Talley’s Insurance Tip of the Month

By:  Talley H-S Kovacs, Esquire                                         tkovacs@pklaw.com

Does your business provide a service and operate pursuant to contracts with vendors or sub-contractors? 

Talley’s tip: If so, take a second or third look at your contracts to make sure that you are getting the appropriate level of indemnity from your business partners for liability that might arise out of your joint endeavors.

For example, imagine a company that delivers mattresses for a national retailer and who sub-contracts with trucking companies to physically retrieve the mattress from a warehouse and deliver to a consumer at their home. You and your employees might play no part in the physical delivery of the mattress, or even the installation of the mattress, but be assured, you will be in the chain of named defendants in a lawsuit should something go awry. In the event that the delivery company causes damage to the house on the way in or out or someone is injured because the installation was not done properly, your company- as the middle man- might not be ultimately liable, but you will be part of the claim, if not the lawsuit.

So, what should you do?

First, look at your contracts. There should be a discrete provision called “Indemnity.” That clause should state explicitly, in plain language if possible, that your company is not liable for the acts or omissions of the other party to the contract. Both sides of the contract should be defined broadly to include employees, agents, officers, members, etc. You want to cut off the possibility that someone else’s negligence while executing work for you or on your company’s behalf does not come back the chain and stick to you.

Second, look at your contracts. There should be a discrete provision called “Insurance.” That clause should, again explicitly and in plain language, state that the vendor or sub-contractor working with you has commercially acceptable levels of insurance and that your company is explicitly named as an “Additional Insured” on their policies where appropriate. There are a couple of ways to go about this, and a lawyer can help.

Third, look at your contracts. If the words “Indemnity” and “Additional Insured” do not make an appearance, it’s time to revisit your exposure to risks in your business and determine whether you could be doing more to protect your company.

Tally H-S Kovacs is a member of PK Law’s General Litigation Group.  Her practice currently focuses on complex civil litigation, insurance coverage disputes, and business litigation.  Ms. Kovacs worked in public policy, homeland security, and public health, and clerked for the Honorable Clayton Greene, Jr. on the Maryland Court of Appeals prior to entering private practice with PK Law, PA.  Ms. Kovacs can be reached attkovacs@pklaw.com or 410-339-5798.

 

This information is provided for general information only.  None of the information provided herein should be construed as providing legal advice or a separate attorney client relationship. Applicability of the legal principles discussed may differ substantially in individual situations. You should not act upon the information presented herein without consulting an attorney of your choice about your particular situation. While PK Law has taken reasonable efforts to insure the accuracy of this material, the accuracy cannot be guaranteed and PK Law makes no warranties or representations as to its accuracy.

Congratulations to Ed O’Meally

PK Law Attorney Edmund O’Meally Receives an “Instructor of the Year” Award From Maryland Police and Correctional Training Commission

PK Law Attorney Edmund O’Meally received am “Instructor of the Year” award from the Maryland Police and Correctional Training Commissions.   The award which has been given out since 1980 and requires an extensive screening process, honors Marylanders for their outstanding contributions to the furtherance of crime prevention.  Mr. O’Meally has been doing semi-annual presentations for School Resource Officers and D.A.R.E. Officers for the past ten years. 

Mr. O’Meally is an equity member of the labor and education department at Pessin Katz Law, P.A., and has worked closely with superintendents, boards of education, private schools, and private sector employers for over twenty years on a wide-variety of matters including collective bargaining, employment litigation, student discipline and special education, drug and alcohol issues, construction and procurement issues, and Open Meetings Act compliance. A 1984 graduate of the University of Maryland School of Law where he served as Executive Editor of the Maryland Law Review, Mr. O’Meally clerked for the judges of the United States Court of Appeals for the Fourth Circuit upon his graduation. Mr. O’Meally is an Adjunct Professor of School Law at Johns Hopkins University, Goucher College, McDaniel College, and Morgan State University and has given numerous presentations on employment and education issues for the North American Association of Education Negotiators, the Education Law Association, the  Maryland Association of Boards of Education, the Maryland Negotiations Service, the Association of School Business Officials, the Public School Superintendents Association of Maryland, the Office of Administrative Hearings, MICPEL, and other groups. Since 2006, Mr. O’Meally has authored the chapters on “Employee Relations and Rights” and “Employee Discipline and Discharge” in the annual editions of the Maryland School Law Deskbook published by LexisNexis. Most recently, Mr. O’Meally was the chief negotiator of the innovative performance based collective bargaining agreement between Baltimore City and the Baltimore Teachers Union as well as several other performance based collective bargaining agreements for non-certificated employees.  Mr. O’Meally is one of the few negotiators in the country who has successfully negotiated this type of agreement and is available to serve as a consultant or negotiator to school systems across the country.

