryland law)).            As such, on June 18, 2008, when CT

Corp. was served with process in the Cueto case -- process that

was   physically     transmitted     to       American      Bank    the       next   day   --

American Bank, as a corporation, had “actual knowledge” of the

lawsuit.      Thus, while we reject the premise of American Bank’s

                                          11
argument that it was required by the policy to give notice only

after it received “actual knowledge” of the suit, we nonetheless

conclude that, as a matter of law, American Bank received actual

knowledge of the suit on June 18, 2008, when its authorized

agent, CT Corp., was served with process.

      American Bank seeks to avoid these conclusions by claiming

that the suit papers, which were addressed and delivered to the

desk of its CFO, were not effectively served on it because, as

of that time, its CFO had departed from its employ.                   But this

argument overlooks the fact that the papers were delivered to

American Bank by CT Corp. in the manner that American Bank had

previously instructed.       The most that American Bank’s argument

accomplishes is to reveal the fact that the suit papers were not

routed internally so as to get promptly into the hands of its

counsel.     As the district court found, “through a variety of

corporate screw-ups, significant suit papers that should have

gotten   immediate   attention      didn’t.”     But   internal      “corporate

screw-ups” provide no basis to excuse American Bank’s failure to

give St. Paul Insurance timely notice of the Cueto suit after

being validly served with process.

      Alternatively,     American    Bank   contends   that,    in   providing

St.   Paul   Insurance    with   notice     on   February      25,   2009,   it

effectively satisfied the policy’s notice provision because the

policy authorizes a notice either “as soon as practicable” or by

                                      12
60 days after the expiration of the policy year on October 1,

2008,   i.e.,     by    November    29,   2008.      Focusing      on   the    second

option, it argues that its failure to satisfy the November 29

deadline was of no legal moment because, by then, the July 2008

default judgment had already been entered, making the difference

between a “timely” notice by November 29, 2008, and notice on

February 25, 2009, insignificant, as St. Paul Insurance could

not have suffered prejudice, as required by Maryland law, if its

position would have been the same on November 29, 2008, and

February 25, 2009.

       This argument, however, rests on a misreading of the notice

provision contained in the policy.              While American Bank suggests

that the notice provision gives it two alternative deadlines for

providing notice -- either “as soon as practicable” or “sixty

(60)    days     after      expiration    of   the    Policy     Year”    --     this

interpretation         is   not   supported    by    the   text.        The    notice

provision reads, “The Insureds shall . . . give to the Insurer

written notice of any Claim . . . as soon as practicable, but in

no event later than . . . sixty (60) days after expiration of

the    Policy    Year.”       (Emphasis    added).         The   policy’s      notice

provision thus defines a single deadline for providing notice,

i.e.,   “as     soon   as   practicable,”      and   the   required     notice    can

never be later than 60 days after the expiration of the policy

year.    This is indicated by the language, “but in no event later

                                          13
than.”     In short, American Bank had a continuing duty to provide

notice    as     soon   as    practicable,          so   long     as    the     as-soon-as-

practicable notice did not come later than 60 days after the

policy term, and it failed to comply with that duty here.

     American Bank argues against this interpretation further by

contending       that   St.      Paul    Insurance        never    took       the    single-

deadline    position       as    its     own    until     its    reply    brief      at     the

summary    judgment      stage,        suggesting        that    St.     Paul      Insurance

forfeited the argument.             The record, however, does not support

American Bank’s assertion.               In its complaint, St. Paul Insurance

quoted     the    policy        provision       requiring       notice        as    soon    as

practicable.       It then alleged that, because that provision was

not complied with, the condition precedent to coverage was not

satisfied.        And   again,      in    its       opening     brief    in     support     of

summary judgment, St. Paul Insurance quoted the policy provision

and argued, “Had St. Paul been provided with notice as soon as

practicable,      it    could     have    ensured        that   defense       counsel       was

properly    retained      and     timely       filed     an   appropriate          motion    to

dismiss for lack of personal jurisdiction.”                            (Emphasis added).

