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HEADNOTE:

Herbert Himelfarb et al. v. The Hartford Fire Insurance Company, No. 61, September Term, 1998

_________________________________________________________________ INSURANCE -- Substantial compliance with a proof of loss provision in an insurance policy is all the law requires, and under appropriate circumstances, the question of compliance is one of fact.

REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 61 September Term, 1998

HERBERT HIMELFARB et al.

v.

THE HARTFORD FIRE INSURANCE COMPANY

Hollander, Eyler, Getty, James S. (Ret., specially assigned), JJ. Opinion by Eyler, J. Filed: October 5, 1998

The issue in this case is whether Herbert and Frances Himelfarb ("Himelfarbs"), appellants, complied with a proof of loss provision in an insurance policy issued by The Hartford Fire Insurance Company ("Hartford"), appellee. On appeal, the

Himelfarbs challenge an order of the Circuit Court for Baltimore City granting Hartford's motion for summary judgment on the basis that the Himelfarbs had not submitted a complete proof of loss to Hartford within sixty days of Hartford's request for information, as required by the policy. We hold that the Himelfarbs succeeded

in creating a genuine dispute of material fact on this issue, and thus, the trial court erred in granting summary judgment. Consequently, we reverse and remand for further proceedings. Fact Background The following information is taken from the affidavits and documents filed by the Himelfarbs in opposition to Hartford's motion for summary judgment. At all relevant times, the

Himelfarbs owned a commercial warehouse located at 1327 Bayard Street in Baltimore, Maryland. On April 29, 1992, the Himelfarbs

leased a portion of the warehouse to Baltimore Woodworks, Inc. ("Baltimore Woodworks"). As part of the transaction, the

Himelfarbs loaned $100,000 to Baltimore Woodworks as a tenant equipment and improvement allowance and retained a security interest in the property that Baltimore Woodworks purchased with the proceeds of the loan.

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Baltimore Woodworks failed to make several of its rental payments, thereby defaulting under the terms of its lease. Consequently, in the Spring of 1994, the Himelfarbs instituted bankruptcy proceedings against Baltimore Woodworks and, at the beginning of the bankruptcy proceedings, performed an inventory of the equipment and material that remained on the premises.1 In November, 1994, some of the equipment and material belonging to Baltimore Woodworks, which was subject to the Himelfarbs' security interest, was stolen from the warehouse. In

late 1994 or early 1995, shortly after the Himelfarbs learned of the theft, Frances Himelfarb reported the loss to Ivan Brendler ("Brendler") of the Brendler Insurance Agency, from whom the Himelfarbs purchased their Hartford insurance policy. Frances

informed Brendler that she would not know the extent of the theft loss until she received the information from the bankruptcy auction of the remaining property. On February 8, 1995, the

bankruptcy trustee auctioned off the remaining equipment and material belonging to Baltimore Woodworks. On June 5, 1995, the Himelfarbs notified Hartford of the loss. Thereafter, they retained the services of Harvey Goodman

of The Goodman-Gable-Gould Company, adjusters, to (1) investigate

In July, 1994, the Himelfarbs entered into a month-to-month tenancy for a portion of the warehouse with Clarence M. Mitchell, III t/a System Configuration & Maintenance Corporation. Mitchell also failed to pay rent, and he abandoned the property in November, 1994. -2-

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the theft, (2) determine the extent of their loss, and (3) pursue their claim with Hartford. The policy issued by Hartford contained various first party and liability coverages, including coverage for theft of property in which the Himelfarbs had a security interest. On October 2,

1995, Hartford requested that the Himelfarbs submit a proof of loss within sixty days. Goodman prepared a "proof of loss,"

utilizing a Hartford printed form, and submitted a signed and sworn copy to Hartford on November 28, 1995. Although the proof

of loss asserted the theft of property on November 1, 1994, and contained the information available to the Himelfarbs up until that time, it did not indicate the cost of repair, replacement, or actual cash value of the stolen items. Instead, the proof of

loss noted that those terms were "to be determined." On November 30, 1995, Hartford wrote a letter to the Himelfarbs noting its dissatisfaction with the proof of loss and demanding that the Himelfarbs provide it with supplemental information no later than December 4, 1995, or else risk denial of their claim. On December 4, 1995, Goodman wrote a letter to

Hartford's counsel stating that "[a]ll available information requested for the Hartford's investigation has been provided independently of the Proof." On December 11, 1995, Hartford

denied the Himelfarbs' claim on the basis that they (1) did not provide prompt notice of the loss, (2) failed to submit an

