UNPUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 05-1731
SCOTTSDALE INSURANCE COMPANY, INCORPORATED,
Plaintiff - Appellee,
versus
NATIONAL CENTER ON INSTITUTIONS AND ALTERNATIVES, INCORPORATED,
Defendant - Appellant.
Appeal from the United States District Court for the District of Maryland, at Baltimore. William D. Quarles, Jr., District Judge. (CA-04-2356-WDQ)
Submitted: February 14, 2006 Decided: March 3, 2006
Before KING and SHEDD, Circuit Judges, and HAMILTON, Senior Circuit Judge.
Affirmed by unpublished per curiam opinion.
Gary R. Jones, Adam H. Garner, BAXTER, BAKER, SIDLE, CONN & JONES, P.A., Baltimore, Maryland, for Appellant. David B. Stratton, JORDAN, COYNE & SAVITS, L.L.P., Washington, D.C., for Appellee.
Unpublished opinions are not binding precedent in this circuit. See Local Rule 36(c). PER CURIAM:
The National Center on Institutions and Alternatives, Inc.
(“NCIA”), appeals the district court’s award of summary judgment to
Scottsdale Insurance Company (“Scottsdale”). Scottsdale initiated
this civil action in the District of Maryland in July 2004, seeking
a declaratory judgment that an insurance policy it had issued to
NCIA is void ab initio. On June 7, 2005, after discovery
proceedings, the court granted summary judgment to Scottsdale. As
explained below, we affirm.
The facts, viewed in the light most favorable to NCIA,
disclose the following. In 1995, at the request of his mother, the
State of Maryland placed Mark Hepburn, a developmentally disabled
adult, in a residential facility operated by NCIA.1 In December
1996, Hepburn was evaluated by the Athelas Institute, Inc.
(“Athelas”), a Maryland non-stock corporation that is not
affiliated with NCIA, for placement in a daytime vocational
program. Hepburn began attending the vocational program in early
1997. In order for him to participate, a van would take Hepburn
from NCIA’s facility to that of Athelas each weekday morning, and
then return him in the afternoon. Although NCIA and Athelas are
1 NCIA is a non-profit corporation that focuses on providing rehabilitative and other services to non-violent criminal offenders. It has offices and treatment centers in Maryland, Virginia, Pennsylvania, and New York.
2 separate organizations, their respective representatives
participated in quarterly meetings concerning Hepburn’s status.
On September 29, 1999, while at the Athelas facility, Hepburn
choked on part of a bologna sandwich. The incident left him in a
persistent vegetative state and prompted an investigation by the
Developmental Disabilities Administration (“DDA”), a Maryland state
agency. On March 6, 2000, following its investigation, DDA sent
NCIA a “Notice of Intent to Impose Intermediate Sanctions” (the
“DAA notice”), asserting that NCIA was aware of prior choking
incidents involving Hepburn, but had nevertheless failed to advise
Athelas that he required one-on-one supervision while eating. The
DAA notice stated that NCIA had contravened Maryland regulations in
connection with the Hepburn choking incident. It informed NCIA
that DAA intended to impose sanctions on NCIA as a result of such
violations. According to NCIA Executive Director Herbert Hoelter,
a notice of sanctions from DDA is unusual, and upon receipt of the
DAA notice he became concerned that NCIA could be liable for
Hepburn’s injuries. DDA and NCIA thereafter settled the Maryland
administrative proceedings by a Consent Agreement, entered into on
May 8, 2000.
On June 15, 2001, NCIA applied to Scottsdale for a one-year
claims-made general and professional liability insurance policy
(the “Initial Policy”). By executing a Retroactive Date
Endorsement for the Initial Policy, NCIA represented to Scottsdale,
3 through Hoelter, that it “could not have reasonable foreseen that
any prior acts or incidents might be the basis of any claim or
‘suit.’” Relying on NCIA’s representations, Scottsdale issued the
Initial Policy, which was effective from July 2001 until July 2002.
