Nat'l Union Fire Ins. Co. of Pittsburgh v. Fund for Animals, Inc.

451 Md. 431

153 A.3d 123

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.

v.THE FUND FOR ANIMALS, INC.

No. 18, Sept. Term, 2016

Court of Appeals of Maryland.

January 27, 2017

Linda S. Woolf (Cheryl Zak Lardieri, Joseph B. Wolf, Goodell, DeVries, Leech & Dann, LLP of Baltimore, MD) on brief for Petitioner/Cross Respondent.

Conor B. O'Croinin (Robert T. Schaffer, III, Zuckerman Spaeder LLP of Baltimore, MD) on brief for Respondent/Cross Petitioner.

Nichole Richardson, Esquire, Laura Foggan, Esquire, Wiley Rein LLP, Washington, DC, Amicus Curiae for Complex Insurance Claims Litigation Association and American Insurance Association.

Daniel J. Healy, Esquire, Anderson Kill L.L.P., Washington, DC, Amy Bach, Esquire, Daniel Wade, Esquire, United Policyholders, San Francisco, CA, Amicus Curiae for United Policyholders.

Barbera, C.J., Greene, Adkins, McDonald, Watts, Hotten, Getty, JJ.

Greene, J.

In this case, Petitioner, National Union Fire Insurance Company of Pittsburgh, Pa. ("National Union"), challenges the Court of Special Appeals' holding that Respondent, the Fund for Animals, Inc. ("FFA"), did not cause actual prejudice to National Union as a result of providing late notice of a claim against FFA under a liability insurance policy issued by National Union to FFA. See MD. CODE ANN., INS. § 19–110 (1997, 2011 Repl. Vol., 2016 Supp.). This case relates to three actions: (1) the Endangered Species Act case ("ESA Case"), where FFA and other plaintiffs sued Ringling Brothers and its owner, Feld Entertainment, Inc. ("Feld") for the mistreatment of Asian elephants in the Ringling Brothers' Circus; (2) the Racketeer Influenced and Corrupt Organizations Act case ("RICO Case"), where Feld sued FFA and the other plaintiffs named in the ESA Case for improper conduct, including paying a witness to testify in order to establish standing to sue Feld in the ESA Case and concealing those payments during discovery; and (3) the Coverage Case, where FFA sued National Union, its insurer, for not providing coverage to FFA when it was sued by Feld in the RICO Case.

This appeal stems from the coverage dispute. The findings in the ESA Case were adverse to FFA and could have been used against it in the RICO case; thus, prejudicing FFA's insurer, National Union. FFA argues that although notice of the RICO claim was late under the policy, National Union, at best, could have "monitored" the ESA Case and could not have intervened in, impacted, or influenced the ESA Case. Moreover, National Union was notified of the RICO Case before settlement, mediation, or a trial had taken place in the RICO action. Therefore, late notification of the RICO Case¹ was not prejudicial to National Union. Accordingly, as a matter of law, National Union was not prejudiced in investigating, settling, or defending the RICO claim as a result of any delay in receiving notice of claims brought against the insured. Therefore, we affirm the judgment of the Court of Special Appeals.

FACTUAL AND PROCEDURAL BACKGROUND

Background

The relevant facts are taken from evidence and testimony presented at trial. FFA, a nonprofit organization dedicated to animal protection issues and an affiliate of the Humane Society of the United States ("HSUS"), was insured under a liability policy issued by National Union. The insurance was purchased to protect HSUS and its affiliates against the risks of lawsuits and claims made against them. National Union issued a "Not–For–Profit Individual and Organization Insurance Policy" to HSUS, which was in effect from January 7, 2006 through June 8, 2008 ("the 2007 Policy"). This was a "claims-made-and-reported-policy."² A "Claim" is defined in the policy to mean "(1) a written demand for monetary relief or (2) a civil ... proceeding for monetary ... relief which is commenced by: (i) service of a complaint or similar pleading[.]" ¶ 2. (b)(1)–(2)(i).

The "Notice/Claim Reporting Provisions" section under Clause 7 of the insurance policy states "[t]he Insureds shall, as a condition precedent to the obligations of the Insurer under this policy, give written notice to the Insurer of any Claim made against an Insured as soon as practicable and either: (1) anytime during the Policy Year ... or (2) within 30 days after the end of the Policy Year ... as long as such Claim is reported no later than 30 days after the date such claim was first made against an insured." ¶ 7. (a)(1)–(2). "A Claim shall be considered to have been first made against an Insured when written notice of such Claim is received by any Insured[.]" ¶ 7.

