Mt. Hawley Ins. Co. v. Adell Plastics, Inc. (Maryland U.S.D.C.)

Filed:  December 3, 2018

Opinion by:  James K. Bredar

Holding:  The United States District Court for the District of Maryland (1) granted a motion for partial reconsideration to modify an interlocutory judgment and (2) denied motion for summary judgment due to genuine disputes of fact surrounding a claim for lack of good faith.

Facts: 

Defendant (“Manufacturer”) ran a business with several buildings covered by a commercial insurance policy maintained by Plaintiff (“Insurer”).  In late 2016, fire destroyed several buildings at Manufacturer’s Baltimore facility. 

Insurer sued in early 2017 seeking a declaration that the contract did not cover Manufacturer’s losses resulting from fire.  A period of significant discovery precipitated cross-motions for summary judgment; the United States District Court of Maryland denied Manufacturer’s motion in full and Insurer’s in part.  Insurer subsequently filed motions to partially reconsider and again for summary judgment, instituting the present proceeding before the same adjudicator.

Analysis: 

First, the court approached the threshold matter of the partial motion to reconsider.  Below, the court had ruled on Manufacturer’s claim that Insurer had lacked good faith in carrying out its investigation when the court denied summary judgment.  Insurer now posited that the court had failed to rule on whether Insurer had demonstrated good faith in carrying out its investigation.  Concurring with Insurer, the court agreed to modify its interlocutory judgment below and grant the motion to reconsider.

Having successfully landed its first punch, Insurer next needed to execute a haymaker: establish the absence of any genuine dispute of material fact as to both elements of a lack of good faith claim.  In order to prevail in summary judgment, Insurer would have to demonstrate that based on the developed record, no dispute of any material fact existed and that Insurer was entitled to judgment as a matter of law on the good faith claim.  "Good faith" is defined by Maryland statute "as an informed judgment based on honesty and diligence supported by evidence the insurer knew or should have known at the time the insurer made a decision on a claim." Md. Cts. & Jud. Proc. Code § 3-1701(a)(4).  The court found that few cases explained this definition of good faith, but that Maryland case law tended to take a totality-of-the-circumstances approach looking at what the insurer did to resolve the coverage dispute, the substance of the coverage dispute, and the insurer's diligence.

Returning to the factual record established below, the court found an abundance of evidence establishing a genuine dispute over both elements.  Insurer had pointed to its claim professional’s declarations and correspondence in denying the insurance claim.  Manufacturer had supported its assertions of bad faith with deposition testimony.  The record supported a genuine dispute as to why Insurer had stopped covering Manufacturer’s losses after attempts at subrogation had failed.

Finding genuine dispute of material fact as to both elements of the lack of good faith claim, the court denied motion for summary judgment.

The full opinion is available in PDF.