Deed by a Disabled Person is Void, Not Voidable

The Maryland guardianship laws do not fully describe the consequences of a disabled person’s entry into a transaction without the knowledge of their guardian.  Is the transaction void or voidable?  Is one who advances funds entitled to ratification of that act by a guardian? Are they entitled to restitution?  Can such a person earn a right of subrogation in the case of the payment of a prior lien?  In Nutter v Black, (No. 1563, Sept. 30, 2015, Kehoe, J.), the Maryland Court of Special Appeals, agreeing with the Baltimore County Circuit Court, held that a reverse mortgage entered into by Edwina E. Black, (“Black”) without the knowledge of her court appointed guardian, attorney David L. Moore, (“Moore”) was void.  Consequently, James B. Nutter & Co. (“Nutter”) was not entitled to ratification by Moore, reimbursement by way of a theory of “unjust enrichment”, or subrogation as a result of the loan transaction and the satisfaction of Black’s existing mortgage.

The opinion of the Court of Special Appeals described Black as “disabled”, meaning one of those “…persons who have been adjudicated by a court to be unable to manage their property and for whom a guardian of the property has been appointed.”  The Court stated that such an individual is to be distinguished from an “incompetent”, the latter being one of those “…individuals who may be unable to manage their property, but who are not subject to guardianship proceedings.”  The Court remarked that the distinction was “critical to the outcome of this appeal”.

The facts of the case were straightforward.  Black was a disabled person.  Nutter was a reverse mortgage lender.  Moore was Black’s court appointed guardian.  Black entered into a reverse mortgage involving Black’s residence with Nutter without Moore’s knowledge or consent.  Nutter asked Moore to ratify the transaction or make restitution.  Moore refused.  Nutter filed suit to compel ratification or, in the alternative, for restitution or subrogation under the prior purchase money mortgage for Black’s residence.

Title to Black’s residence was in the name of Moore, as her guardian, and was subject to a deed of trust, again in the name of Moore.  The parties stipulated that the title agent for the reverse mortgage “failed to properly identify the guardianship action in the Court record.”  The stipulation did not mention if the title agent was aware of Black’s disability based upon the deed and deed of trust for her residence.

As part of the closing on the reverse mortgage, Nutter paid off the deed of trust on Black’s residence, paid settlement costs and advanced funds to Black.  After Moore was notified of the satisfaction of the loan used to purchase Black’s residence he investigated the Nutter loan.  After several months of trying to reach Moore, Nutter subsequently wrote to Moore and asked him to either ratify the transaction or return the funds paid out at closing.

Moore advised Nutter that the transaction was void as a matter of law and he had no obligation to return the monies paid out by Nutter.  Nutter contended that the transaction was voidable and it was entitled to a declaratory judgment so stating and related relief.

The Baltimore County Circuit Court agreed with Moore.  The reverse mortgage was void, not voidable; Nutter had “constructive notice of Ms. Black’s disability”; and, therefore, Nutter was not entitled to restitution because the transaction was void, not voidable.

The Circuit Court denied Nutter’s claim for restitution because that claim was premised solely upon Nutter’s contention that the reverse mortgage transaction was voidable.  The reasoning of the Circuit Court was that because the transaction was void, Nutter acquired no rights in Black’s residence property and “thus was not compelled to pay the [existing] mortgage in order to preserve any rights.”

