United States District Court, District of Columbia
BERMAN JACKSON UNITED STATES DISTRICT JUDGE.
September 10, 2018, plaintiff Rockhill Insurance Company
(“Rockhill”) brought this suit concerning the
interpretation of a commercial general liability policy.
Plaintiff seeks a declaration that it does not owe a duty
under the policy to defend or indemnify, Wharf Horizontal
REIT Leaseholder, LLC (“WHRL”), or a number of
affiliated entities, Hoffman-Madison Waterfront, LLC
(“HMW”), Hoffman-Struever Waterfront, LLC
(“HSW”), Wharf District GP Joint Venture, LLC
(“WDGPJV”), Wharf District Joint Venture, LLC
(“WDJV”), Wharf Horizontal REIT, LLC
(“WHR”), and Wharf Fish Market REIT Leaseholder,
LLC (“Fish Market REIT”) (collectively,
“developer defendants”), in a civil suit brought
against the developer defendants by commercial tenants
located in the Southwest Waterfront area in the District of
Columbia. Compl. [Dkt. # 1] ¶ 1, 12. The underlying suit
was filed in United States District Court for the District of
Columbia and is captioned, The Wharf, Inc., et al. v. The
District of Columbia, et al., 1:15-CV-01198-CKK (2015)
(“Wharf Suit”). Id.
Rockhill's complaint raises three claims:
• Count I alleges that under the insurance policy,
Rockhill “does not owe a duty to defend or
indemnify” the developer defendants in the underlying
suit, and it seeks “recoupment of attorneys' fees,
costs, and expenses paid by Rockhill in defense of the Wharf
Suit.” Compl. ¶ 77.
• Count II pleads in the alternative, that Rockhill is
equitably “entitled to recover . . . defense costs that
are incurred in connection with non-covered claims and
issues.” Id. ¶ 79.
• Count III alleges that Rockhill has no duty to defend
or indemnify individual defendant Fish Market REIT because it
is not an “‘insured under the Rockhill Policy
with respect to its own conduct, or the conduct of any
‘insured' under the Rockhill Policy, with respect
to the Wharf Suit, ” id. ¶ 83. It seeks
reimbursement of at least 50% of all defense costs incurred
since Fish Market REIT joined the Wharf Suit in February
2017, and contends that moving forward, Fish Market REIT must
share in defense costs or retain separate defense counsel.
Id. ¶¶ 85-88.
filed an answer and counterclaim on November 16, 2018.
Developer Defs.' Answer to Rockhill's Compl. &
Countercl. [Dkt. # 17] (“Defs.' Answer” or
“Countercl.”). They raise three counts in their
• Count I alleges that Rockhill entered into a
subsequent separate “binding and enforceable
contract” with defendants in December 2015
(“December 2015 Agreement”), Countercl. ¶
76, and that Rockhill breached the terms of that agreement by
refusing to pay certain defense costs incurred in the
underlying suit, id. ¶¶ 79-80, and
“by attempting to control the defense.”
Id. ¶ 81.
• Count II pleads that Rockhill breached its duty to
defend the developer defendants under the terms of the
insurance policy by refusing to pay for certain costs
incurred in the underlying suit, demanding developer
defendants allocate costs between what Rockhill believes are
covered and non-covered claims, and by delaying payment of
defense costs owed. Countercl. ¶¶ 85-89.
• Count III alleges that Rockhill breached the implied
covenant of good faith and fair dealing arising under both
the Policy and the December 2015 Agreement. Countercl.
pending before the Court is plaintiff Rockhill's motion
for judgment on the pleadings with respect to Counts I and
III of its complaint and Counts I, II, and III of developer
defendants' counterclaim. Rockhill's Mot. for J. on
the Pleadings [Dkt. # 24] (“Pl.'s Mot.”);
Mem. of P. & A. in Supp. of Pl.'s Mot. [Dkt. # 24-1]
(“Pl.'s Mem.”). The developer defendants
opposed that motion, and cross-moved for judgment on the
pleadings on Count I of Rockhill's complaint.
Developers' Cross-Rule 12(c) Mot. for J. on Count I of
Rockhill's Compl. [Dkt. # 25] (“Defs.'
Cross-Mot.”); Developers' Consolidated Brief in
Opp. to Pl.'s Mot. & in Supp. of Cross-Mot. [Dkt. #
25-1] (“Defs.' Cross-Mem.”). They did not
cross-move on any of the other counts in Rockhill's
complaint, or in their counterclaim. Id. The issues
have been fully briefed and are ripe for
decision. For the reasons stated below,
plaintiff's motion for judgment on the pleadings is
denied in part and granted in part, and defendants'
motion is granted in part and denied in part. The Court finds
that Rockhill owes a duty to defend under the insurance
policy WHRL, HMW, HSW, WDGPJV, WDJV, and WHR. Rockhill does
not owe a duty to defend Fish Market REIT under the policy.