Then, during oral argument before the district court, counsel

for St. Paul Insurance again stated:

     With respect to late notice, that’s the second duty
     that was breached by [American Bank].       Under the
     notice provision, they have to provide notice as soon
     as practicable.   And under case law back in 2009 and
     case law now, the as-soon-as-practicable provision has

                                               14
     always, generally in most states, [required] proof of
     prejudice, whereas the latter part of the notice
     provision, where it says notice within sixty days of
     the expiration of the policy has been considered a
     claims-made   provision  that  has  to   be  enforced
     strictly.   [American Bank] did not provide notice as
     soon as practicable.

(Emphasis     added).       In   ruling      on     the    motions     for     summary

judgment, moreover, the district court relied only on the “as

soon as practicable” language to define the notice requirement,

analyzing    it    in   conjunction    with       American    Bank’s     contractual

duty to defend.          It concluded that “as soon as practicable”

meant in sufficient time to file a response in court on behalf

of American Bank “within the time set by the Illinois court

system for responding to lawsuits,” in this case, 30 days after

service.      American     Bank’s     argument      that     St.   Paul      Insurance

forfeited its argument for a single deadline simply cannot be

maintained.

     In any event, notwithstanding American Bank’s efforts to

constrict    St.    Paul   Insurance’s       position      with    its    forfeiture

argument and thereby limit the scope of our review, our ultimate

task is to review the district court’s judgment and the relevant

policy language on which the judgment was based.                       The district

court held that American Bank failed to provide notice as soon

as practicable, and the policy supports that ruling, describing,

as   we    hold,    a   single   as-soon-as-practicable              deadline     for

providing notice, so long as the notice is not more than 60 days

                                        15
after    the    policy      term.       The    defining     characteristic        of    that

notice obligation is notice given “as soon as practicable.”

        In sum, when American Bank was served with the complaint

and summons in the Cueto suit on June 18, 2008, its duty to

notify    St.       Paul    Insurance      was      triggered.      Yet,     it   did       not

provide St. Paul Insurance with notice until eight months later,

on February 25, 2009.             No one can credibly argue that that lapse

of time was “as soon as practicable.”                        As a result, American

Bank’s notice to St. Paul Insurance was not timely.

       American Bank maintains correctly, however, that even if it

failed to provide notice as soon as practicable, Maryland law

still    requires          that   St.    Paul       Insurance      “establish[]        by     a

preponderance of the evidence that the lack of . . . notice has

resulted in actual prejudice to [it].”                           Md. Code Ann., Ins.

§ 19-110 (emphasis added).                 The Maryland Court of Appeals has

recognized that “[i]t is very difficult to fashion a workable

‘one    size        fits   all’     standard”        to   define    actual    prejudice.

Allstate Ins. Co. v. State Farm Mut. Auto. Ins. Co., 767 A.2d

831, 841 (Md. 2001).                 But under the facts before it, which

involved       an    insured’s      lack      of    cooperation     rather    than      late

notice, the Maryland Court of Appeals interpreted § 19-110’s

prejudice requirement to hold that the insurer suffered actual

prejudice when “there was a credible defense to be presented and

                                               16
. . . [the insured’s] non-cooperation precluded State Farm from

even presenting that defense.”                 Id. at 844.

       In this case, the district court concluded that American

Bank’s late notice precluded St. Paul Insurance from exercising

its contractual rights, as stated in the policy, to participate

in     American      Bank’s     defense          and      advance     credible    defense

strategies       before      the      default        judgment       was    entered.       It

explained:

       Had the insured not breached its obligation [to give
       timely notice and] to defend, this would have been a
       relatively trivial matter [based on a lack of personal
       jurisdiction] and, by any standards -- with apologies
       to Potter Stewart, I know it when I see it -- this is
       prejudice.

