Janjer Enterprises, Inc. v. Executive Risk Indemnity, Inc.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
JANJER ENTERPRISES, INCORPORATED, 
Plaintiff-Appellant,
v.
 No. 03-1684
EXECUTIVE RISK INDEMNITY,
INCORPORATED, (Chubb Group),
Defendant-Appellee.

Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Peter J. Messitte, District Judge.
(CA-02-2895-PJM)
Argued: January 20, 2004
Decided: May 6, 2004
Before WILKINSON, GREGORY, and SHEDD, Circuit Judges.
Affirmed by unpublished opinion. Judge Gregory wrote the opinion,
in which Judge Wilkinson and Judge Shedd joined.
COUNSEL
ARGUED: James Michael Brault, Albert David Brault, BRAULT,
GRAHAM, SCOTT & BRAULT, Rockville, Maryland, for Appel-
lant. Jonathan Adrian Constine, HOGAN & HARTSON, L.L.P.,
Washington, D.C., for Appellee. ON BRIEF: Douglas S. Crosno,
HOGAN & HARTSON, L.L.P., Washington, D.C., for Appellee.
2 JANJER ENTERPRISES v. EXECUTIVE RISK INDEMNITY
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
GREGORY, Circuit Judge:
Plaintiff-appellant Janjer Enterprises, Inc. ("Janjer") appeals from
the judgment of the United States District Court for the District of
Maryland granting summary judgment to defendant-appellee Execu-
tive Risk Indemnity, Inc. ("Executive Risk") on its claim that Execu-
tive Risk breached their contract by refusing to defend and indemnify
Janjer in a sexual harassment suit brought by one of its employees.
Executive Risk disclaimed coverage on the basis that Janjer failed to
comply with the policy’s notification of claim provision, a strict con-
dition precedent to coverage, by not providing its vice president of
claims with written notice of the suit as soon as practicable or no later
than sixty days after the sexual harassment claim was first made. Jan-
jer argued that under Maryland law, specifically Maryland Insurance
Code § 19-110 ("Section 19-110"), Executive Risk was required to
show prejudice before denying coverage on this basis. The district
court rejected Janjer’s argument, holding that Section 19-110’s preju-
dice requirement was inapplicable because the policy in question, by
making compliance with the notification of claim provision a strict
condition precedent to coverage, was a "claims made plus reporting,"
rather than a strict "claims made," policy. For the reasons that follow,
we affirm.
I.
Janjer is a Maryland corporation whose principal place of business
is in Silver Spring, Maryland. Executive Risk is a Delaware corpora-
tion with its principal place of business in Simsbury, Connecticut.
On August 19, 1998, Executive Risk issued the first of several
annual "Employment Practices Liability Insurance" policies to Janjer.
The policy in question, Policy No. 8166-5265 (the "Policy"), was in
effect between August 19, 2000 and August 19, 2001. Under the
JANJER ENTERPRISES v. EXECUTIVE RISK INDEMNITY 3
terms of the Policy, Executive Risk agreed to indemnify Janjer "for
Defense Expenses and Loss . . . resulting from Claims first made
against [Janjer] during the Policy period or, if applicable, the
Extended Reporting Period, for Employment Practices Wrongful Acts
occurring subsequent to the Retroactive Date stated in Item 6 of the
Declaration and before the expiration of the Policy Period." J.A. 156
(emphasis omitted). In addition, Executive Risk agreed, subject to
certain limitations, to "defend any covered Claim, even if the allega-
tions thereof are groundless, false, or fraudulent." Id. (emphasis omit-
ted). The Policy defined the term "Claim" to mean:
any written notice received by [Janjer] from any current or
former Employee . . . or from any person or entity acting on
behalf of such a current or former Employee . . . including
but not limited to the Equal Employment Opportunity Com-
mission . . . that a current or former employee . . . intends
to hold [Janjer] responsible for an Employment Practices
Wrongful Act.
Id. at 156-57 (emphasis omitted). The term "Claim" was also defined
to include "any judicial, administrative or other proceeding against
[Janjer] by a current or former Employee . . . for an Employment
Practices Wrongful Act." Id. at 157 (emphasis omitted). The term
"Employment Practices Wrongful Act" was defined as "any actual or
alleged: (1) Wrongful Termination; (2) Discrimination; (3) Harass-
ment; (4) Retaliation; or (5) Workplace Tort." Id. at 158 (emphasis
omitted).
Under the Policy, a claim was deemed to be "first made" when Jan-
jer became aware that an employee or former employee commenced,
or intended to commence, a proceeding to hold it responsible for an
Employment Practices Wrongful Act. Id. at 166. The Policy further
provided that "[a]ll Related Claims will be treated as a single Claim
made at the time the first of such Related Claims was made." Id.