As to the December 2015 Agreement, the Court finds that there
remain questions of fact so judgment on the pleadings is not
April 23, 2014, the District of Columbia assigned its
landlord rights and duties on several commercial barges
located at the Municipal Fish Market on the District of
Columbia's Southwest Waterfront to defendant WHRL. Compl.
¶ 2; Defs.' Answer ¶ 2. That same day, WHRL
purchased a “Lessor's Risk” commercial
liability insurance policy insuring the Municipal Fish Market
located at 1100 Maine Avenue, S.W., Washington D.C. 20024.
Compl. ¶ 3; Defs.' Answer ¶ 3; Ex. I to Compl.
[Dkt. # 1-10] (the “Policy”) at
RHIC000009. The tenants of the insured property
operate three seafood businesses at the Municipal Fish
Market. Compl. ¶ 1; Defs.' Answer ¶ 1.
23, 2015 those tenants sued WHRL and HMW, alleging that the
defendants' major redevelopment project along the
Southwest Waterfront disrupted their businesses and breached
their lease agreements, and they brought a number of tort
claims arising out of the defendants' actions, including
trespass and nuisance violations, among other
claims. Ex. A to Pl.'s Compl. [Dkt. # 1-2]
(“Wharf Compl.”) ¶¶ 229-73.
29, 2015, a few days after the Wharf Suit was filed,
defendants HMW and WHRL tendered their defense to Rockhill
pursuant to the commercial general liability policy.
Countercl. ¶ 14; Rockhill's Answer & Affirmative
Defenses to the Developer Defs.' Countercl. [Dkt. # 20]
(“Rockhill Answer”) ¶ 14. Rockhill
disclaimed the duty to defend them in the Wharf Suit and
rejected their tender. Countercl. ¶ 15; Rockhill Answer
¶ 15. Defendants HMW and WHRL asked the insurance
company to reconsider its position in a letter dated
September 11, 2015. Countercl. ¶ 16; Rockhill Answer
¶ 16. Specifically, defendants asked that Rockhill
provide a defense under “Coverage B” of the
Policy. Countercl. ¶ 16; Rockhill Answer ¶ 16
agreed. On or about October 9, 2015, Rockhill sent a letter
to defendants HMW and WHRL in which it agreed to defend them
in the Wharf Suit pursuant to a reservation of rights. Ex. E
to Compl. [Dkt. # 1-6] (“Oct. 9, 2015 Rockhill
Letter”). The letter provided in relevant part:
Rockhill's continued handling of this matter is not an
admission of any kind on the part of Rockhill. No act by a
Rockhill representative while investigating, negotiating a
settlement of the claim, or defending the Lawsuit should be
construed as waiving any company rights. Rockhill reserves
its rights under the Policy to deny coverage to HMW, WHRL, or
anyone else claiming coverage under this policy.
Id. at 2. The letter further explained that
“based on the facts as we understand them, coverage is
uncertain right now or may be significantly limited, ”
id., and that “[a]fter careful review”
the insurance company believed that “only the
‘personal advertising offense' relative to
‘wrongful eviction from, wrong entry into, or the
invasion of the right of private occupancy' [was]
implicated” under Coverage B. Id. at 7. The
letter also informed HMW and WHRL that the insurance company
had retained the law firm of Leder & Hale, PC to
represent them in the Wharf Suit. Id. at 2.
thereafter, Rockhill adjustor Leslie Bowles, who was assigned
to the claim, participated on a conference call with
defendants' counsel, Pillsbury, who had been representing
HMW and WHRL in the Wharf Suit. Countercl. ¶ 20;
Rockhill Answer ¶ 20. The parties dispute what happened
on the call. According to defendants, Bowles and the
Pillsbury attorneys negotiated the terms of a new agreement
by which defendants would be allowed to proceed with their
counsel of choice, Pillsbury, but the insurance company would
pay past and future defense costs at the lower
Laffey rates. Countercl. ¶ 23. Defendants
allege that under this agreement “Rockhill would fund
the entirety of the defense of the Wharf Suit, ”
Id. ¶ 24, “without any reservation of
rights regarding the duty to defend.” Id.
¶ 1. According to defendants, the new agreement was
“memorializ[ed]” in a December 1, 2015 email
exchange between Bowles and a Pillsbury attorney.
Id. ¶ 1 n.1; Ex. A to Defs.' Countercl.