       Even   though      American        Bank      had    the   contractual      duty    to

provide its own defense, for which it would, under the policy,

be    reimbursed     by   St.      Paul    Insurance,        the     policy   nonetheless

provides that St. Paul Insurance “shall have the right and shall

be    given   the    opportunity        to     effectively       associate      with,    and

shall be consulted in advance by, [American Bank] regarding:

(a)     the     selection       of      appropriate          defense       counsel;      (b)

substantive       defense     strategies,           including       decisions    regarding

the    filing       and   content         of     substantive         motions;    and     (c)

settlement negotiations.”                 (Emphasis added).               American Bank’s

late    notice      denied      St.    Paul         Insurance      the    opportunity    to

participate in the selection of counsel, to speak with counsel,

                                               17
and    to    discuss    credible        defense         strategies       for     dismissing

Cueto’s suit before the default judgment.                             St. Paul Insurance

was also denied the opportunity to involve itself in considering

the possibility of settlement negotiations with Cueto prior to

the    default     judgment       and   prior      to     the    expenditure       of    $1.8

million incurred by American Bank to vacate it.                                When a late

notice      precludes        an    insurer         from      exercising          meaningful

contractual rights provided to it by the policy -- in this case,

all the contractual rights -- we agree with the district court

that the insurer has suffered actual prejudice.

       Accordingly,     we        affirm     the      district         court’s    judgment

concluding that St. Paul Insurance was entitled, by reason of

late notice, to deny insurance coverage to American Bank for the

Cueto suit.        Because we conclude that American Bank’s notice was

untimely     and    caused    prejudice,         we   need      not    address    St.    Paul

Insurance’s alternative argument that American Bank should also

be    denied   coverage      because       it    breached       its     contractual      duty

timely to defend the Cueto action.

                                            III

       American Bank also contends that St. Paul Insurance waived

or    is    estopped    from      asserting        its     late-notice         defense    to

coverage and that the district court erred in granting St. Paul

Insurance summary judgment with respect to these arguments.                               It

                                            18
relies    mainly      on   a   telephone      conversation        initiated       by    its

general counsel, Erik Bolog, with St. Paul Insurance’s claims

counsel, Christopher Nelson, on February 27, 2009, during which

Nelson     stated,      according       to    American     Bank,      that      insurance

coverage existed for the Cueto suit.                    American Bank claims that

it   relied      on   this     representation       “in       deciding     to   continue

litigating the Cueto Action, whereas it would have pursued early

settlement if St. Paul had instead declined coverage.”

     The    district       court,      relying     on   the    absence     of   evidence

showing     that      American    Bank       changed     its    position,       rejected

American Bank’s arguments, stating, “I don’t see any basis on

this summary judgment record, with all of the inferences given

in favor of American Bank Holdings, that there was any change of

position in reliance upon that or any prejudice to American Bank

Holdings to the extent that I credit the notion that someone

said, ‘You’re covered,’ and then changed their mind.”                           We agree

with the court’s conclusion for multiple reasons.

     With respect to waiver, the record facts do not support any

finding of an intentional waiver by St. Paul Insurance of its

late-notice      defense.        The    record     shows      that   American     Bank’s

insurance broker forwarded the Cueto suit papers by email to St.

Paul Insurance on February 25, 2009, telling St. Paul Insurance

that American Bank was “no[t] involved or related to any of the

entities    or     individuals      that     are   listed.”          The   broker      also

                                             19
advised St. Paul Insurance that American Bank had hired the law

firm of Bryan Cave in St. Louis to represent it.                       Responding the

next day, February 26, St. Paul Insurance acknowledged receipt

of the email, stating that it “retain[ed] the right to raise any

and   all     coverage     issues   and     to       assert   appropriate       coverage

defenses that may apply during the course of our investigation.”

      On the following day, February 27, 2009, American Bank’s

general counsel Bolog called St. Paul Insurance’s claims counsel

Nelson to discuss the suit.              As of that time, American Bank had

already retained Bryan Cave to represent it in the Cueto suit,

and Bryan Cave had already filed a motion on American Bank’s

behalf to      vacate      the   $98.5   million       default      judgment.     Bolog

stated   in    his   deposition      that       he   called    because   of     the   big

problem he had, especially because the judgment was so large and

the suit was so frivolous.               In this context, he asked whether

American      Bank   was    “covered      for    this,”       and   Nelson    responded

“yes.”      Taken in context, this statement related to whether the

type of claim described by Bolog would fall under the policy and

did not respond or even relate to a late-notice question.                             The

conversation, according to Bolog, went as follows:

      My recollection of the call with Mr. Nelson was that I
      called him and told him we had a problem. It was a 98
      million-dollar judgment against us.