(emphasis omitted). The term "Related Claims" was defined to mean
"all Claims based on, arising out of, directly or indirectly resulting
from, in consequence of, or in any way involving the same or related
facts, circumstances, situations, transactions, events or Employment
Practices Wrongful Acts or the same or related series of facts, circum-
4 JANJER ENTERPRISES v. EXECUTIVE RISK INDEMNITY
stances, situations, transactions, events or Employment Practice
Wrongful Acts." Id. at 160 (emphasis omitted).
The Policy, however, also contained a notification of claim provi-
sion, which stated that Janjer was required to provide Executive Risk
with written notice of any claim first made against Janjer during the
policy period "as soon as practicable and in no event later than sixty
. . . days after such Claim is first made." Id. at 165 (emphasis omit-
ted). Moreover, the Policy required that all written notices of claims
made be sent to Executive Risk’s vice president of claims. Id. at 155.
Importantly, the Policy expressly stated that compliance with the noti-
fication of claim provision was a strict condition precedent to cover-
age. Id. ("Compliance with this notice requirement is a strict
condition precedent to coverage under this Policy.").
On March 2, 2001, Janjer received a Notice of Charge of Discrimi-
nation from the Equal Employment Opportunity Commission
("EEOC"), stating that Oneyda Ventura-Cruz, an employee at a
Popeye’s Restaurant owned and operated by Janjer, filed a complaint
alleging that she was subjected to gender discrimination in violation
of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq.
Specifically, Ventura-Cruz alleged that the general manager of the
Popeye’s Restaurant, Bill Buckley, sexually harassed her on several
occasions. She also alleged that her immediate supervisor and Janjer’s
human resources department failed to take appropriate corrective
measures when informed of these incidents.
After investigating Ventura-Cruz’s allegations, the EEOC deter-
mined, on May 30, 2001, that there was reasonable cause to believe
that Ventura-Cruz was sexually harassed and subjected to a hostile
work environment, and that Janjer failed to take reasonable care to
prevent the sexual harassment. In issuing its determination, the EEOC
provided the parties with a proposed Conciliation Agreement and
invited them to participate in the conciliation process. Although both
parties agreed to participate in the conciliation process, they were
unable to reach a resolution after Ventura-Cruz rejected a settlement
offer made by Janjer. Consequently, on August 10, 2001, the EEOC
issued Ventura-Cruz a right-to-sue letter.
JANJER ENTERPRISES v. EXECUTIVE RISK INDEMNITY 5
On October 4, 2001, Ventura-Cruz commenced an action in the
Circuit Court for Prince George’s County, Maryland asserting several
employment practices and common law claims arising out of the mis-
conduct alleged in her EEOC complaint. In a letter dated October 19,
2001, Janjer requested that Executive Risk indemnify and defend it
in the suit commenced by Ventura-Cruz. On November 30, 2001,
Executive Risk denied coverage, stating that Ventura-Cruz’s suit was
related to the claim she filed with the EEOC, which under the Policy
was considered to be first made on March 2, 2001 when Janjer
received the Notice of Charge of Discrimination from the EEOC.
Because Janjer did not provide Executive Risk’s vice president of
claims with written notice of Ventura-Cruz’s EEOC claim until Octo-
ber 19, 2001,1 Executive Risk denied coverage, reasoning that Janjer
failed to comply with the Policy’s notification of claim provision,
which was a strict condition precedent to coverage.
Upon being informed of Executive Risk’s decision to disclaim cov-
erage, Janjer filed a complaint with the Maryland Insurance Adminis-
tration ("MIA") alleging that Executive Risk wrongfully denied
coverage for Ventura-Cruz’s suit. Janjer asserted that its noncompli-
ance with the Policy’s notification of claim provision did not provide
Executive Risk with a basis to deny coverage because Executive Risk
was not prejudiced by its noncompliance. On April 17, 2002, the MIA
concluded that Executive Risk’s denial of coverage did not violate the
Maryland Insurance Code. By letter dated June 10, 2002, Janjer
requested that the MIA reopen and review its complaint. In a letter
dated August 19, 2002, the MIA informed Janjer that it failed to
appeal the MIA’s initial determination in a timely fashion and thus
1
In a policy renewal application dated July 1, 2001, Janjer listed
Ventura-Cruz’s pending EEOC claim. J.A. 77-83. This application, how-
ever, was submitted to an insurance agent at Executive Risk. Conse-
quently, it did not constitute proper notice of Ventura-Cruz’s claim
because the Policy expressly required that all written notices of claims
made be submitted to Executive Risk’s vice president of claims. Such a
requirement is aimed at preventing "an insured from insisting that an
insurer’s underwriting department sift through a renewal application and
decide what should be forwarded to the claims department on the
insured’s behalf." Am. Cas. Co. of Reading, Pa. v. Continisio, 17 F.3d
62, 69 (3d Cir. 1994).