On July 19, 2002, NCIA applied to renew the Initial Policy’s
coverage, with the renewal to be effective from July 30, 2002,
until July 30, 2003. By Question 12 on the renewal application,
Scottsdale asked “[a]re there any circumstances known which may
give rise to a claim or lawsuit.” NCIA, through Hoelter, checked
the answer “No.” The renewal application was then approved by
Scottsdale, which issued a renewal policy (the “Renewal Policy”).
On November 4, 2002, NCIA informed Scottsdale that Hepburn’s
mother had sued NCIA, on behalf of her son, for damages stemming
from the 1999 choking incident. On June 11, 2003, Scottsdale
forwarded NCIA a letter stating that it would defend NCIA in the
litigation involving the Hepburn claim. Scottsdale specifically
reserved its right, however, to disclaim any duty to indemnify or
defend NCIA if Scottsdale later discovered that NCIA knew or could
have foreseen, when it applied for the Renewal Policy, that it
might be sued on Hepburn’s behalf. Scottsdale’s letter also
informed NCIA that Scottsdale was initiating a coverage
investigation of the Hepburn claim. On July 21, 2004, Scottsdale
sent NCIA a letter of rescission on the Renewal Policy, and
4 tendered to NCIA a check for over $89,000, the amount of the
premiums NCIA had paid thereon.
On July 22, 2004, NCIA acknowledged receipt of Scottsdale’s
rescission letter and advised Scottsdale that it would place the
refunded premiums in a trust account, pending resolution of this
declaratory judgment proceeding. That same day, Scottsdale
initiated this action, seeking a judgment declaring the Renewal
Policy to be void ab initio, and that Scottsdale was not
responsible for defending or indemnifying NCIA in litigation on the
Hepburn claim. By its complaint, Scottsdale contended that NCIA
made material misrepresentations on its applications for the
Initial Policy and the Renewal Policy in failing to disclose the
Hepburn choking incident. On March 4, 2005, following discovery
proceedings, Scottsdale moved for summary judgment, which the
district court granted by its Memorandum Opinion and Order of June
7, 2005. Scottsdale Ins. Co. v. Nat’l Ctr. on Insts. and
Alternatives, No. CA-04-2356, 2005 WL 1367079 (D. Md. June 7,
2005). NCIA has timely noted an appeal, and we possess
jurisdiction pursuant to 28 U.S.C. § 1291.
We review de novo an award of summary judgment, viewing the
facts and inferences drawn therefrom in the light most favorable to
the non-moving party. See Seabulk Offshore, Ltd. v. Am. Home
Assurance Co., 377 F.3d 408, 418 (4th Cir.2004). Such an award “is
appropriate only ‘if the pleadings, depositions, answers to
5 interrogatories, and admissions on file, together with the
affidavits, . . . show that there is no genuine issue of material
fact and that the moving party is entitled to a judgment as a
matter of law.’” Id. (quoting Fed. R. Civ. P. 56(c)) (alteration
in original).
The parties agree that Maryland law governs any legal issues
relating to the Renewal Policy.
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UNPUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 05-1731
SCOTTSDALE INSURANCE COMPANY, INCORPORATED,
Plaintiff - Appellee,
versus
NATIONAL CENTER ON INSTITUTIONS AND ALTERNATIVES, INCORPORATED,
Defendant - Appellant.
Appeal from the United States District Court for the District of Maryland, at Baltimore. William D. Quarles, Jr., District Judge. (CA-04-2356-WDQ)
Submitted: February 14, 2006 Decided: March 3, 2006
Before KING and SHEDD, Circuit Judges, and HAMILTON, Senior Circuit Judge.
Affirmed by unpublished per curiam opinion.
Gary R. Jones, Adam H. Garner, BAXTER, BAKER, SIDLE, CONN & JONES, P.A., Baltimore, Maryland, for Appellant. David B. Stratton, JORDAN, COYNE & SAVITS, L.L.P., Washington, D.C., for Appellee.
Unpublished opinions are not binding precedent in this circuit. See Local Rule 36(c). PER CURIAM:
The National Center on Institutions and Alternatives, Inc.
(“NCIA”), appeals the district court’s award of summary judgment to
Scottsdale Insurance Company (“Scottsdale”). Scottsdale initiated
this civil action in the District of Maryland in July 2004, seeking
a declaratory judgment that an insurance policy it had issued to
NCIA is void ab initio. On June 7, 2005, after discovery
proceedings, the court granted summary judgment to Scottsdale. As
explained below, we affirm.