      The judgment was in my mind disturbing for numerous
      factors, most importantly being that [American Bank]
      had never done any business whatsoever in Illinois,

                                           20
    had no relationship whatsoever to the transaction,
    which was part of the underlying claim, that somehow a
    by now I know convicted felon who had done 7 and a
    half years for fraud and other related issues upon a
    court had obtained a 98 million-dollar judgment
    against [American Bank] for something [American Bank]
    had no involvement in nor did [American Bank’s
    subsidiary] for that matter have any involvement in,
    that the judgment on its face was certainly corrupt,
    that somehow 66 million dollars in punitive damages
    had been awarded into a trust on behalf of St. Clair
    County, and this judge allowed this person who had
    been disbarred and spent 7 and a half years in prison
    for frauds upon the court to be the trustee, to be
    able to use those funds for whatever purpose he so
    chose, including settling the compensatory part of the
    claim, and then awarded 30 some-odd million dollars in
    legal fees to a law firm that entered its appearance
    the day after the judgment had been entered. I found
    all that to be disturbing to say the least.

    Then I’ve learned of course that the plaintiff was a
    former trial lawyer who was a convicted felon.       I
    advised him that this felon’s brother was the chief
    judge of this court, that the associate judge,
    Gleeeson, who was the judge that signed this order,
    somehow needed the approval of the brother to become a
    tenured judge, and that from all accounts from
    newspapers and all the information I could gather, St.
    Clair County, Illinois, was known as a judicial
    cesspool and that questionable judgments and verdicts
    happened there on a regular basis.

    I asked him if we were covered for this.      He said,
    yes.   He did not equivocate.    He did not say, we’re
    taking a look at it.    I have no recollection of any
    type of ambivalence in his position.

(Emphasis added).    Remarkably, this conversation did not include

any discussion of notice, nor did it indicate that St. Paul

Insurance   was   waiving   any   late-notice   defense.   Indeed,   the

record makes clear that St. Paul Insurance intended to preserve

a late-notice defense, as further evidenced during the next two

                                    21
weeks, when it drafted at least two letters stating that as its

position.     In   each    draft,      it    recited     the    facts    and     then

explained,   “Although     it   appears       that     the   Claim     involves    a

Lending Act [for which Lender Liability Coverage was afforded by

the policy], it is not clear whether notice was given to [St.

Paul Insurance] as soon as practicable.                  [St. Paul Insurance]

reserves the right to deny coverage due to late notice.”                           On

April 15, 2009, at the conclusion of its investigation, St. Paul

Insurance sent American Bank a letter formally denying coverage

for a lack of timely notice.

     In this context, there was no waiver of the late-notice

defense.     Maryland     Law   requires       that    waiver    be     “an   actual

intention    to    relinquish     an        existing    right,        benefit,     or

advantage, with knowledge, either actual or constructive, of its

existence, or such conduct as to warrant an inference of such

intention to relinquish.”       Creveling v. GEICO, 828 A.2d 229, 243

(Md. 2003) (emphasis added) (internal quotation marks omitted)

(quoting GEICO v. Grp. Hosp. Med. Servs., 589 A.2d 464, 466 (Md.

1991)).

     If Bolog’s testimony is accurate -- and, at this stage we

assume that it is -- it appears that Nelson’s affirmation of

coverage was referring to no more than the nature of the claim

as a Lending Act and the Lender Liability Coverage provided by

the policy, as noted in Nelson's draft letters.                       In no manner

                                       22
could Nelson’s response be construed as an actual intention to

waive the late-notice defense.                  And there is no basis to infer

waiver     from       Nelson’s    conduct.        Moreover,        because     St.   Paul

Insurance had the suit papers for only a day, it would not be

reasonable to conclude that it had conducted an investigation

and intentionally decided in the conversation on February 27,

2009, to waive any late-notice defense.

