UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 20-1937
JOWITE LIMITED PARTNERSHIP,
Plaintiff – Appellant,
v.
FEDERAL INSURANCE COMPANY,
Defendant – Appellee.
Appeal from the United States District Court for the District of Maryland, at Baltimore.
Deborah Lynn Boardman, Magistrate Judge. (1:18-cv-02413-DLB)
Argued: September 21, 2021 Decided: November 4, 2021
Before QUATTLEBAUM and RUSHING, Circuit Judges, and Rossie D. ALSTON, Jr.,
United States District Judge for the Eastern District of Virginia, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Ira Lee Oring, FEDDER AND GARTEN PROFESSIONAL ASSOCIATION,
Owings Mills, Maryland, for Appellant. Bryant Green, NILES, BARTON & WILMER,
LLP, Baltimore, Maryland, for Appellee. ON BRIEF: Jay Abarbanel, FEDDER AND
GARTEN PROFESSIONAL ASSOCIATION, Owings Mills, Maryland, for Appellant.
Craig D. Roswell, NILES, BARTON & WILMER, LLP, Baltimore, Maryland, for
Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
In 2017, Appellant Jowite Limited Partnership sought coverage from Appellee
Federal Insurance Company for damage to a building under an all-risk insurance policy
(the “Policy”). Citing various exclusions in the Policy, including exclusions for loss or
damage caused by settling and for loss or damage caused by faulty planning or design,
Federal denied coverage and Jowite sued. On cross-motions for summary judgment, the
district court denied Jowite’s motion and granted Federal’s. Jowite appealed. Finding no
reversible error, we affirm the district court.
I.
Jowite owns three apartment buildings in Easton, Maryland that were originally
constructed in the late 1980s. At some point in 1999, a property manager noticed that one
of the buildings—Building 300—was sinking into the ground. Repairs to Building 300
were attempted but were unsuccessful.
In January 2013, a new property management company began managing the
apartment buildings. When the new management company noticed that Building 300 was
sinking, it hired an engineering firm to evaluate the settlement issues and a construction
company to repair the building. The engineering firm attributed Building 300’s settlement
problems to, in part, “a concentrated load that may not have been accounted for in the
original design and over time has sagged due to insufficient support in th[e] area.” J.A.
1250. The construction company attempted to fix the problems which the engineering firm
identified by installing several hydraulic jacks underneath the support beams in the
building’s interior. While installing the hydraulic jacks, the construction company noticed
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several other structural problems in the building. Most significantly, the construction
company discovered that the foundation and the footer near the back wall of the building
had “failed[,] causing the building to become extremely out of level.” J.A. 617.
Following the repairs, the engineering firm reinspected Building 300 and found
additional structural problems. Roughly two years later, the building was inspected again,
this time by a new construction company, which recommended that the building be
demolished completely. Rather than undertaking additional repairs, Jowite filed an
insurance claim with Federal under the Policy, seeking coverage for the damage caused to
the building “due to ground settling.” J.A. 1385.
After receiving Jowite’s claim, Federal retained its own structural engineer to
inspect Building 300. Federal’s engineer observed that the damage to the building,
including cracks to the building’s exterior, were “consequences that may have occurred as
a result of ongoing settlement over the building’s approximately 30-year life.” J.A. 635.
Federal’s engineer also observed that the building sat on soil containing organic matter,
which is apparently naturally degradable and compressible, and that the building had
irregular shaped footings with off-centered piers. Jowite’s retained liability expert opined
that “the root cause of the problem . . . [was] inadequate design and construction of [the]
building foundation[],” J.A. 801, and that an “adequately designed and supported”
foundation would not have settled. J.A. 894.
Federal denied Jowite’s claim for coverage for the damage to Building 300, citing
several exclusions in the Policy, including the defective design exclusion and the settling
exclusion.
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The Policy’s defective design exclusion provides:
This insurance does not apply to loss or damage (including the cost of
correcting or making good) caused by or resulting from any faulty,
inadequate or defective:
• planning, zoning, development, surveying, siting;
• design, specifications, plans, workmanship, repair, construction,
renovation, remodeling, grading, compaction;
• materials used in repair, construction, renovation or remodeling;
or
• maintenance
of part or all of any property on or off the premises shown in the
Declarations.
This Planning, Design, Materials Or Maintenance exclusion does not apply
to ensuing loss or damage caused by or resulting from a peril not otherwise
excluded.
J.A. 64.
The Policy’s settling exclusion provides:
This insurance does not apply to loss or damage caused by or resulting
from settling, cracking, shrinking, bulging or expansion of land, paved or
concrete surfaces, foundations, pools, buildings or other structures.
This Settling exclusion does not apply to ensuing loss or damage caused by
or resulting from a specified peril.
J.A. 68. 1
On cross-motions for summary judgment, the district court denied Jowite’s motion
and granted Federal’s, concluding that both the defective design and settling exclusions
barred coverage. On appeal, Jowite argues that the district court incorrectly interpreted
1
Bolded terms are defined by the Policy.
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both exclusions under Maryland law. As to the design exclusion, Jowite contends that the
district court improperly interpreted the “ensuing loss” exception to the exclusion. That
exception restores coverage for “ensuing loss or damage caused by or resulting from a peril
not otherwise excluded.” Jowite maintains that the district court erred by holding that the
exception could not apply where the loss or damage could not be separated from the
defectively designed property. As to the settling exclusion, Jowite argues that the district
court erred by refusing to apply the “efficient proximate cause” rule to conclude that the
defectively design and construction of Building 300’s foundation, not the “settling,” was
the proximate cause of the loss.
