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GREAVES v. STATE FARM INS. CO.

October 20, 1997

BERNICE GREAVES, et al., Plaintiffs,
v.
STATE FARM INSURANCE COMPANY, Defendant.



The opinion of the court was delivered by: KOLLAR-KOTELLY

 The parties to the above-captioned matter have filed cross-motions for summary judgment to resolve Plaintiffs' declaratory-judgment action. The single question for the Court to decide is: Whether Plaintiffs' individual injuries suffered during a single fire constitute three separate "occurrences" as that term is defined by the relevant insurance policy that Defendant State Farm Insurance Company (State Farm) issued. Upon considering the pleadings and the applicable law, the Court finds that State Farm is entitled to summary judgment.

 I. BACKGROUND

 The material facts are simple and undisputed. On December 26, 1995, Michael Pope and Angela Scruggs were injured, and Thomas J. Shelton, III *fn1" was killed when a fire consumed an apartment building owned by Weldon McPhail. The Plaintiffs in the present case first filed an action in the Superior Court for the District of Columbia that sought compensation for Mr. McPhail's alleged negligent acts and omissions. See Greaves v. McPhail, 96ca002785 (D.C. Super. Ct.).

 At the time of the fire, State Farm insured Mr. McPhail's apartment building. The policy established two separate monetary limitations: $ 1 million per "occurrence"; and $ 2 million aggregate for all occurrences during the policy's coverage period. See Apartment Policy, Special Form 3, Business Liability and Medical Payments Limits of Insurance, Section II.2, 3(b). Plaintiffs eventually discovered that State Farm intended to limit its insurance coverage of Mr. McPhail pursuant to the $ 1 million-single occurrence provision. Believing that their injuries constitute separate occurrences, the Plaintiffs contend that the higher $ 2 million limitation applies.

 On February 14, 1997, Plaintiffs brought suit in the Superior Court for the District of Columbia against State Farm. The Complaint seeks a declaratory judgment that establishes State Farm's potential liability to Mr. McPhail at the aggregate amount of $ 2 million. State Farm filed a timely notice of removal on March 14, 1997 to this District Court. *fn2" The parties have filed cross-motions for summary judgment on the narrow question of whether State Farm is obligated to insure Mr. McPhail for $ 1 million or $ 2 million.

 II. DISCUSSION

 Both the Plaintiffs and State Farm assert that the language of the insurance policy is clear, though they reach contradictory conclusions about the import of the policy's language. In the alternative, Plaintiffs have suggested that their interpretation evinces, at the very least, a profound ambiguity in the policy's coverage limitations. Accordingly, the Plaintiffs seek judgment based on contra proferentem.

 The Court first will examine the threshold choice-of-law question that the parties have presented; then proceed to reach the merits of the claim. The Court concludes that District of Columbia law controls this controversy, that the policy's language is not ambiguous, and that the $ 1 million limitation governs State Farm's liability for the damages sustained during the December 26, 1995 fire.

 A. Choice of Law

 When sitting in diversity, a federal court must apply the choice-of-law rules of the forum state. See Eli Lilly & Co. v. Home Ins. Co., 246 U.S. App. D.C. 243, 764 F.2d 876, 882 (D.C. Cir. 1985), later proceeding, 254 U.S. App. D.C. 1, 794 F.2d 710 (D.C. Cir. 1986), cert. denied, 479 U.S. 1060, 107 S. Ct. 940, 93 L. Ed. 2d 991 (1987). The District of Columbia has adopted an "interest analysis" approach to resolve conflict-of-laws questions. See Stutsman v. Kaiser Foundation Health Plan, 546 A.2d 367 (D.C. 1988). Under this calculus, the trial court's initial obligation is to determine whether there is a "false conflict" between the two putatively contradictory laws. See Rong Yao Zhou v. Jennifer Mall Restaurant, Inc., 534 A.2d 1268 (D.C. 1987). A false conflict exists when the laws of different states are: 1) the same; 2) different but would produce the same outcome under the facts of the case; or 3) when the policies of one state would be furthered by the application of its laws while the policy of the other state would not be advanced by the application of its laws. See Biscoe v. Arlington County, 238 U.S. App. D.C. 206, 738 F.2d 1352, 1360 (D.C. Cir. 1984). When confronted with a false conflict, a court may "apply the law of the state whose policy would be advanced by the application of its law or forum law if no state's policy would be advanced by application of its law." Long v. Sears and Roebuck & Co., 877 F. Supp. 8, 11 (D.D.C. 1995).

 No true conflict of laws exists in the case at bar. Both Maryland and the District of Columbia instruct their courts to determine the plain meaning of the policy language and resolve any actual ambiguities in favor of the insured. See, e.g., Meade v. Prudential Ins. Co. of America, 477 A.2d 726, 728 (D.C. 1984); Howell v. Harleysville Mut. Ins. Co., 305 Md. 435, 505 A.2d 109, 113 (Md. 1986); see also Geico v. Fetisoff, 294 U.S. App. D.C. 279, 958 F.2d 1137, 1141 (D.C. Cir. 1992); Continental Casualty Co. v. Cole, 258 U.S. App. D.C. 50, 809 F.2d 891, 896 (D.C. Cir. 1987). The absence of a true conflict compels the application of District of Columbia law by default. See Fowler v. A & A Co., 262 A.2d 344, 348 (D.C. 1970).

 B. The Policy's Language Unambiguously Supports State Farm's Interpretation

 The law of the District of Columbia mandates that "clear and unambiguous language [in an insurance policy] should be construed according to its everyday meaning." Continental Casualty, 809 F.2d at 896. If, however, a reasonable layperson would be able to attach two plausible meanings to it, the policy is considered ambiguous and must be "construed in favor of the insured wherever reasonable." Id. at 895; see also Gry c es v. Lavine, 675 A.2d 67, 69 (D.C. 1996). The Court of Appeals for the District of Columbia has cautioned that "a contract is not rendered ambiguous merely because the parties disagree over its proper interpretation." Gryces, 675 A.2d at 69. Moreover, District of Columbia courts "must ever guard against allowing sympathy for a party to produce a result contrary to the ...


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