Court Opinion

ID: 5123561
Source: CourtListenerOpinion
Date Created: 2021-11-04 19:00:33.642999+00
Date Added: 2024-06-11T08:22:34.398809
License: Public Domain

UNPUBLISHED

                       UNITED STATES COURT OF APPEALS
                           FOR THE FOURTH CIRCUIT

                                      No. 20-1937

JOWITE LIMITED PARTNERSHIP,

                    Plaintiff – Appellant,

             v.

FEDERAL INSURANCE COMPANY,

                    Defendant – Appellee.

Appeal from the United States District Court for the District of Maryland, at Baltimore.
Deborah Lynn Boardman, Magistrate Judge. (1:18-cv-02413-DLB)

Argued: September 21, 2021                                   Decided: November 4, 2021

Before QUATTLEBAUM and RUSHING, Circuit Judges, and Rossie D. ALSTON, Jr.,
United States District Judge for the Eastern District of Virginia, sitting by designation.

Affirmed by unpublished per curiam opinion.

ARGUED: Ira Lee Oring, FEDDER AND GARTEN PROFESSIONAL ASSOCIATION,
Owings Mills, Maryland, for Appellant. Bryant Green, NILES, BARTON & WILMER,
LLP, Baltimore, Maryland, for Appellee. ON BRIEF: Jay Abarbanel, FEDDER AND
GARTEN PROFESSIONAL ASSOCIATION, Owings Mills, Maryland, for Appellant.
Craig D. Roswell, NILES, BARTON & WILMER, LLP, Baltimore, Maryland, for
Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

       In 2017, Appellant Jowite Limited Partnership sought coverage from Appellee

Federal Insurance Company for damage to a building under an all-risk insurance policy

(the “Policy”). Citing various exclusions in the Policy, including exclusions for loss or

damage caused by settling and for loss or damage caused by faulty planning or design,

Federal denied coverage and Jowite sued. On cross-motions for summary judgment, the

district court denied Jowite’s motion and granted Federal’s. Jowite appealed. Finding no

reversible error, we affirm the district court.

                                                  I.

       Jowite owns three apartment buildings in Easton, Maryland that were originally

constructed in the late 1980s. At some point in 1999, a property manager noticed that one

of the buildings—Building 300—was sinking into the ground. Repairs to Building 300

were attempted but were unsuccessful.

       In January 2013, a new property management company began managing the

apartment buildings. When the new management company noticed that Building 300 was

sinking, it hired an engineering firm to evaluate the settlement issues and a construction

company to repair the building. The engineering firm attributed Building 300’s settlement

problems to, in part, “a concentrated load that may not have been accounted for in the

original design and over time has sagged due to insufficient support in th[e] area.” J.A.

1250. The construction company attempted to fix the problems which the engineering firm

identified by installing several hydraulic jacks underneath the support beams in the

building’s interior. While installing the hydraulic jacks, the construction company noticed

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several other structural problems in the building. Most significantly, the construction

company discovered that the foundation and the footer near the back wall of the building

had “failed[,] causing the building to become extremely out of level.” J.A. 617.

       Following the repairs, the engineering firm reinspected Building 300 and found

additional structural problems. Roughly two years later, the building was inspected again,

this time by a new construction company, which recommended that the building be

demolished completely.     Rather than undertaking additional repairs, Jowite filed an

insurance claim with Federal under the Policy, seeking coverage for the damage caused to

the building “due to ground settling.” J.A. 1385.

       After receiving Jowite’s claim, Federal retained its own structural engineer to

inspect Building 300. Federal’s engineer observed that the damage to the building,

including cracks to the building’s exterior, were “consequences that may have occurred as

a result of ongoing settlement over the building’s approximately 30-year life.” J.A. 635.

Federal’s engineer also observed that the building sat on soil containing organic matter,

which is apparently naturally degradable and compressible, and that the building had

irregular shaped footings with off-centered piers. Jowite’s retained liability expert opined

that “the root cause of the problem . . . [was] inadequate design and construction of [the]

building foundation[],” J.A. 801, and that an “adequately designed and supported”

foundation would not have settled. J.A. 894.

       Federal denied Jowite’s claim for coverage for the damage to Building 300, citing

several exclusions in the Policy, including the defective design exclusion and the settling

exclusion.

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The Policy’s defective design exclusion provides:

       This insurance does not apply to loss or damage (including the cost of
       correcting or making good) caused by or resulting from any faulty,
       inadequate or defective:

             • planning, zoning, development, surveying, siting;
             • design, specifications, plans, workmanship, repair, construction,
               renovation, remodeling, grading, compaction;
             • materials used in repair, construction, renovation or remodeling;
               or
             • maintenance

       of part or all of any property on or off the premises shown in the
       Declarations.

       This Planning, Design, Materials Or Maintenance exclusion does not apply
       to ensuing loss or damage caused by or resulting from a peril not otherwise
       excluded.

J.A. 64.

The Policy’s settling exclusion provides:

       This insurance does not apply to loss or damage caused by or resulting
       from settling, cracking, shrinking, bulging or expansion of land, paved or
       concrete surfaces, foundations, pools, buildings or other structures.

       This Settling exclusion does not apply to ensuing loss or damage caused by
       or resulting from a specified peril.

J.A. 68. 1

       On cross-motions for summary judgment, the district court denied Jowite’s motion

and granted Federal’s, concluding that both the defective design and settling exclusions

barred coverage. On appeal, Jowite argues that the district court incorrectly interpreted

       1
           Bolded terms are defined by the Policy.

                                              4
both exclusions under Maryland law. As to the design exclusion, Jowite contends that the

district court improperly interpreted the “ensuing loss” exception to the exclusion. That

exception restores coverage for “ensuing loss or damage caused by or resulting from a peril

not otherwise excluded.” Jowite maintains that the district court erred by holding that the

exception could not apply where the loss or damage could not be separated from the

defectively designed property. As to the settling exclusion, Jowite argues that the district

court erred by refusing to apply the “efficient proximate cause” rule to conclude that the

defectively design and construction of Building 300’s foundation, not the “settling,” was

the proximate cause of the loss.