Before the Court of Special Appeals, Moore argued that because of Ms. Black’s disability, the reverse mortgage transaction was void and Nutter’s only rights, if any, lie in restitution or subrogation.  Nutter contended that the reverse mortgage transaction was voidable based upon Moore’s not timely rescinding the loan.  Had he done so, Nutter argued, it would have been made whole by repayment upon rescission.  Because of the delay and failure to rescind on the part of Moore, Nutter asserted that he “constructively affirmed” the reverse mortgage.

The Court of Special Appeals noted that Maryland courts have limited ruling deeds to be void due to possible subsequent consequences involving the chain of title to those circumstances involving the “face of the deed”, meaning forgery, by example.  However, Moore was, in essence, asking the Court to rule that Black’s deed was, indeed, a forgery due to her lack of capacity.

The Court of Special Appeals agreed with Moore.  It reasoned that because Maryland’s guardianship statute vested title to all property of a disabled person in that person’s guardian, the disabled person was like a forger:  “Owning nothing, she can convey nothing.”  Furthermore, the Court stated that a properly recorded court appointment of a guardian is “constructive notice to the world that the disabled person is without authority to convey his or her property.”  The Court noted that “imprudence” in a title search bears its own risks, and a deed by a disabled person should be treated no differently than “any other readily-recognizable title flaw.”

From an equitable standpoint the Court pointed out there were policy reasons to treat the transaction as void rather than voidable citing depletion of the guardianship estate by the reduced equity in the property as a result of the transaction; and, consequently, any increase in the property’s value inuring solely to Nutter; and, furthermore, ratification of the transaction possibly depriving Black eventually of all equity in the property; and, finally, rescission of the loan forcing Black to produce funds which were not available to her or her guardian and which would have to be secured from other sources.

Nutter’s woes were further compounded on appeal by the observation of the Court of Special Appeals that any argument regarding Nutter’s right to restitution had not been properly preserved for appeal.  As a result, the Court refused consideration of any argument regarding a right of Nutter to restitution.

The Court of Special Appeals also spoke to the voluntary nature of the payoff of the existing mortgage on the property.  It indicated that an “officious payor” (volunteer) would not be entitled to any relief for its actions by way of the argument of “unjust enrichment” and, in this case, that is how it viewed Nutter.  In finding Nutter an “officious payor”, the Court stated that since Black lacked capacity any “contract” between she and Nutter was void and, therefore, Nutter was not acting under a legal duty when it paid off the existing mortgage.  Nor did Nutter act “under any sense of moral duty” due to the business nature of the transaction.  Also, because the contract was void, it was not acting to protect any interest it might have had in the property.  Finally, Nutter could not claim it was acting at Black’s behest since she lacked the capacity to enter into the business transaction.  The fact that Nutter may have been acting on mistaken information was irrelevant to its argument for relief.

In conclusion, the Court’s opinion was that Black’s lack of capacity; Nutter’s lack of “diligence and prudence” in extending the loan to Black; and the deed to Black’s residence and the associated purchase money deed of trust “unambiguously informed anyone who bothered to read them that [Black] was under a disability and that Moore was the guardian of her property” were sufficient to deny Nutter any equitable relief arising out of theories of unjust enrichment or subrogation.  Nutter was a volunteer, purely as a result of the action of Black being void, not entitled to equitable relief.

Nutter highlights the observation that those who deal with a disabled person whose guardian has attended to all formalities of a court ordered guardianship do so at their own peril.  Had Black been merely incompetent, the result of the case may have been different.  In Nutter, the Court of Special Appeals has stated that it will not allow the rights of the disabled to be compromised because of the actions of third parties.  The case may find its way to the Maryland Court of Appeals, the State’s highest court.

PK Law’s Estate Planning and Wealth Preservation Attorneys can assist with guardianship issues.   To contact a PK Law Estate Planning Attorney click here.  To contact a PK Law Wealth Preservation Attorney click here.  For additional information about PK Law contact information@pklaw.com.