6 JANJER ENTERPRISES v. EXECUTIVE RISK INDEMNITY
declined to reopen Janjer’s complaint. In doing so, however, the MIA
stated that it reviewed the documentation provided by Janjer with its
June 10th letter and concluded that such documentation would not
have altered its determination. On September 17, 2002, Janjer
appealed the MIA’s August 19th determination and requested a hear-
ing. On September 24, 2002, the MIA denied Janjer’s appeal and
request for a hearing, stating that such a request was untimely.
On May 24, 2002, Janjer informed Executive Risk that it reached
a settlement in the Ventura-Cruz suit and demanded reimbursement
for the settlement amount and attorney’s fees incurred in connection
with the suit. On July 24, 2002, after Executive Risk refused to adhere
to its demand, Janjer commenced the present action in the Circuit
Court for Montgomery County, Maryland, seeking reimbursement for
$250,000 in settlement costs and over $100,000 in related legal fees.
On August 30, 2002, Executive Risk removed the case to the United
States District Court for the District of Maryland on the basis of
diversity of citizenship. On January 6, 2003, Janjer moved for partial
summary judgment, asserting that Section 19-110 requires an insurer
to show prejudice before denying coverage for noncompliance with
a notification of claim provision. On January 27, 2003, Executive
Risk filed a cross-motion for summary judgment, arguing that the
Policy expressly made compliance with the notification of claim pro-
vision a condition precedent to coverage and that the prejudice
requirement of Section 19-110 did not apply to claims made policies
that contained a strict reporting requirement.
After reviewing the parties cross-motions for summary judgment,
the district court granted Executive Risk’s motion, holding that Exec-
utive Risk did not have to show actual prejudice because the Policy,
when read as a whole, was a "claims made and reporting" policy and
thus exempt from Section 19-110’s prejudice requirement. This
appeal followed.
II.
A.
"We review a district court’s grant of summary judgment de novo."
Continental Airlines, Inc. v. United Airlines, Inc., 277 F.3d 499, 508
JANJER ENTERPRISES v. EXECUTIVE RISK INDEMNITY 7
(4th Cir. 2002)). Summary judgment is appropriate only where "there
is no genuine issue as to any material fact and . . . the moving party
is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c).
Because we are a federal court sitting in diversity, we apply Maryland
substantive law, which both parties agree governs this action, to deter-
mine whether the district court’s grant of summary judgment was
proper. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).
B.
Section 19-110 of the Maryland Insurance Code, "Disclaimers of
Coverage on Liability Policies," provides, in pertinent part, that:
[a]n insurer may disclaim coverage on a liability insurance
policy on the ground that the insured or a person claiming
the benefits of the policy through the insured has breached
the policy by failing to . . . giv[e] the insurer required notice
only if the insurer establishes by a preponderance of the evi-
dence that the lack of . . . notice has resulted in actual preju-
dice to the insurer.
MD. CODE ANN., INS. § 19-110. In construing and applying Section 19-
110, Maryland courts have held that "claims made and reporting" pol-
icies, which require that a claim be both made against the insured and
reported to the insurer during the policy period, are not subject to its
prejudice requirement. Maynard v. Westport Ins. Corp., 208 F. Supp.
2d 568, 574 (D. Md. 2002), aff’d, 55 Fed. Appx. 667 (4th Cir.
2003)(unpublished)("Under Maryland law, the ‘actual prejudice’
requirement of § 19-110 does not apply to a ‘claims made plus report-
ing’ policy. . . ." (quoting Rouse Co. v. Fed. Ins. Co., 991 F. Supp.
460, 465 (D. Md. 1998)). Consequently, insurers of "claims made and
reporting" policies need not establish by a preponderance of the evi-
dence that they were prejudiced by the insured’s failure to notify them
of a claim made during the policy period prior to disclaiming cover-
age. On the contrary, Maryland courts have held that strict "claims
made" policies, which only require that a claim be made against the
insured during the policy period, are subject to Section 19-110’s prej-
udice requirement. Rouse Co., 991 F. Supp. at 465 ("If . . . the policy
is a ‘claims made’ policy, requiring only that a claim be made against
the insured during the policy period to afford coverage, § 19-110 does
8 JANJER ENTERPRISES v. EXECUTIVE RISK INDEMNITY
apply." (citing St. Paul Fire & Marine Ins. Co. v. House, 554 A.2d
404 (Md. 1989)).
Under Maryland law "[i]t is axiomatic that an insurance contract is
interpreted like any other contract." Id. Thus, Maryland courts deter-
mine whether a policy is a strict "claims made" or "claims made and
reporting" policy by construing the policy as a whole rather than con-
sidering each provision in isolation. See Sullins v. Allstate Ins. Co.,
667 A.2d 617, 619 (Md. 1995). If the policy, when read as a whole,
is clear and unambiguous, "[Maryland courts] . . . assume the parties
meant what they said and will not resort to extrinsic evidence to
ascertain the [policy’s] meaning." Rouse Co., 991 F. Supp. at 465.
