All Class Constr., LLC v. Mut. Benefit Ins. Co.

3 F.Supp.3d 409

ALL CLASS CONSTRUCTION, LLC, et al., Plaintiffs

v.MUTUAL BENEFIT INS. CO., Defendant.

Civil No. JKB–13–3358.

United States District Court, D. Maryland.

Feb. 26, 2014.

Steven Lee Tiedemann, Westminster, MD, for Plaintiffs.

Charles B. Peoples, Thomas Thomas and Hafer LLP, Baltimore, MD, for Defendant.

MEMORANDUM

JAMES K. BREDAR, District Judge.

Pending before the Court is Defendant Mutual Benefit Insurance Company's (“Mutual Benefit”) motion to dismiss or, in the alternative, motion for summary judgment. (ECF No. 9.) The Court has considered it, the Plaintiffs' opposition (ECF No. 11), and Mutual Benefit's reply (ECF No. 12). No hearing is necessary. Local Rule 105.6 (D.Md. 2011). The motion will be granted.

I. Background

This is an insurance coverage case brought originally in Maryland state court and removed on the basis of diversity to this Court. Plaintiffs are All Class Construction, LLC (“All Class”), William Chaffman, David Dzergoski, and John Cirone. Plaintiffs allege two causes of action against Mutual Benefit: Count I—violation of Maryland statutory law for failure to act in good faith in denial of Plaintiffs' claim for coverage, and Count II—breach of contract or third-party contract. (Compl., ECF No. 2.) Mutual Benefit has supplied to the Court a copy of the insurance policy at issue with its motion (Def.'s Mot. Ex. 1, ECF No. 9–1), and Plaintiffs do not contest its authenticity or that it is integral to their complaint. Accordingly, the Court will rely upon it in considering Defendant's motion. See Am. Chiropractic Ass'n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir.2004).

A. Insurance Policy

The policy provided, inter alia, commercial property coverage and commercial general liability coverage and was issued on December 6, 2012, to nonparty BOC Masonry, LLC, which was located in Hanover, Pennsylvania, and which had an additional location in Carroll County, Maryland. ( Id. ECF No. 9–1 at 1.) The policy period was January 28, 2013, to January 28, 2014. ( Id.) On February 19, 2013, the policy was amended to add All Class, also located in Carroll County, Maryland, as an insured, effective retroactively to the policy's inception date of January 28, 2013. ( Id. ECF No. 9–1 at 136.) By its terms, the amended policy included as insureds the members and managers of All Class ( id. ECF No. 9–1 at 31), and it seems to be understood by all parties to the instant suit that Chaffman, Dzergoski, and Cirone fall within that definition.

Relevant to this case, the policy provided coverage for “personal and advertising injury liability,” and if the policy applied, the coverage included Mutual Benefit's duty to defend the insureds against any suit seeking those damages. ( Id. ECF No. 9–1 at 28.) “Personal and advertising injury” (hereinafter, “P & A Injury”) was defined to mean the following:

injury, including consequential “bodily injury”, arising out of one or more of the following offenses:

a. False arrest, detention or imprisonment;

b. Malicious prosecution;

c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;

d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;

e. Oral or written publication, in any manner, of material that violates a person's right of privacy;

f. The use of another's advertising idea in your “advertisement”; or

g. Infringing upon another's copyright, trade dress or slogan in your “advertisement”.

( Id. ECF No. 9–1 at 36.)

The policy defined “advertisement” in the following way:

[A] notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. For the purposes of this definition:

a. Notices that are published include material placed on the Internet or on similar electronic means of communication; and

b. Regarding web-sites, only that part of a web-site that is about your goods, products or services for the purposes of attracting customers or supporters is considered an advertisement.

( Id. ECF No. 9–1 at 34.)

The policy also included some exclusions to P & A Injury coverage that might be considered relevant to this case:

a. Knowing violation of rights of another b. Material published with knowledge of falsity

c. Material published prior to policy period

...

f. Breach of contract

...

i. Infringement of copyright, patent, trademark or trade secret

...

p. Recording and distribution of material or information in violation of law

( Id. ECF No. 9–1 at 28, 39.)

Finally, the policy addressed limits of insurance and provided the following in pertinent part:

1. The Limits of Insurance shown in the Declarations and the rules below fix the most we will pay regardless of the number of:

a. Insureds;

b. Claims made or “suits” brought; or

c. Persons or organizations making claims or bringing “suits”.

2. The General Aggregate Limit is the most we will pay for the sum of:

a. ...;

b. ...; and

c. Damages under Coverage B [P & A Injury].

