UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-1726
WESTPORT INSURANCE CORPORATION,
Plaintiff - Appellee,
versus
DAVID ALBERT, a public accountant doing
business in Montgomery County; CAROLYN QUILL,
a public accountant doing business in
Montgomery County; RUBINO & MCGEEHIN, a
Maryland professional corporation doing
business in Montgomery County,
Defendants - Appellants,
and
BRUCE BURTOFF, M.D.,
Defendant.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Alexander Williams, Jr., District Judge.
(CA-04-2315-8-AW)
Argued: September 19, 2006 Decided: December 6, 2006
Before MICHAEL and GREGORY, Circuit Judges, and Thomas E. JOHNSTON,
United States District Judge for the Southern District of West
Virginia, sitting by designation.
Affirmed by unpublished opinion. Judge Gregory wrote the opinion,
in which Judge Michael and Judge Johnston joined.
ARGUED: Charles Elliott Wilson, Jr., MCCARTHY WILSON, Rockville,
Maryland, for Appellants. Jeffrey John Ward, THOMPSON, LOSS &
JUDGE, L.L.P., Washington, D.C., for Appellee. ON BRIEF: Ronald W.
Cox, Jr., MCCARTHY WILSON, Rockville, Maryland, for Appellants.
Unpublished opinions are not binding precedent in this circuit.
2
GREGORY, Circuit Judge:
David Albert, Carolyn Quill, and Rubino & McGeehin
(“Appellants”) appeal the decision of the United States District
Court for the District of Maryland granting Westport Insurance
Corporation (“Westport”) summary judgment under Federal Rule of
Civil Procedure 12(c). Westport sought a declaratory ruling that
it did not have to provide coverage under either of two accounting
malpractice insurance policies for a claim made against Appellants.
For the reasons discussed below, we affirm the ruling of the
district court.
I.
This case arises from the management of the estate of Ruth F.
Bernstein. In the 1996 codicil to her will, Bernstein named Donald
Albert, a licensed attorney and professional accountant, as
personal representative for her estate. In that codicil, Bernstein
directed that the bulk of her estate be distributed to her nephew
Bruce Burtoff, his wife, and a generation-skipping trust for his
children.
In December 1998, Bernstein entered into a Private Annuity
Agreement (“PA Agreement”) with R.B. Investments, LLC, a company
Burtoff had created. The purpose of the agreement was to provide
Bernstein with a quarterly income while transferring funds to her
beneficiaries in a way that avoided estate and gift taxes.
3
Bernstein died in January 1999, and on August 31, 1999, Albert sued
Burtoff to challenge the PA Agreement. Burtoff sent Albert a
letter on August 22, 2001, requesting that he withdraw the suit and
stop “wasting” estate funds. On November 29, 2001, Burtoff filed
a petition in the Superior Court of the District of Columbia to
remove Albert as personal representative of Bernstein’s estate and
a motion to expedite the removal.
In his filings, Burtoff accused Albert of being a
“malfeasant,” providing “sketchy and inadequate accounting
statements,” “breach[ing] his fiduciary duties,” “mismanag[ing]
Estate property,” and failing “to perform material duties of his
office.” (J.A. 52-54.) Albert received these complaints on
December 3, 2001. On January 30, 2002, Burtoff filed a complaint
in the Superior Court of the District of Columbia, alleging
accounting and legal malpractice against Albert, Quill, Rubino &
McGeehin, Jim Farris, and Babirak, Albert, Vangello & Shaheen, PC.*
Appellants had purchased successive professional malpractice
insurance policies from Westport. The 2001 policy promised to
defend and indemnify Appellants from any accounting malpractice
claims made against and reported by them during the period from
January 1, 2001, to January 1, 2002. The 2002 policy covered the
Defendants from January 1, 2002, to January 1, 2003. The 2002
*
The legal malpractice claims were covered and defended by
another insurance company.
4
policy also included a “Prior Knowledge Exclusion” that excluded
from coverage:
any act, error, omission, circumstance, or “personal
injury” occurring prior to the effective date of this
“policy” if any insured at the effective date knew or
could have reasonably foreseen that such act, error,
omission, circumstance or “personal injury” might be the
basis of a “claim.”
Albert gave Westport notice of the Burtoff suit on February 19,
2002.
Westport instituted its declaratory judgment action in the
District of Maryland on July 20, 2004. Westport sought a ruling
that neither the 2001 nor the 2002 policy covered Burtoff’s
malpractice claim against Appellants. Appellants filed an answer
and counterclaim on September 14, 2004, to which Westport replied
on September 30, 2004. Westport filed a motion for judgment on the
pleadings on November 11, 2004. Appellants then filed for leave to
amend their answer and counterclaim. The district court granted
summary judgment to Westport on May 31, 2005, finding that the 2001
policy did not cover the Burtoff malpractice claim and that the
2002 policy prohibited coverage of it under the prior knowledge
exclusion. After the court denied Appellants’ post-judgment
motions on September 22, 2005, Appellants appealed to this Court.
