On April 6, 2016, Judge Ellen Lipton Hollander of
the U.S. District Court for the District of Maryland granted American Western
Home Insurance Company’s Motion to Dismiss for Failure to State a Claim,
reaffirming that: (1) Maryland does not recognize a first party bad faith claim
against an insurance company under a tort theory; and (2) the Maryland Consumer
Protection Act (“MCPA”) does not apply to insurance companies licensed to do
business in Maryland.
Plaintiff Joe Gladney sued Defendant American
Western Home Insurance Company (“American Western”) in Civil Action No.:
ELH-15-1559 for: (1)
“bad faith” in failing to adequately consider the severity of, and properly
investigate, his claims; (2) breach of contract for denying coverage; and (3)
violating the MCPA by falsely representing that it provided coverage for losses
suffered as a result of windstorms after it denied coverage for windstorm
damage to Plaintiff’s warehouse, which was insured by a commercial property and
general liability insurance policy issued by the American Western. American
Western argued that it had denied coverage based upon its finding that the
damage was due to defective manufacturing and installation of metal brackets used
on the warehouse’s roof, not a windstorm.
Maryland has long recognized a tort
cause of action by an insured party where an insurer refuses in bad faith to
settle a third-party’s claim against the insured; however, the Court – citing to
the Fourth
Circuit’s decision in Hartz v. Liberty Mut. Ins. Co., 269 F.3d
474 (4th Cir. 2001) – concluded that Maryland law does not
recognize first party tort actions against insurers for failure to settle
insurance claims. While Plaintiff attempted to circumvent that long-standing principle
by alleging his claim derived from the Maryland Unfair Claim Settlement Practices Act
(“MUCSPA”), the Court pointed out that the MUCSPA specifically provides only
“administrative remedies,” and does not create a private cause of action.
In analyzing Plaintiff’s MCPA claim, the
Court succinctly quoted the relevant provision of the Commercial Law
article of the Maryland Annotated Code Section 13-104, titled “Exemptions,”
which states that the MCPA does not apply to:
The professional
services of a certified public accountant, architect, clergyman, professional
engineer, lawyer, veterinarian, insurance
company authorized to do business in the State, insurance producer licensed by the State, Christian Science
practitioner, land surveyor, property line surveyor, chiropractor, optometrist,
physical therapist, podiatrist, real estate broker, associate real estate
broker, or real estate salesperson, or medical or dental practitioner[.]
Md. Code Ann., Com.
Law § 13-104(1) (emphasis added).
Given that Western American is explicitly
included in that exceptive list, as an “insurance producer”, the Court granted its Motion to Dismiss
Plaintiff’s claim for violation of the MCPA for failure to state a claim upon
which relief can be granted.
This matter will proceed on Plaintiff’s breach of
contract action and RSRM will continue to follow this and other relevant
matters in this District’s Federal Court.
- Jessica P. Butkera