The facts, viewed in the light most favorable to NCIA,
disclose the following. In 1995, at the request of his mother, the
State of Maryland placed Mark Hepburn, a developmentally disabled
adult, in a residential facility operated by NCIA.1 In December
1996, Hepburn was evaluated by the Athelas Institute, Inc.
(“Athelas”), a Maryland non-stock corporation that is not
affiliated with NCIA, for placement in a daytime vocational
program. Hepburn began attending the vocational program in early
1997. In order for him to participate, a van would take Hepburn
from NCIA’s facility to that of Athelas each weekday morning, and
then return him in the afternoon. Although NCIA and Athelas are
1 NCIA is a non-profit corporation that focuses on providing rehabilitative and other services to non-violent criminal offenders. It has offices and treatment centers in Maryland, Virginia, Pennsylvania, and New York.
2 separate organizations, their respective representatives
participated in quarterly meetings concerning Hepburn’s status.
On September 29, 1999, while at the Athelas facility, Hepburn
choked on part of a bologna sandwich. The incident left him in a
persistent vegetative state and prompted an investigation by the
Developmental Disabilities Administration (“DDA”), a Maryland state
agency. On March 6, 2000, following its investigation, DDA sent
NCIA a “Notice of Intent to Impose Intermediate Sanctions” (the
“DAA notice”), asserting that NCIA was aware of prior choking
incidents involving Hepburn, but had nevertheless failed to advise
Athelas that he required one-on-one supervision while eating. The
DAA notice stated that NCIA had contravened Maryland regulations in
connection with the Hepburn choking incident. It informed NCIA
that DAA intended to impose sanctions on NCIA as a result of such
violations. According to NCIA Executive Director Herbert Hoelter,
a notice of sanctions from DDA is unusual, and upon receipt of the
DAA notice he became concerned that NCIA could be liable for
Hepburn’s injuries. DDA and NCIA thereafter settled the Maryland
administrative proceedings by a Consent Agreement, entered into on
May 8, 2000.
On June 15, 2001, NCIA applied to Scottsdale for a one-year
claims-made general and professional liability insurance policy
(the “Initial Policy”). By executing a Retroactive Date
Endorsement for the Initial Policy, NCIA represented to Scottsdale,
3 through Hoelter, that it “could not have reasonable foreseen that
any prior acts or incidents might be the basis of any claim or
‘suit.’” Relying on NCIA’s representations, Scottsdale issued the
Initial Policy, which was effective from July 2001 until July 2002.
On July 19, 2002, NCIA applied to renew the Initial Policy’s
coverage, with the renewal to be effective from July 30, 2002,
until July 30, 2003. By Question 12 on the renewal application,
Scottsdale asked “[a]re there any circumstances known which may
give rise to a claim or lawsuit.” NCIA, through Hoelter, checked
the answer “No.” The renewal application was then approved by
Scottsdale, which issued a renewal policy (the “Renewal Policy”).
On November 4, 2002, NCIA informed Scottsdale that Hepburn’s
mother had sued NCIA, on behalf of her son, for damages stemming
from the 1999 choking incident. On June 11, 2003, Scottsdale
forwarded NCIA a letter stating that it would defend NCIA in the
litigation involving the Hepburn claim. Scottsdale specifically
reserved its right, however, to disclaim any duty to indemnify or
defend NCIA if Scottsdale later discovered that NCIA knew or could
have foreseen, when it applied for the Renewal Policy, that it
might be sued on Hepburn’s behalf. Scottsdale’s letter also
informed NCIA that Scottsdale was initiating a coverage
investigation of the Hepburn claim. On July 21, 2004, Scottsdale
sent NCIA a letter of rescission on the Renewal Policy, and
4 tendered to NCIA a check for over $89,000, the amount of the
premiums NCIA had paid thereon.