Appellants raise three issues on appeal. They first argue
that the district court erred in granting summary judgment to
Westport. They also claim that the district court abused its
discretion when it denied their motion to amend their answer and
5
counterclaim. Finally, they assert that the district court abused
its discretion when it denied their motion for reconsideration.
II.
Under Federal Rule of Civil Procedure 12(c), a district court
should treat a motion for judgment on the pleadings as a motion for
summary judgment if “matters outside the pleadings are presented to
and not excluded by the court.” Fed. R. Civ. P. 12(c). Because
the district court treated Westport’s motion for judgment on the
pleadings as a motion for summary judgment, we review de novo the
district court’s grant of summary judgment to Westport. See Laber
v. Harvey, 438 F.3d 404, 415 (4th Cir. 2006). Summary judgment is
proper “if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
(1986). The moving party bears the burden to show that there is no
genuine issue of material fact, and the court “must assess the
evidence as forecast in the documentary materials . . . in the
light most favorable to the party opposing the motion.”
Charbonnages de Fr. v. Smith, 597 F.2d 406, 414 (4th Cir. 1979).
We review a district court’s denial of a motion to amend a
pleading for abuse of discretion. Laber, 438 F.3d. at 428. We
6
similarly review a district court’s denial of post-judgment motions
made under Federal Rules of Civil Procedure 59 and 60 for abuse of
discretion. Collision v. Int’l Chem. Workers Union, 34 F.3d 233,
237 (4th Cir. 1994); Nat’l Credit Union Admin. Bd. v. Gray, 1 F.3d
262, 265 (4th Cir. 1993).
III.
A.
Westport seeks a ruling that the prior knowledge exclusion of
the 2002 policy exempts the company from defending Appellants
against Burtoff’s malpractice suit. The policy excludes from
coverage any “act, error, omission, circumstance, or ‘personal
injury’ ” occurring prior to January 1, 2002, that the insured
“knew or could have reasonably foreseen,” even if the actual claim
against the insured was made during the policy period. Westport
contends that no genuine issue of material fact exists as to
whether Appellants could have reasonably foreseen in 2001 that
Burtoff would bring a malpractice suit against them in 2002.
Westport argues that the allegations Burtoff made in his removal
petition would have put any reasonable accountant on notice that a
malpractice suit was forthcoming. Appellants disagree, arguing
that the petition did not and could not have provided them with
such notice. We agree with Westport.
7
Because Westport brought this action under the diversity
jurisdiction granted to the federal courts by 28 U.S.C. § 1332, we
look to the law of Maryland to determine the standard by which we
judge whether the prior knowledge exclusion applies. See Erie R.R.
Co. v. Tompkins, 304 U.S. 64 (1938). Maryland courts use an
objective standard of reasonableness. See Maynard v. Westport Ins.
Co., 208 F. Supp. 2d 568, 571 (D. Md. 2002); Culver v. Cont’l Ins.
Co., 1 F. Supp. 2d 545, 546 (D. Md. 1998). We therefore consider
whether there is any material fact in dispute that would have put
an objectively reasonable accountant on notice that a malpractice
suit was forthcoming.
It is undisputed that Burtoff’s removal petition made numerous
allegations against Appellants. Burtoff claimed that Albert failed
to file accounting statements, “breached his fiduciary duty,”
“mismanaged Estate property,” was “unable to discharge the duties
and powers of his office,” “failed to account for the assets of the
Estate,” and acted as a “malfeasant.” Burtoff also claimed that
Albert had “enriched himself through wasteful litigation”
concerning the estate and had delivered “sketchy” and “materially
and intentionally inaccurate” accountings when pressed. (J.A. 52-
54.) Accusations of that sort should have put a reasonable
accountant on notice that Burtoff could next file a claim for
damages. No facts that Appellants offer change the effectiveness
of that notice. Furthermore, the record reflects that Appellants
8
considered, prior to the effective date of the 2002 policy,
“whether or not to report [Burtoff’s petition] to the insurance
company.” (J.A. 324.) In light of the allegations in and the
consideration Appellants gave to the removal petition, they should
have foreseen the 2002 malpractice suit and reported it to
Westport.
We find as a matter of law that the allegations Burtoff made
in his petition to remove Albert as the personal representative of
Bernstein’s estate would have put a reasonable accountant on notice
that a malpractice suit was forthcoming. The prior knowledge
exclusion included in the 2002 policy prohibits coverage for the
malpractice action Burtoff filed in 2002. Summary judgment for
Westport is therefore proper.