Applying these principles of contract construction, we find that the
district court properly concluded that the Policy is a "claims made and
reporting" policy and thus not subject to Section 19-110’s prejudice
requirement.
In the present case, the Declaration page of the Policy provides, in
pertinent part, that it is "a claims made policy which applies, subject
to its terms, only to ‘claims’ first made during the policy period.
. . ." J.A. 154 (emphasis added). The Policy’s Insuring Agreements
further provide that "Executive Risk . . . and [Janjer], subject to all
of the terms, conditions and limitations of this Policy, agree" that
Executive Risk will defend and indemnify Janjer for claims first made
during the policy period or, if purchased, any extended reporting
period. Id. at 156 (emphasis added). One such condition, indeed "a
strict condition precedent to coverage under [the] Policy," required
that Janjer provide Executive Risk written notice of any claim first
made during the policy period "as soon as practicable and in no event
later than sixty . . . days after such Claim [being] first made." Id. at
165 (emphasis omitted). When read together, these provisions clearly
make the Policy a "claims made and reporting" policy. Executive
Risk agreed to defend and indemnify Janjer for claims first made dur-
ing the policy period only if Janjer reported such claims as soon as
practicable and in no event later than sixty days after they were first
made.
Janjer nonetheless argues that the Policy is a strict "claims made"
policy because the reporting requirement was not included in the Poli-
cy’s Declaration page and Insuring Agreements. To support this argu-
JANJER ENTERPRISES v. EXECUTIVE RISK INDEMNITY 9
ment, Janjer notes that the policy in Maynard v. Westport Insurance
Corporation, a policy that was held to be a "claims made and report-
ing" policy, expressly provided in the Insuring Agreement that the
insurer would indemnify the insured for "CLAIMS first made against
[the] INSURED during the POLICY PERIOD and reported to the
[Insurer] in writing during the POLICY PERIOD or within sixty
. . . days thereafter. . . ." 208 F. Supp. 2d at 575. Janjer, however,
points out a distinction that has no substantive difference. While plac-
ing a reporting requirement in a policy’s declaration page or insuring
agreement is one manner in which parties can create a "claims made
and reporting" policy, it is not the exclusive manner. Parties may also
create a "claims made and reporting" policy, as was done here, by
expressly providing in a policy’s declaration page or insuring agree-
ment that coverage is subject to certain terms and conditions and set-
ting forth those terms and conditions, including a reporting
requirement as a strict condition precedent to coverage, in another
part of the policy. See, e.g., Lexington Ins. Co. v. St. Louis Univ., 88
F.3d 632, 634-35 (8th Cir. 1996)(holding that insurer did not have to
show prejudice because the policy, although stating that it was a
"claims made" policy, made compliance with notice provision a con-
dition to coverage). An opposite conclusion would run afoul of Mary-
land’s practice of construing insurance policies as a whole and would
render meaningless an essential part of the Policy.
Thus, having determined that the Policy is a "claims made and
reporting" policy, we conclude that Executive Risk properly dis-
claimed coverage under the Policy. The Policy expressly required that
Janjer provide Executive Risk with written notice of any claim first
made during the policy period as soon as practicable or, in any event,
not later than sixty days after such claim being first made. Janjer
failed to comply with this express condition precedent to coverage.
Despite having received the EEOC’s Notice of Charge of Discrimina-
tion on March 2, 2001, Janjer did not notify Executive Risk of
Ventura-Cruz’s claim until October 1, 2001—approximately seven
months after Ventura-Cruz’s claim was first made under the terms of
the Policy and two months after the Policy expired.2
2
Our conclusion that the Policy is a "claims made and reporting" pol-
icy and that Executive Risk properly disclaimed coverage on the basis
10 JANJER ENTERPRISES v. EXECUTIVE RISK INDEMNITY
III.
For the foregoing reasons, we affirm the district court’s grant of
summary judgment.
AFFIRMED
that Janjer failed to comply with the Policy’s notification of claim provi-
sion is further supported by the fact that the MIA reached a similar con-
clusion. Under Maryland law, the MIA is charged with investigating
insurance violation claims and has the authority "to order an insurer to
pay a claim whenever the insurer’s refusal to pay the claim violates
either the insurance policy or the law." Mut. Life Ins. Co. of NY v. Ins.
Comm’r, 723 A.2d 891, 898-99 (Md. 1999). After reviewing Janjer’s
claim and the terms of the Policy, the MIA concluded that Executive
Risk’s denial of coverage because of Janjer’s noncompliance with the
Policy’s notification of claim provision neither violated Maryland law or
the terms of the Policy.