This information is provided for general information only.  None of the information provided herein should be construed as providing legal advice or a separate attorney client relationship. Applicability of the legal principles discussed may differ substantially in individual situations. You should not act upon the information presented herein without consulting an attorney of your choice about your particular situation. While PK Law has taken reasonable efforts to insure the accuracy of this material, the accuracy cannot be guaranteed and PK Law makes no warranties or representations as to its accuracy.

Maryland Court of Special Appeals finds Tenant Entitled to Jury Trial

In Kirk v. Hilltop Apartments, L.P., the Maryland Court of Special Appeals (No. 2054, September 30, 2015, Krauser, C.J.) was called upon to decide a novel question.  If a lease has no expiration date and a tenant sues a landlord for a breach of lease, how does one determine if the case is properly in the Maryland District Court’s jurisdiction or that of the Circuit Court?  The issue is not a minor one, because if the “value of the right to possession” (or the “amount in controversy”) to the tenant exceeds $15,000 then the tenant is entitled to a jury trial in the Circuit Court.  If not, the case remains within the District Court’s jurisdiction.  In this case, the Circuit Court denied its jurisdiction and struck a demand to jury trial by Kirk and she appealed that decision.

Kirk was a longtime tenant in a federally subsidized housing complex.  Due to lease violations the landlord, Hilltop, sought termination of her lease and repossession of the premises.  When she failed to vacate her apartment by the termination date, Hilltop sued for repossession of her unit in the District Court.  Kirk alleged that the amount in controversy exceeded the District Court’s $15,000 jurisdictional limit and the case was then transferred to the Circuit Court which, in turn, agreed with a motion filed by Hilltop that the amount involved was less than $15,000 and sent the case back to the District Court, as being within its exclusive jurisdiction.

Kirk reasoned as follows:

“…because her lease, by its express terms, automatically renews for successive one-year terms unless terminated for good cause, she has a right to possess the apartment for an “indefinite period of time” and, thus, the value of her right to possess the premises should have been calculated by multiplying the annual fair market rental payment by the number of years of her remaining estimated life expectancy, the product of which, it is undisputed, exceeds $15,000.”

Hilltop believed that the “amount in controversy” should be as follows:

“…the value of Kirk’s right to possess the premises should be calculated, not by multiplying her annual rent by her estimated life expectancy, but by multiplying her monthly rental payment by the number of months that remained on her current lease, which was due to expire on December 31, 2013 (approximately nine months after Hilltop notified Kirk that it was terminating the lease).”

Hilltop’s methodology would deny the jurisdiction of the Circuit Court.

Kirk entered into a model lease required to be used by the Federal Department of Housing and Urban Development for Section 8 federally subsidized housing.  The lease provided that after expiration of the first year of the term it would continue for successive one-year terms unless it automatically terminated for “good cause”.

In its termination notice to Kirk, Hilltop recited a litany of alleged lease violations which gave it the right to terminate Kirk’s lease.  Kirk denied the alleged violations.  Moreover, she contended that until a court ruled that Hilltop terminated her lease for “good cause” it continued indefinitely.  Furthermore, she argued that she only needed two more months beyond Hilltop’s lease termination date to reach the jurisdictional limit at which she could maintain a jury trial in the Circuit Court, there being no dispute as to the amount of the monthly rental due Hilltop pursuant to her lease.  The issue was the length of time Kirk had the right to continued possession of the premises.

Kirk argued two cases in the Maryland Court of Appeals supported her position.  (See Carroll v. Housing Opportunities Commission, 306 Md. 515, 525 (1986) and Cottman v. Princess Anne Villas, 340 Md. 295 (1995)). Hilltop argued that a later-decided case supported its position. (See Carter v. Maryland Management Co., 377 Md. 596 (2003)

The Maryland Court of Special Appeals agreed with Kirk’s use of the two Maryland Court of Appeals cases in determining the length of her tenancy.  Her “model lease”, applicable to “project-based federal housing program[s]”, provided for automatic renewals until the lease was terminated for “good cause” and neither Hilltop’s cited case nor subsequent federal housing program regulations negated that fact.  The judgment of the circuit court was reversed and the matter was remanded to that court for further proceedings.  