B.
In their original answer and counterclaim, Appellants admitted
that they had knowledge of Burtoff’s claim prior to 2002. On
December 10, 2004, they sought leave to amend to correct their
mistaken understanding of the word claim. In its summary judgment
ruling on May 31, 2005, the district court denied their motion to
amend.
Federal Rule of Civil Procedure 15(a) allows a party to amend
a pleading once as a matter of course before a responsive pleading
is served. After that opportunity has passed, the party may amend
9
only by leave of the court. The Rule states that leave “shall be
freely given when justice so requires.” Fed. R. Civ. P. 15(a). We
have interpreted the Rule to provide that “leave to amend a
pleading should be denied only when the amendment would be
prejudicial to the opposing party, there has been bad faith on the
part of the moving party, or the amendment would have been futile.”
Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986).
In its denial of the motion to amend, the district court
pointed out that any amendment Appellants might make would be
futile. The court concluded that even if it allowed Appellants to
retract their admission that they knew about the forthcoming claim,
it would still find that they reasonably could have foreseen that
claim. Because the evidence shows that an objectively reasonable
accountant would have foreseen the malpractice claim prior to 2002,
we find that the district court did not abuse its discretion in
denying Appellants’ motion to amend.
C.
After the district court’s ruling, Appellants moved the court
for reconsideration, a new trial, or relief from the order. They
claimed that Westport should be required to provide coverage under
the 2001 policy as a “claims made” policy. The district court
denied those motions.
10
We have held that a court may only grant a post-judgment
motion under Federal Rule of Civil Procedure 59(e) “(1) to
accommodate an intervening change in controlling law; (2) to
account for new evidence not available at trial; or (3) to correct
a clear error of law or prevent manifest injustice.” Bogart v.
Chapell, 396 F.3d 548, 555 (4th Cir. 2005). If the motion has been
made under Federal Rule of Civil Procedure 60(b), a court should
grant it only to “accomplish justice” because the rule “is
extraordinary and is only to be invoked upon a showing of
exceptional circumstances.” Compton v. Alton S.S. Co., 608 F.2d
96, 102 (4th Cir. 1979). A court should not grant reconsideration
when the movant attempts “to raise arguments which could have been
raised prior to the issuance of the judgment” or “to argue a case
under a novel legal theory that the party had the ability to raise
in the first instance.” Pac. Ins. Co. v. Am. Nat. Fire Ins. Co.,
148 F.3d 396, 403 (4th Cir. 1998).
The district court rejected Appellants’ post-judgment motions
as an attempt to raise a new argument. The court stated that
“[t]he appropriate time for Defendants to present their theory of
coverage under the 2001 policy was in opposition to Plaintiff’s
motion for judgment on the pleadings.” (J.A. 383.) Appellants
argue that they were bound by the mistaken admissions that they
made in their answer and counterclaim and thus could not have
consistently made the argument that the 2001 policy covered the
11
malpractice suit. The district court properly noted that
Appellants could have pleaded their new claim in the alternative to
their argument that the 2002 policy covered the action.
The district court also rejected the argument that Maryland
law should force Westport to defend Appellants under the 2001
policy. Maryland Insurance Code section 19-110 states:
An insurer may disclaim coverage on a liability insurance
policy on the ground that the insured . . . has breached
the policy by failing to cooperate with the insurer or by
not giving the insurer required notice only if the
insurer establishes by a preponderance of the evidence
that the lack of cooperation or notice has resulted in
actual prejudice to the insurer.
Md. Code. Ann., Ins., § 19-110 (LexisNexis 1997). This law,
however, applies only to “claims made” policies and not “claims
made and reported policies.” Maynard, 208 F. Supp. 2d at 574. The
Insuring Agreement of the 2001 policy states that the insured must
give “immediate written notice” of any claim arising within the
policy period. This statement identifies the policy as a “claims
made and reported” policy not covered under Maryland Insurance Code
§ 19-110. Appellants provided notice of Burtoff’s claim against
them to Westport on February 19, 2002, and thus did not satisfy the
reporting requirement of the 2001 policy.
We find that the district court did not abuse its discretion
when it denied Appellants’ post-judgment motions. Appellants
should have raised their argument that the 2001 policy covered the
malpractice action in their opposition to Westport’s motion for
12
summary judgment. Further, because the 2001 policy is a “claims
made and reported” policy, Maryland law provides Appellants no
relief.
IV.
Because Appellants have not demonstrated that any material
fact is genuinely at issue, and because the district court did not
abuse its discretion in denying Appellants’ motions, the decision
of the district court is affirmed.
AFFIRMED
13