On July 22, 2004, NCIA acknowledged receipt of Scottsdale’s
rescission letter and advised Scottsdale that it would place the
refunded premiums in a trust account, pending resolution of this
declaratory judgment proceeding. That same day, Scottsdale
initiated this action, seeking a judgment declaring the Renewal
Policy to be void ab initio, and that Scottsdale was not
responsible for defending or indemnifying NCIA in litigation on the
Hepburn claim. By its complaint, Scottsdale contended that NCIA
made material misrepresentations on its applications for the
Initial Policy and the Renewal Policy in failing to disclose the
Hepburn choking incident. On March 4, 2005, following discovery
proceedings, Scottsdale moved for summary judgment, which the
district court granted by its Memorandum Opinion and Order of June
7, 2005. Scottsdale Ins. Co. v. Nat’l Ctr. on Insts. and
Alternatives, No. CA-04-2356, 2005 WL 1367079 (D. Md. June 7,
2005). NCIA has timely noted an appeal, and we possess
jurisdiction pursuant to 28 U.S.C. § 1291.
We review de novo an award of summary judgment, viewing the
facts and inferences drawn therefrom in the light most favorable to
the non-moving party. See Seabulk Offshore, Ltd. v. Am. Home
Assurance Co., 377 F.3d 408, 418 (4th Cir.2004). Such an award “is
appropriate only ‘if the pleadings, depositions, answers to
5 interrogatories, and admissions on file, together with the
affidavits, . . . show that there is no genuine issue of material
fact and that the moving party is entitled to a judgment as a
matter of law.’” Id. (quoting Fed. R. Civ. P. 56(c)) (alteration
in original).
The parties agree that Maryland law governs any legal issues
relating to the Renewal Policy. And, in Maryland, an insurance
policy may be voided ab initio if it was issued in reliance on a
material misrepresentation. See N. Am. Specialty Ins. Co. v.
Savage, 977 F. Supp. 725, 728 (D. Md. 1997). NCIA’s contends on
appeal that a genuine issue of fact exists concerning whether it
made such misrepresentations when it asserted (1) that there were
not “any circumstances known [to NCIA] which may give rise to a
claim or lawsuit,” and (2) that it “could not have reasonable
foreseen that any prior acts or incidents might be the basis of any
claim or ‘suit.’” NCIA acknowledges that these representations
were material to Scottsdale’s policy issuance decisions, and that
Scottsdale relied on them in issuing the Renewal Policy. Moreover,
NCIA does not contend that Hoelter was unaware of the Hepburn
choking incident when he made representations for NCIA on the
relevant policy applications.
NCIA’s asserts that the policy applications called for NCIA to
subjectively determine whether it thought a future civil action was
likely. It contends that, although the relevant limitations period
6 had not expired, the facts relating to the Hepburn choking incident
could give rise to a reasonable inference that, by July 2001,
Hoelter and NCIA reasonably believed that no legal actions would
result from the incident. Question 12 on NCIA’s renewal
application, however, did not require NCIA to speculate as to the
likelihood that some event, such as the Hepburn choking incident,
might lead to a future lawsuit. Rather, it asked whether there
were “any circumstances known [to NCIA] which may give rise to a
claim or lawsuit.” NCIA acknowledges on appeal that the word
“may,” as used in Question 12, means “might possibly.” See Reply
Br. at 3. As a result, NCIA was required to answer “Yes” to
Question 12 if it knew of circumstances that might possibly give
rise to a claim or lawsuit. At the time Question 12 was answered
in connection with the Renewal Policy, NCIA knew of the Hepburn
Choking Incident and, from the DAA notice of March 2000, that it
might be liable for Hepburn’s injuries. NCIA was, in these
circumstances, aware that a claim or lawsuit might possibly arise
out of the Hepburn choking incident. In face of such knowledge,
NCIA incorrectly answered “No” on Question 12.
Accordingly, the district court did not err in concluding that
there is no genuine issue of fact on whether NCIA made a material
misrepresentation upon which Scottsdale relied in its issuance of
7 the Renewal Policy. We are thus obliged to affirm the court’s
award of summary judgment to Scottsdale.2
AFFIRMED
2 We dispense with oral argument because the facts and legal contentions of this appeal are adequately presented in the materials before the Court and argument would not aid us in the decisional process.