                                              II.

       We review de novo a district court’s decision to grant summary judgment, applying

the same legal standards as the district court and viewing all facts and reasonable inferences

in the light most favorable to the nonmoving party. News & Observer Publ’g Co. v.

Raleigh-Durham Airport Auth., 597 F.3d 570, 576 (4th Cir. 2010). Summary judgment is

warranted “if the movant shows that there is no genuine dispute as to any material fact and

the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “Facts are

material when they might affect the outcome of the case, and a genuine issue exists when

the evidence would allow a reasonable jury to return a verdict for the nonmoving party.”

News & Observer Publ’g Co., 597 F.3d at 576 (internal quotation marks omitted). If the

nonmoving party “has failed to make a sufficient showing on an essential element of [his]

case with respect to which [he] has the burden of proof,” summary judgment is appropriate.

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “When faced with cross-motions for

                                              5
summary judgment, the court must review each motion separately on its own merits to

determine whether either of the parties deserves judgment as a matter of law.” Rossignol

v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (internal quotation marks omitted).

       A federal court sitting in diversity must apply the forum state’s substantive law.

Francis v. Allstate Ins. Co., 709 F.3d 362, 369 (4th Cir. 2013). Thus, as a court exercising

diversity of citizenship jurisdiction pursuant to 28 U.S.C. § 1332, the district court correctly

concluded that Maryland law governs the interpretation of the Policy. J.A. 1577.

                                              III.

       Based upon our review of the record, there appear to be no disputed material facts

in this case.

       Although Jowite concedes that there is no controlling Maryland authority directly

applicable to either exclusion, Jowite instead argues that the district court failed to

accurately predict how Maryland courts would interpret each exclusion. While we agree

that there is no controlling Maryland authority interpreting either exclusion, 2 principles of

Maryland insurance policy interpretation are well-settled. “[T]he interpretation of an

insurance policy is governed by the same principles generally applicable to the construction

of other contracts[.]” Mitchell v. AARP Life Ins. Program, New York Life Ins. Co., 779

       2
         The parties heavily rely on two Maryland district court cases in Selective Way Ins.
Co. v. Nat’l Fire Ins. Co. of Hartford, 988 F. Supp. 2d 530 (D. Md. 2013) and Bethany
Boardwalk Group LLC v. Everest Security Ins. Co., No. ELH-18-3918, 2020 WL 1063060
(D. Md. Mar. 5, 2020). Both cases interpret similar insurance policy terms, but they are
ultimately inapposite. For example, Selective Way provides only limited guidance because
the relevant policy language differs from the language at issue here.

                                               6
A.2d 1061, 1069 (Md. Ct. Spec. App. 2001) (citing Philadelphia Indem. Ins. Co. v.

Maryland Yacht Club, Inc., 742 A.2d 79, 85 (Md. 1999)). When determining coverage

under an insurance policy, “‘the primary principle of construction is to apply the terms of

the insurance contract itself.’” Universal Underwriters Ins. Co. v. Lowe, 761 A.2d 997,

1005 (Md. Ct. Spec. App. 2000) (quoting Bausch & Lomb v. Utica Mut. Ins. Co., 625 A.2d

1021, 1031 (Md. 1993)). Courts must consider the policy’s plain language and assign the

“words and phrases their ordinary and accepted meanings as defined by what a reasonably

prudent lay person would understand them to mean.” Kendall v. Nationwide Ins. Co., 702

A.2d 767, 771 (Md. 1997).

       Generally, when an insured claims a breach of an insurance policy “the insured bears

the burden of proving every fact essential to his or her right to recovery, ordinarily by a

preponderance of the evidence.” Gen. Ins. Co. v. Walter E. Campbell Co., 241 F. Supp.

3d 578, 597 (D. Md. 2017) (citing N. Am. Acc. Ins. Co. v. Plummer, 176 A. 466, 469 (Md.

1935)). If the insured meets its burden and the insurer relies upon an exclusion to deny

coverage, the insurer bears the burden of proving that the exclusion applies. See Finci v.

Am. Cas. Co., 593 A.2d 1069, 1087 (Md. 1991).

       Applying these straightforward rules of insurance policy interpretation, we agree

with the district court that the design exclusion bars coverage for the claim. Essentially,

Jowite argues that the collapse 3 of Building 300 could be both the “peril” and the “loss or

       3
         The parties disagree whether Building 300 actually “collapsed,” but the district
court did assume, for the purposes of its analysis, “that a serious impairment of the building
has occurred such that it is a ‘collapse’ under Maryland law.” J.A. 1584-85.

                                              7
damage” under the ensuing loss exception. But Jowite’s interpretation runs afoul of

Maryland’s primary principle of contract construction—to construe an insurance policy’s

text consistent with what an ordinary layperson would understand it to mean—to say

nothing of the fact that Jowite’s interpretation would also strip the design exclusion of any

real meaning. We therefore agree with the district court’s conclusion that the ensuing loss

exception cannot reasonably be understood to mean that the collapse of Building 300 could

be both the “ensuing loss or damage” and the “peril not otherwise excluded.”

       While we conclude that the district court committed no reversible error in holding

that the design exclusion bars coverage of Jowite’s claim, we also observe, without

deciding, that the result of this case would be unchanged were we to review the district

court’s application of the settling exclusion.

                                                                                AFFIRMED

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