[Dkt. # 17-1] (“December 2015 Agreement”).
insists that “[a]t no point did Rockhill or the
developer defendants discuss or agree that the reservations
pursuant to which the defense was provided would be altered,
withdrawn, or otherwise waived.” Rockhill Answer ¶
23. But it acknowledges that it did agree “that the
defense provided under the reservation of rights could be
provided through [defendants'] choice of counsel at
agreed-upon rates.” Id.
February 2016, Pillsbury sent Rockhill invoices for defense
costs incurred between July 2015 through December 2015 at
Laffey Matrix rates, and Rockhill paid those
invoices in full. Countercl. ¶ 29; Rockhill Answer
WHRL filed a counterclaim in the Wharf Suit on March 29,
2016, Compl. ¶ 33; Defs.' Answer ¶ 33, and on
May 9, 2016, it amended its counterclaim, alleging that the
commercial tenants breached their leases and that as their
landlord, it is entitled to evict them. Compl. ¶ 35;
Defs.' Answer ¶ 35; Ex. D to Compl. [Dkt. # 1-5].
continued to send invoices to Rockhill, but the insurance
company began raising concern about the costs of pursuing
counterclaims in the Wharf Suit, and it deducted certain
amounts from invoices during the billing period of May 2016
through October 2016. Countercl. ¶¶ 31-32; Rockhill
Answer ¶¶ 31-32.
the Wharf Suit was underway, on or about October 31, 2016,
defendant WHRL assigned its interest in the commercial leases
to a separate entity, defendant Fish Market REIT. Compl.
¶ 36, Defs.' Answer ¶ 36. WHRL then moved to
join the new landlord of the leases, Fish Market REIT, in the
Wharf Suit as a defendant and counterclaim plaintiff, and
that motion was granted on February 12, 2017 by the district
court. Compl. ¶ 37; Defs.' Answer ¶ 37.
February 27, 2017, days after Fish Market REIT joined the
suit, Rockhill's counsel sent a letter to defendants
“supplement[ing]” its initial October 9, 2015
letter. Ex. F to Compl. [Dkt. # 1-7] (“Feb. 27, 2017
Rockhill Letter”) at 1. In the letter, Rockhill listed
a number of issues raised in the Wharf Suit that in its view
were not covered by the Policy and it advanced several
proposals to limit or terminate the insurance company's
funding of the litigation, including an “equitable
allocation of future defense costs between covered and
non-covered claims” or a “policy buy-back.”
Id. at 2-3. Rockhill expressed a desire to work with
defendants to find a resolution to the dispute, but it
informed them that if no accord was reached, court proceeding
may be necessary. Id. at 3.
supplemental letter included a “coverage
analysis” explaining why the plaintiffs' claims in
the Wharf Suit were “likely” outside of the
policy's coverage, id. at 6-8, and why the
policy did not cover the costs of prosecuting counterclaims.
Id. at 8-9. The letter also stressed that the
newly-added defendant, Fish Market REIT, did not qualify as
an insured. Id. at 8. The supplemental letter
repeated the insurance company's reservation of rights:
“Nothing in this letter should be construed as waiving
any defenses raised in Rockhill's initial letter or
otherwise.” Id. at 6.
of the defendants, HMW, WHRL, and Fish Market REIT, responded
by letter on April 22, 2017, contending that Rockhill owed
them a duty to defend against the entire Wharf Suit under
both the Policy and the separate December 2015 Agreement. Ex
C. to Defs.' Cross-Mot. [Dkt. # 25-4] (“April 22,
2017 Defs.' Letter”) at 1-8. In the letter, they
also acknowledged that Fish Market REIT is not an insured
under the Policy: “You correctly point out that Wharf
Fish Market REIT Leaseholder (“WFMRL”) is not
[Rockhill's] insured.” Id. at 6. But they
took the position that Rockhill “cannot escape
responsibility for defense costs on the ground that some
defense work also benefits entities that are not insured of
the developer defendants' counterclaim.”
Id. at 7.
April 26, 2017, the underlying plaintiffs filed a Second
Amended Complaint in the Wharf Suit, naming other affiliates
of HMW, WHRL, and Fish Market REIT - that is, WDGPJV, WHR,
HSW, and WDJV, as additional defendants. Compl. at ¶ 38;
Defs.' Answer ¶ 38. The Third Amended Complaint,
which is now the operative complaint in the Wharf Suit,
followed in September 2017. Compl at ¶ 39; Defs.'
Answer ¶ 39.