      American Bank also relies on a telephone conversation on

March 16, 2009, in which St. Paul Insurance’s claims counsel

allegedly told American Bank representatives that American Bank

could not settle the Cueto suit without St. Paul Insurance’s

consent,        allegedly       implying     coverage.            But,   again,      that

conversation did not relate to the late-notice issue, nor did it

in any way indicate a waiver of the notice requirement.                           To the

contrary, at the time the statement was made, St. Paul Insurance

was     still     considering       whether      to     provide     coverage    with   a

reservation of rights to deny coverage due to late notice, as

indicated in the draft letters dated March 13 and March 16,

2009.      While       St.   Paul   Insurance         ultimately    decided     to   deny

coverage,       the    record    facts     do    not,    to   any    extent,     support

American Bank’s claim that this March 16 conversation manifested

St. Paul Insurance’s intent to waive its right to assert a late-

notice defense to coverage.

                                           23
        The same record facts also require rejection of American

Bank’s estoppel argument.              Under Maryland law, “[o]ne asserting

the benefit of an estoppel must have been misled to his injury

and have changed his position for the worse.”                          Rubinstein v.

Jefferson      Nat’l    Life    Ins.     Co.,    302    A.2d   49,    52   (Md.    1973)

(emphasis added).           We again see no evidence in the record that

would permit a reasonable jury to conclude that American Bank

actually changed its position for the worse in reliance on its

conversations with St. Paul Insurance representatives.

        American Bank contends that, had it known that St. Paul

Insurance      would    deny    coverage       in    April   2009,    it   would    have

sought a settlement, mediation, or other resolution of the Cueto

suit in February or March 2009.                     But no reasonable jury could

credit such claims.             Indeed, Bolog’s conversation with Nelson

and American Bank’s early retention of Bryan Cave suggest that,

based    on    its     assessment      that      the   suit    was     frivolous      and

apparently corrupt, American Bank was not thinking of settlement

or an alternative dispute resolution at all.                       Moreover, there is

no evidence that if it had sought a settlement, it would have

received a more favorable outcome than it actually received --

i.e., vacating the default judgment and dismissing the case at a

cost    of    some   $1.8     million.      In      fact,    the    only   evidence    of

settlement was Cueto’s later offer to settle for $10 million,

which    American      Bank    refused    to     accept.       In    short,   American

                                           24
Bank’s       estoppel    argument        amounts       to    pure     speculation.                See

Creveling, 828 A.2d at 247 (refusing to find an estoppel when

the   “prejudice        or   detrimental         reliance      suffered         . .      .    [was]

purely speculative”).

        We   therefore       conclude         that    the    district         court      properly

rejected American Bank’s waiver and estoppel arguments.

                                                IV

        Finally,   American         Bank      contends      that     St.      Paul      Insurance

failed to act in good faith in denying coverage for the Cueto

claim, in violation of Maryland statutory law.                                  See Md. Code

Ann., Cts. & Jud. Proc. § 3-1701.                      We conclude that this claim

was properly dismissed.

        Section 3-1701(d)(1)(i) provides that the statutory claim

for failure to act in good faith applies to civil actions in

which    the    insured      seeks       a    determination         of   whether         coverage

actually       exists    under      an       insurance      policy,      and       §    3-1701(e)

requires a finding “in favor of the insured” on that coverage

question.       See Md. Code Ann., Cts. & Jud. Proc. §§ 3-1701(d), 3-

1701(e).       In view of our ruling that the district court did not

err     in    concluding      that       American      Bank    failed         to       satisfy     a

condition       precedent      of    coverage         by    failing        to    give        timely

notice, American Bank cannot satisfy the statutory requirement

under    §    3-1701(e)      that    there       be   a     finding      in     favor        of   the

                                                25
insured that coverage actually existed.   We therefore affirm the

district court’s summary judgment on this claim.

                            *   *    *

     For the reasons given, the judgment of the district court

is

                                                        AFFIRMED.

                                26