Preview:

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND * * * * Civil No. JFM-07-11 * * * *****

NAUTILUS INSURANCE COMPANY v. BSA LIMITED PARTNERSHIP, ET AL.

MEMORANDUM Plaintiff Nautilus Insurance Company ("Nautilus" or "the Insurer") brings this declaratory judgment action to clarify its duty to defend and indemnify its insured, defendant BSA Limited Partnership ("BSA" or "the Insured"), in a civil suit brought by defendants Bridgette Feemster, Sabrina Lymore, Mary Brown, Betrice Harris, Michelle Hawkins, Shirley Holland, Dyanne Johnson, Lillian Johnson, Shirley Lattimore, and Dorothy Paul (collectively "Feemster Parties") against BSA.1 The underlying suit was brought by the Feemster Parties in the United States District Court for the District of Columbia in an action captioned Bridgette Feemster, et al. v. BSA Limited Partnership, Case No. 1-04 cv-01901-RBW ("underlying DC suit"). Now pending before the court is plaintiff Nautilus's motion for summary judgment and motion for default judgment against BSA. The issues have been fully briefed and no hearing is necessary. Local Rule 105.6. For the reasons stated below, plaintiff's summary judgment motion is denied in part and granted in part, and plaintiff's motion for default judgment against

The Fourth Circuit has stated that "[a] dispute between a liability insurer, its insured, and a third party with a tort claim against the insured over the extent of the insurer's responsibility for that claim is an `actual controversy' within the meaning of the federal Declaratory Judgment Act, even though the tort claimant has not yet reduced his claim against the insured to judgment." Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 375 n.3 (4th Cir. 1994), overruled on other grounds by Wilton v. Seven Falls Co., 515 U.S. 277 (1995).

1

BSA is granted.2

I. The underlying DC suit arises out of BSA's ownership and operation of the Bates Street Townhomes ("the Townhomes") in the District of Columbia. The Feemster Parties, plaintiffs in the underlying DC suit, were residents of the Townhomes. BSA participated in the Section 8 rental assistance program, entering into a renewable Housing Assistance Payments ("HAP") contract for the Townhomes with the United States Department of Housing and Urban Development ("HUD"). Under HAP contracts, HUD agrees to provide rental assistance payments to the landlord on the tenant's behalf. The low-income tenant pays 30% of his or her adjusted income, and HUD pays the difference between the tenant's payment and the rent. When a HAP contract expires, a private landlord may choose to opt-out of Section 8 instead of renewing, but the landlord must give proper notice to tenants affected by the opt-out

While defendant BSA accepted service of Nautilus's Complaint through its attorney, Robert Greenberg, BSA has failed to respond to Nautilus's Complaint and has not filed an opposition to Nautilus's motion for summary judgment or motion for default judgment against BSA. Therefore, plaintiff's motion for default judgment is granted. However, the Feemster Parties are "not bound by the default judgment because, as an injured third party, [they are] entitled to defend on the merits in the declaratory judgment proceeding." Penn America Ins. Co. v. Valade, 28 Fed. Appx. 253, 256 n.* (4th Cir. 2002) (unpublished per curiam op.). As the Fourth Circuit has found, when an insurer brings a declaratory judgment action against the insured and the injured third party, injured third parties such as the Feemster Parties "acquire[] standing-independent of that of the insured-to defend itself in the declaratory judgment proceeding." Id. at 257. The default judgment entered today against BSA "does not negate the case or controversy existing between the insurer . . . and the injured third party." Id.; see also Fed. Kemper Ins. Co. v. Rauscher, 807 F.2d 345, 353 (3d Cir. 1986) (entry of default against insured in insurer's declaratory judgment action did not require entry of judgment against injured parties because the injured parties "ha[d] standing to defend the declaratory judgment action despite the absence of . . . the actual insured"). 2

2

and tenants have the right under federal law to remain in their units. See 42 U.S.C.

Download Nautilus Insurance Co. v. BSA Limited Partnership.pdf

Maryland Law