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adequate proof of loss, and (3) failed to demonstrate any insurable interest.2 On April 25, 1996, after numerous telephone calls and letters, Goodman obtained the information with respect to the items sold at the bankruptcy auction in February, 1995. Shortly

thereafter, Goodman finished his investigation and, on June 6, 1996, forwarded a formal estimate of loss. In order to prepare

the formal estimate of loss, Goodman needed information on the items sold at the bankruptcy auction so that he could compare that information to the inventory of the property taken at the beginning of the bankruptcy proceedings. included with the June 6, 1996 packet. This information was The inference relied on

by Goodman and the Himelfarbs was that the items that were not sold at the auction, but which were on the original inventory list, were the items that had been stolen in November, 1994. Hartford and Goodman exchanged correspondence in August and September, 1996, confirming the date of loss as November 19, 1994, and not November 1, 1994, as originally reported. In a

letter dated December 6, 1996, Hartford once again denied the Himelfarbs' claim on the ground that, to the extent pertinent here, the proof of loss was inadequate. On February 26, 1997, the Himelfarbs filed a complaint against Hartford in the Circuit Court for Baltimore City seeking The "notice" and "insurable interest" issues are not before us on this appeal. -42

to recover their loss.

On July 14, 1997, Hartford filed its

motion for summary judgment and a hearing on the motion was held on October 20, 1997. The trial court held that the Himelfarbs

failed to file a timely proof of loss, which was a material breach of the policy, and granted Hartford's motion.3 appeal followed. This

For the reasons that follow, we reverse. QUESTION PRESENTED

On appeal, the Himelfarbs present two questions for our review, which we have rephrased and combined into one question as follows: Did the Himelfarbs as a matter of law fail to file a timely and adequate proof of loss, thereby breaching the insurance policy, precluding recovery? STANDARD OF REVIEW Appellate review of summary judgment is governed by Maryland Rule 2-501(e). Summary judgment is proper if "there is no

genuine dispute as to any material fact and . . . the party in whose favor judgment is entered is entitled to judgment as a matter of law." Rule 2-501(e). "In determining whether a party

is entitled to judgment under this rule, the court must view the

The transcript of the hearing indicates that the trial court may have perceived the Himelfarbs' argument as one of conceding that they had breached the proof of loss provision in the policy but arguing that the breach was immaterial. Our review indicates that their position was that they had complied with the policy provision, not that their action constituted an immaterial breach. -5-

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facts, including all inferences, in the light most favorable to the opposing party." Baltimore Gas & Electric Co. v. Lane, 338

Md. 34, 43 (1995); see also Beatty v. Trailmaster Products, Inc., 330 Md. 726, 739 (1993). The role of the trial court is to

decide issues of law and not to resolve disputed issues of fact. DeBusk v. Johns Hopkins Hosp., 105 Md. App. 96, 102 (1995). Summary judgment proceedings are not intended as a substitute for trial. (1996). General Accident Ins. Co. v. Scott, 107 Md. App. 603, 611 Upon review of summary judgment matters, an appellate

court determines whether the trial court was legally correct. De Busk, 105 Md. App. at 102. DISCUSSION On appeal, the Himelfarbs contend that the trial court could not, as a matter of law, find that they failed to abide by the terms and conditions of the insurance policy. They argue that

determining whether their proof of loss met the requirements of the policy was a factual issue to be submitted to a fact finder at trial. In addition, the Himelfarbs contend that, absent

prejudice to Hartford, they should not be precluded from recovering on their claim because of an unavoidable delay in submitting a formal estimate of loss. Hartford disagrees and argues that summary judgment was appropriate because the Himelfarbs failed to abide by the following insurance policy provision:

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3. Duties In The Event Of Loss Or Damage a. You must see that the following are done in the event of loss or damage to Covered Property: * * * (7) Send us a signed, sworn proof[ ] of loss containing the information we request to investigate the claim. You must do this within 60 days after our request. We will supply you with the necessary forms.
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Hartford contends that the information submitted in the proof of loss on November 28, 1995, was insufficient to enable Hartford to investigate the Himelfarbs' claim and, as such, precludes the Himelfarbs from recovering under the policy. Hartford also

argues that it need not establish actual prejudice in order to deny a claim when an insured fails to abide by an express policy provision. Hartford's latter contention is correct. Although several

states require an insurer to demonstrate actual prejudice before denying a claim on the basis of failure to comply with a policy provision requiring a proof of loss, Maryland is not one of those states. Generally, an insurer need not establish actual

prejudice in order to deny a first party coverage claim for a breach of a policy provision requiring a proof of loss. See Md.

The printed proof of loss form supplied by Hartford and utilized by the insured in this case was not a part of the policy. Consequently, it is impossible to discern from the policy what information would have to be included in a proof of loss in order to satisfy this provision. -7-

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Code Ann., Ins.

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