3. ...

4. Subject to Paragraph 2. above, the Personal and Advertising Injury Limit is the most we will pay under Coverage B for the sum of all damages because of all “personal and advertising injury” sustained by any one person or organization.

( Id. ECF No. 9–1 at 32.) The Declarations page limited the P & A Injury coverage to $1 million per person or organization and provided a General Aggregate Limit of $2 million. ( Id. ECF No. 9–1 at 1.)

B. Underlying Suit

Mutual Benefit has also provided a copy of the Underlying Complaint that was filed against Plaintiffs and that precipitated Plaintiffs' claim for P & A Injury coverage. ( Id. ECF No. 9–2.) Again, Plaintiffs have relied upon this complaint as the basis for their suit here and have not contested the authenticity of it. Accordingly, the Court will rely upon it in its consideration of Mutual Benefit's motion.

The Underlying Plaintiffs, WGG, Inc., and Window Specialists, Inc., sued Dana LeCompte, individually and d/b/a L.I. Glazing; L.I. Glazing; All Class; Chaffman; Dzergoski; and Cirone in federal district court, Middle District of Pennsylvania. Civ. No. JEJ–13–864, complaint filed April 5, 2013. Neither LeCompte nor L.I. Glazing is a party to the instant suit.

Essentially, the Underlying Complaint alleges that the Underlying Plaintiffs entered into several contractual arrangements with LeCompte who, in exchange for his becoming an officer of the Underlying Plaintiffs and his accepting certain forms of compensation, agreed to merge his sole proprietorship, L.I. Glazing, into the Underlying Plaintiffs and assign certain valuable contracts to Underlying Plaintiffs. LeCompte also entered into a nonsolicitation and noncompetition agreement and a confidentiality agreement pertaining to the Underlying Plaintiffs' confidential information and trade secrets. Despite these contractual obligations, LeCompte was, at the same time, working secretly with Chaffman, Dzergoski, and Cirone to form All Class and to assign the same valuable contracts to All State that he had assigned to the Underlying Plaintiffs; further, he was providing information to Underlying Plaintiffs' newly assigned contracts customers and its bond and surety company that caused Underlying Plaintiffs to be in default on at least one contract, to lose other business to All Class, and to incur damage to their customer relationships. LeCompte also allegedly solicited new business on behalf of All State, in derogation of his obligations to the Underlying Plaintiffs. In addition, LeCompte was alleged to have stolen the Underlying Plaintiffs' confidential information and trade secrets and to have caused the Underlying Plaintiffs irreparable damage by deleting significant customer information from the Underlying Plaintiffs' computer system. Although the primary bad actor was alleged to be LeCompte, All State, Chaffman, Dzergoski, and Cirone were alleged to be complicit in LeCompte's maneuverings. ( Id. ECF No. 9–2 at 8–25.)

The Underlying Complaint included ten counts, six of which named All State, Chaffman, Dzergoski, and Cirone as defendants:

• Count III: tortious interference with contract and with existing and prospective business relations;

• Count IV: tortious interference with contractual relations

• Count V: violation of the Pennsylvania Uniform Trade Secrets Act

• Count VI: misappropriation of confidential information, trade secrets and customer relationships/inevitable disclosure

• Count VII: unfair competition

• Count X: civil conspiracy

C. Denial of Insurance Coverage

Plaintiffs allege they submitted a claim for coverage to Mutual Benefit in May or June of 2013. (Compl. ¶ 10.) Coverage was denied in a letter dated June 11, 2013. ( Id. ¶ 16.) Plaintiffs' present counsel wrote a letter on August 16, 2013, to Mutual Benefit and “requested a complete copy of the Policy and all endorsements, amendments, modifications, etc.” and further “asked for a detailed denial of the Claim, and an indication of the specific Policy provisions implicated in each reason for denial.” ( Id. ¶¶ 35, 36.) On August 20, 2013, he wrote another letter to Mutual Benefit and notified them again of the claim and the Underlying Suit and requested coverage. ( Id. ¶¶ 48, 49.) He received a letter from Mutual Benefit on August 21, 2013, reaffirming the denial of the claim. ( Id. ¶ 50.) He wrote an additional letter on August 27, 2013, asking for “an itemization of the specific reasons for denial and citations to exact Policy provisions” and asserting that the claim was within the P & A Injury coverage. ( Id. ¶ 52, 53.) On September 10, 2013, Mutual Benefit's Maryland counsel sent a letter denying the claim. ( Id. ¶ 57.) The Pennsylvania federal case was settled “in...