PK Law’s Real Estate, Land Use and Zoning Attorneys can be contacted by clicking here or contact information@pklaw.com.

This information is provided for general information only.  None of the information provided herein should be construed as providing legal advice or a separate attorney client relationship. Applicability of the legal principles discussed may differ substantially in individual situations. You should not act upon the information presented herein without consulting an attorney of your choice about your particular situation. While PK Law has taken reasonable efforts to insure the accuracy of this material, the accuracy cannot be guaranteed and PK Law makes no warranties or representations as to its accuracy.

 

What is the Meaning of…..

In Rigby v Allstate Indemnity Company, (Maryland Court of Special Appeals, No. 0263, September 30, 2015, Krauser, C.J.) the intermediate appellate court (the “Court”) was called upon to decide a case of first impression in Maryland.  The Court held that under the facts of the case a person who had caused an automobile accident was not a “dependent person, under your care” so as to render that person an insured under a personal umbrella insurance policy.  The result was that the accident was not a “covered occurrence” under the terms of the policy.

Rigby, and others, were injured when a vehicle operated by Robert Vanderford and owned by Lawrence Archembeault, with whom Vanderford was residing, and whose “umbrella” insurance policy with Allstate was the subject of the appeal, collided with Rigby’s police cruiser on a road shoulder, injuring her, another person, and a tow truck operator.

Appellants asserted that Vanderford’s youth, the length of his residency with Archembeault, as well as his past and present economic reliance on and close personal relationship with him, made Vanderford a “dependent person” and in the care of Archembeault at the time of the accident and, therefore, an “insured person” as defined by the Allstate policy.

Archembeault held an automobile insurance policy that provided up to $500,000 of liability coverage and an “umbrella” policy with coverage up to $5,000,000 for negligence.  The umbrella policy, the focus of the appeal, defined an “insured person” to include “any dependent person in your care, if that person is a resident of your household.”  Rigby sought a ruling that the umbrella policy’s coverage applied to the accident because the automobile policy’s coverage was insufficient to provide for the victims’ damages.  She lost her arguments.

The facts of the case reflected that for a three year period Vanderford lived principally at the residence of Archembeault together with his domestic partner and Archembeault’s mother.  However, the continuity of that residency was interrupted on three separate occasions when Vanderford moved out.

Fourteen months before the accident, Vanderford obtained full-time employment and thereafter agreed to pay a rent of $600 per month toward the residence. Prior to that, he lived at the residence rent free.  He then also assumed responsibility for the payment of such personal expenses as the cost of his telephone, food, and clothing (which had previously been paid by Archembeault).  Vanderford paid for fuel for the vehicle which Archembeault allowed him to use and which was involved in the accident.

According to the Court, the facts tended to indicate the existence of “…the semblance of a familial relationship…”.  However,  Archembeault “…never claimed Vanderford as a dependent on his tax return, never gave Vanderford any money, credit cards, or an ‘allowance,’ nor paid for Vanderford’s medical care or designated him as a beneficiary of his health insurance policy. Moreover, [Archembeault] admitted that he did not exercise any control over Vanderford’s comings and goings. In fact, Vanderford was, in [Archembeault’s] words, ‘free to leave at any time he cho[se]’ and did move out on three separate occasions.”

In discussing rules of construction of the wording relevant to the case, the Court noted that:  “…an insurance policy, like any contract, must be construed ‘in its entirety,’ and, ‘if reasonably possible,’ [a court must]… give effect ‘to each clause,’ ‘avoiding an interpretation which casts out or disregards a meaningful part of the language of the writing unless no other course can be sensibly and reasonably followed.”  Any ambiguity in the terms of the policy are to be liberally construed in favor of the insured and against the insurer as drafter of the instrument.  Furthermore, a “…policy term is considered ‘ambiguous’ if, to a reasonably prudent person, the term is susceptible to more than one meaning.”

The policy in Rigby defined an “insured person” as: “…c) any dependent person in your care, if that person is a resident of your household.”  The Court stated that the terms “dependent” and “in the care of” “…are not synonymous though they arguably partially overlap.”