Further, pursuant to the policy, FFA was responsible for defending itself, and National Union had a duty to advance defense costs. The insured's right to tender its defense i.e., transferring the obligation of the defense, and all costs associated with the insurer terminates if not exercised within 30 days of the date the claim is first made pursuant to Clause 7. ¶¶ 1 & 8. "Provided that the Insureds [including FFA] have complied with the foregoing, the Insurer [National Union] shall be obligated to assume the defense of the Claim ... [o]nce the defense has been so tendered, the Insured [FFA] shall have the right effectively to associate with the Insurer [National Union] in the defense of such Claim, including, but not limited to negotiating a settlement." ¶ 8.

Although, the coverage dispute relates to both the ESA Case and the RICO Case, we primarily address the Coverage Case in this appeal. The other two cases are relevant because they form the basis as to why National Union believes it was actually prejudiced, enabling it to disclaim coverage under its policy. The ESA Case is a case in which FFA was the plaintiff and adverse factual findings and a judgment were entered against FFA. Those adverse findings could have been raised against FFA in the RICO Case on grounds of collateral estoppel. National Union had no duty to defend FFA in the ESA Case because National Union provided defense coverage and FFA was acting as a plaintiff in the ESA Case. Therefore, National Union could not have affected the outcome of the ESA proceedings. In the RICO Case, FFA was sued by Feld, a defendant in the ESA Case, for misconduct that allegedly occurred during the prosecution of the ESA Case. In the Coverage Case, FFA sued its insurer, National Union, for failing to provide coverage to it. National Union disclaimed coverage on the grounds that it received late notice of the RICO Case. It further claimed that had National Union known earlier it could have stepped in and "monitored" or advised FFA in the ESA Case. Intervention, National Union claims, would have prevented the adverse factual findings which prejudiced FFA's defense in the RICO Case.

In the ESA Case, FFA, an organizational plaintiff, along with other organizational plaintiffs and an individual plaintiff, Thomas Rider, sued Ringling Brothers and its owner, Feld. While the ESA Case was pending, Feld brought the RICO Case against FFA and the other organizational plaintiffs for allegedly bribing the individual plaintiff to falsely testify and commit other criminal acts, in order to establish standing to sue Feld. Feld sought to recover damages in the form of attorneys' fees and costs incurred in defending the ESA Case. FFA did not notify National Union of the RICO claim until over two years after the claim had been filed. By that time, the court in the ESA Case had ruled in favor of the defendant, Feld, on the ground that the ESA organizational plaintiffs, including FFA, lacked standing. The court also made several factual findings, including that the organizational plaintiffs had paid the individual plaintiff for testimony that was false and that those payments were concealed during discovery. National Union denied coverage on the grounds that FFA failed to provide timely notice. Subsequently, FFA brought the Coverage Case against National Union, which in turn defended on the grounds that it was prejudiced by the late notice.

National Union claimed actual prejudice because it believed FFA was precluded, in the RICO Case, from contesting many of the facts found by the court in the ESA Case as those facts undermined any defense FFA might have raised.

The ESA Case (Not Covered by the 2007 Policy)

The ESA Case was brought in 2000 in the United States District Court for the District of Columbia before the Honorable Emmet G. Sullivan. The ESA Case was not covered by the 2007 Policy because the Policy provided coverage to FFA in defense of claims made against it by another party, not in the case where FFA was the plaintiff. FFA, the American Society for the Prevention of Cruelty to Animals ("ASPCA"), the Animal Welfare Institute ("AWI"), and Thomas Rider sued Feld and Ringling Brothers for declaratory and injunctive relief, alleging Ringling Brothers' mistreated Asian elephants in its circus training techniques, violating the Endangered Species Act, 16 U.S.C. § 1531 et seq .

The suit was brought under § 1540(g), the citizen-suit provision of the ESA, which requires standing under the "case or controversy" provision of Article III of the United States Constitution, meaning at least one plaintiff must make a showing:

(1) that the plaintiffs have suffered an "injury in fact"—an invasion of a judicially cognizable interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) that there be a causal connection between the injury and the conduct complained of—the injury must be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court; and (3) that it be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.

Bennett v. Spear , 520 U.S. 154, 167, 117 S.Ct. 1154, 1163, 137 L.Ed.2d 281, 298 (1997) (citing Lujan v. Defenders of Wildlife , 504 U.S. 555, 560–561, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351, 364 (1992) ).

Mr. Rider alleged he was...