II.
We review de novo a district court’s decision to grant summary judgment, applying
the same legal standards as the district court and viewing all facts and reasonable inferences
in the light most favorable to the nonmoving party. News & Observer Publ’g Co. v.
Raleigh-Durham Airport Auth., 597 F.3d 570, 576 (4th Cir. 2010). Summary judgment is
warranted “if the movant shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “Facts are
material when they might affect the outcome of the case, and a genuine issue exists when
the evidence would allow a reasonable jury to return a verdict for the nonmoving party.”
News & Observer Publ’g Co., 597 F.3d at 576 (internal quotation marks omitted). If the
nonmoving party “has failed to make a sufficient showing on an essential element of [his]
case with respect to which [he] has the burden of proof,” summary judgment is appropriate.
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “When faced with cross-motions for
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summary judgment, the court must review each motion separately on its own merits to
determine whether either of the parties deserves judgment as a matter of law.” Rossignol
v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (internal quotation marks omitted).
A federal court sitting in diversity must apply the forum state’s substantive law.
Francis v. Allstate Ins. Co., 709 F.3d 362, 369 (4th Cir. 2013). Thus, as a court exercising
diversity of citizenship jurisdiction pursuant to 28 U.S.C. § 1332, the district court correctly
concluded that Maryland law governs the interpretation of the Policy. J.A. 1577.
III.
Based upon our review of the record, there appear to be no disputed material facts
in this case.
Although Jowite concedes that there is no controlling Maryland authority directly
applicable to either exclusion, Jowite instead argues that the district court failed to
accurately predict how Maryland courts would interpret each exclusion. While we agree
that there is no controlling Maryland authority interpreting either exclusion, 2 principles of
Maryland insurance policy interpretation are well-settled. “[T]he interpretation of an
insurance policy is governed by the same principles generally applicable to the construction
of other contracts[.]” Mitchell v. AARP Life Ins. Program, New York Life Ins. Co., 779
2
The parties heavily rely on two Maryland district court cases in Selective Way Ins.
Co. v. Nat’l Fire Ins. Co. of Hartford, 988 F. Supp. 2d 530 (D. Md. 2013) and Bethany
Boardwalk Group LLC v. Everest Security Ins. Co., No. ELH-18-3918, 2020 WL 1063060
(D. Md. Mar. 5, 2020). Both cases interpret similar insurance policy terms, but they are
ultimately inapposite. For example, Selective Way provides only limited guidance because
the relevant policy language differs from the language at issue here.
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A.2d 1061, 1069 (Md. Ct. Spec. App. 2001) (citing Philadelphia Indem. Ins. Co. v.
Maryland Yacht Club, Inc., 742 A.2d 79, 85 (Md. 1999)). When determining coverage
under an insurance policy, “‘the primary principle of construction is to apply the terms of
the insurance contract itself.’” Universal Underwriters Ins. Co. v. Lowe, 761 A.2d 997,
1005 (Md. Ct. Spec. App. 2000) (quoting Bausch & Lomb v. Utica Mut. Ins. Co., 625 A.2d
1021, 1031 (Md. 1993)). Courts must consider the policy’s plain language and assign the
“words and phrases their ordinary and accepted meanings as defined by what a reasonably
prudent lay person would understand them to mean.” Kendall v. Nationwide Ins. Co., 702
A.2d 767, 771 (Md. 1997).
Generally, when an insured claims a breach of an insurance policy “the insured bears
the burden of proving every fact essential to his or her right to recovery, ordinarily by a
preponderance of the evidence.” Gen. Ins. Co. v. Walter E. Campbell Co., 241 F. Supp.
3d 578, 597 (D. Md. 2017) (citing N. Am. Acc. Ins. Co. v. Plummer, 176 A. 466, 469 (Md.
1935)). If the insured meets its burden and the insurer relies upon an exclusion to deny
coverage, the insurer bears the burden of proving that the exclusion applies. See Finci v.
Am. Cas. Co., 593 A.2d 1069, 1087 (Md. 1991).
Applying these straightforward rules of insurance policy interpretation, we agree
with the district court that the design exclusion bars coverage for the claim. Essentially,
Jowite argues that the collapse 3 of Building 300 could be both the “peril” and the “loss or
3
The parties disagree whether Building 300 actually “collapsed,” but the district
court did assume, for the purposes of its analysis, “that a serious impairment of the building
has occurred such that it is a ‘collapse’ under Maryland law.” J.A. 1584-85.
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damage” under the ensuing loss exception. But Jowite’s interpretation runs afoul of
Maryland’s primary principle of contract construction—to construe an insurance policy’s
text consistent with what an ordinary layperson would understand it to mean—to say
nothing of the fact that Jowite’s interpretation would also strip the design exclusion of any
real meaning. We therefore agree with the district court’s conclusion that the ensuing loss
exception cannot reasonably be understood to mean that the collapse of Building 300 could
be both the “ensuing loss or damage” and the “peril not otherwise excluded.”
While we conclude that the district court committed no reversible error in holding
that the design exclusion bars coverage of Jowite’s claim, we also observe, without
deciding, that the result of this case would be unchanged were we to review the district
court’s application of the settling exclusion.
AFFIRMED
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