In light of the fact that the issues before the Court had not been previously addressed in Maryland, it turned to two out-of-state opinions for guidance.  In Girrens v. Farm Bureau Mutual Insurance Company, 715 P.2d 389 (Kan. 1986), the Kansas Supreme Court addressed the issue of the interpretation of the term “dependent person” in an automobile insurance policy.  In Henderson v. State Farm Fire and Casualty Company, 596 N.W.2d 190 (Mich. 1999), the Michigan Supreme Court considered the issue of how to construe the term “in the care of” in a homeowner’s insurance policy.

The Kansas Supreme Court held that,

“…in ‘the context used in the present policy,’ the standard articulated by the trial court, that ‘a dependent person’ requires a ‘substantial contribution’ to ‘provide the necessities of life,’ was not ‘unreasonable’ and that, given that [the potential insured] ‘was employed full time as a machinist with supplemental income provided from farming,’ the mere fact that he still lived in his parents’ home did not mean that he was a ‘dependent person.’”

Consequently that individual was not a “dependent” under the policy and coverage was properly denied.

In Rigby, the Court stated that merely because the term “dependent”  “…has several slightly different dictionary definitions that “…does not render that term ambiguous.”  Consequently, the Court stated that “…Vanderford’s circumstances lead us to conclude that the circuit court did not err in finding that Vanderford was not “dependent” upon [Archembeault] to the extent that it rendered [the former] a “dependent person” under the Allstate policy at issue.”

The Court also rejected the claim that the term “in the care of” is ambiguous.  In so doing, it applied factors recited in Henderson in construing the terms of a homeowner’s insurance policy.  According to the Court, seven of the eight factors weighed against a finding that Vanderford was, at the time of the accident, “in the care of” Archembeault, and, therefore, an insured under Archembeault’s umbrella policy as:

“(1) [Archembeault] had no legal responsibility to care for Vanderford; (3) [Archembeault] had no supervisory or disciplinary responsibility over Vanderford; (4) [Archembeault] was not providing “substantial essential financial support” to Vanderford (or, at least, it was not clearly erroneous for the court below to so conclude); (5) Vanderford’s living arrangement was temporary (or, at least, it was not clearly erroneous for the court below to so conclude); (6) Vanderford was a twenty-two-year-old emancipated adult; (7) Vanderford was in good health; and (8) Vanderford was working full-time and earning $26,000 per year. Only the second of the eight Henderson factors, that is, that there was “some form of dependency,” tilts in favor of appellants’ position, as [Archembeault] had, in fact, allowed Vanderford to live in his home for a modest rent and to drive his car to work. Thus, there was ample evidence to support the circuit court’s conclusion that Vanderford was not “in the care of” [Archembeault].”

PK Law’s Insurance Team provides its insurance clients with comprehensive guidance in the constantly changing world of insurance.  They help clients anticipate and deal effectively with change, find solutions, and achieve positive results. 

  • Transactional: Acquisitions, Compliance, Liquidation, Product Development, Licensing, Rate and Forms, Agent/Broker Contracts, Managing General Agreements, Captive Insurance, Policy Drafting
  • Regulatory: Investigations, Enforcement, Compliance, Market Conduct Exams, Form Filings, Rating Issues, Privacy, Coverage Opinions and Legal Analysis, Government Relations, Freedom of Information Act (FOIA) Requests
  • Litigation: Administrative Proceedings, Agent/Broker Disputes, Bad Faith, Fraud and Unfair Business Practices, Class Actions, Coverage Disputes/Declaratory Judgment Actions, ERISA and Employment Matters, Insurance Defense, Mediations, Professional Negligence Case Representation, Environmental Claims and Insurance Producer Liability Litigation

 

This information is provided for general information only.  None of the information provided herein should be construed as providing legal advice or a separate attorney client relationship. Applicability of the legal principles discussed may differ substantially in individual situations. You should not act upon the information presented herein without consulting an attorney of your choice about your particular situation. While PK Law has taken reasonable efforts to insure the accuracy of this material, the accuracy cannot be guaranteed and PK Law makes no warranties or representations as to its accuracy.