Monday, September 30, 2013

Boiardi v. Freestate (Maryland U.S.D.C.)

Filed: September 25, 2013
Opinion by: Judge Ellen Lipton Hollander

Held: Question of fact precluded summary judgment where a plaintiff homeowner sued her insurance broker for negligence in failing to obtain insurance for the homeowner's property, and the broker was unable to demonstrate that there was no material dispute that insurance could not have been obtained for the property.

Facts: Plaintiff and her late husband were owners of a home.  At its purchase in 2000, the home was insured through Chubb Insurance Company ("Chubb").  Following the death of her husband in 2007, the insurance premium for the home was not paid and on August 20, 2008, Chubb canceled the policy for nonpayment.  The mortgagee, Washington Mutual Bank ("WMB"), pursuant to the deed of trust, obtained a lender-placed insurance policy at a higher annual premium than the Chubb policy.  WMB billed this premium to the escrow account for the home loan.  Plaintiff subsequently learned of WMB's actions and contacted her insurance broker, the Defendant,  on January 9, 2009. She requested that the Defendant find less expensive insurance for the home.

The Defendant, with the assistance of an associate, contacted two other insurers to find alternate insurance for the property, including AIG, however, the broker failed to secure coverage.  While the application for coverage with AIG was pending, a fire broke out in the garage of the home resulting in substantial damage to the home and its contents. A claim was apparently made against the policy obtained by the bank. That insurance company issued a check payable to the Plaintiff's deceased husband on October 5, 2009 for a portion of the loss. However, the Plaintiff failed to cash the check or otherwise have ASIC re-issue the payment prior to the foreclosure sale of the home in 2010. The Plaintiff subsequently brought this action against the Defendant for negligence, breach of fiduciary duty, negligent misrepresentation, intentional misrepresentation, and fraud.  Following discovery, the Defendant moved for summary judgment on all counts.

Analysis: Under Maryland law, an insurance broker, retained to obtain insurance, may be liable for negligence to his employer if he (1) fails to obtain a policy and (2) fails to inform his employer of his failure to obtain the insurance.  See Intl. Bhd. of Teamsters v. Willis Corroon Corp. of Md., 369 Md. 724 (2002).  Alternately, a broker can be liable to his employer if he fails to exercise reasonable diligence and due care, resulting in a void or defective policy issuing to the employer.  See Lowitt v. Pearsall Chem. Corp. of Md., 242 Md. 245 (1966).  In order to prevail on a claim based in negligence in Maryland, a plaintiff has the burden to prove that the defendant had a duty of care, which he breached, proximately causing the plaintiff's damages.  See 100 Inv. Ltd. P'ship v. Columbia Town Ctr. Title Co., 430 Md. 197 (2013).  Unavailability of insurance is an affirmative defense of the defendant broker.  The defendant raising this defense has the burden to demonstrate insurance was not available in order to prevail.  United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488 (4th Cir. 1998).

The Defendant argued that neither insurer he approached would have issued insurance because of the prior policy cancelation, the home itself had a poor insurance rating, one insurer approached by the Defendant had denied coverage, and the Defendant's expert opined that AIG would have ultimately denied insurance even if the property had not been lost to a fire while the application was pending.

The Court found that there was a genuine material dispute as to the insurability of the property because the home had previously been insured, was subsequently insured under the policy obtained by the bank, and a jury could have decided that AIG would have issued a policy based on statements made by the AIG underwriters prior to the fire loss.  Summary judgment as to Plaintiff's action for negligence was therefore denied.

The full opinion is available in .pdf.