Third Amended Complaint alleges that in April 2014 the
District assigned its rights as landlord to WHRL, an alter
ego of HMW. Wharf Compl. ¶¶ 8, 61. The underlying
plaintiffs claim that “[u]nder the terms of each lease,
[they] are entitled to exclusive use of certain water
frontages to operate open air fish markets and a seafood
deli, ” and that they “also have the right to
access and use the Common Area.” Id. ¶
106. The Common Area is “designated for general use,
convenience, and benefit of the commercial tenants in the
area and their customers on the Municipal Fish Market
(e.g. restrooms, parking areas, driveways, walkways,
loading and unloading for deliveries).” Id.
underlying plaintiffs allege, among other things, that the
developer defendants breached the terms of their leases
through repeated unauthorized encroachments onto the
Municipal Fish Market, Wharf Compl. ¶ 248, and that
developer defendants violated their property rights through
trespass and nuisance violations. See Id.
¶¶ 263, 268 (alleging defendants “wrongfully
excercis[ed] ownership, dominion, and control over portions
of the Municipal Fish Market, ” and that
defendants' activities have interfered with
plaintiffs' “private use and enjoyment of their
followed up with two letters to Fish Market REIT dated
January 15, 2018 and February 16, 2018, demanding that it
contribute 50% of defense costs incurred since it joined the
Wharf Suit on February 13, 2017. Ex. G to Compl. [Dkt. # 1-8]
(“January 15, 2018 Rockhill Letter”); Ex. H to
Compl. [Dkt. # 1-9] (“February 16, 2018 Rockhill
Letter”). The letter states that if no agreement is
reached, “Rockhill reserves its right to request court
allocation as to the equitable distribution of defense costs,
fees, and expenses.” January 15, 2018 Rockhill Letter
Rule of Civil Procedure 12(c) authorizes a party to move for
judgment on the pleadings at any time “after the
pleadings are closed - but early enough not to delay
trial.” Fed.R.Civ.P. 12(c). Pleadings include any
“copy of a written instrument that is an exhibit to a
pleading.” Fed.R.Civ.P. 10(c). Here, the parties have
attached to their pleadings copies of their correspondence,
the insurance policies, the purported December 2015
Agreement, and the Third Amended Complaint in the underlying
suit, among other documents. See Exs. A-J to Compl.
[Dkt. # 1-2 to 1-11]; Ex. A to Countercl. [Dkt. # 17-1]; Exs.
B-C to Defs.' Cross-Mot. [Dkt. # 25-3 to 25-4]. For the
purpose of resolving the pending motions, the Court may only
consider the contents of the pleadings.
D.C. Circuit recently observed, “judgment on the
pleading is rare, ” and because it “provides
judicial resolution at an early stage of a case, the party
seeking . . . [it] shoulders a heavy burden of
justification.” Dist. No. 1, Pac. Coast Dist.,
Marine Eng'rs Beneficial Ass'n, AFL-CIO v. Liberty
Mar. Corp., 933 F.3d 751, 760 (D.C. Cir. 2019)
(“Liberty Mar.”). Parties are entitled
to pretrial judgment on the pleadings “if the moving
party demonstrates that no material fact is in dispute and
that it is entitled to judgment as a matter of law.”
Schuler v. PricewaterhouseCoopers, LLP, 514 F.3d
1365, 1370 (D.C. Cir. 2008), quoting Peters v. Nat'l
R.R. Passenger Corp., 966 F.2d 1483, 1485 (D.C. Cir.
1992). When analyzing a motion for judgment on the pleadings,
the Court must “accept as true the allegations in the
opponent's pleadings, and as false all controverted
assertions of the movant.” Liberty Mar., 933
F.3d at 761, quoting Haynesworth v. Miller, 820 F.2d
1245, 1249 n.11 (D.C. Cir. 1987) (collecting cases),
abrogated on other grounds by Hartman v. Moore, 547
U.S. 250 (2006). The Court must “view the facts
presented in the pleadings and the inferences to be drawn
therefrom in the light most favorable to the nonmoving
party.” Peters, 966 F.2d at 1485, quoting
Jablonski v. Pan Am. World Airways, Inc., 863 F.2d
289, 290-91 (3d Cir. 1988). “Under this standard,
‘a judgment on the pleadings is not appropriate' if
there are ‘issues of fact which if proved would defeat
recovery,' ‘even if the trial court is convinced
that the party opposing the motion is unlikely to prevail at
trial.'” Liberty Mar., 933 F.3d at 761,
quoting Wager v. Pro, 575 F.2d 882, 884 (D.C. Cir.
parties presume that District of Columbia of law applies.
That presumption is correct for two reasons. District of
Columbia law is appropriate in this case because the place of
performance and the insured risk is in the District of
Columbia. Adolph Coors Co. v. Truck Ins. Exch., 960
A.2d 617, 620 (D.C. 2008). Additionally, insurance law
dictates that courts interpret the allegations in an
underlying lawsuit based on where the suit was filed.
Travelers Indem. Co. of Illinois v. United Food &
Commercial Workers Int'l Union, 770 A.2d 978, 988
(D.C. 2001) (“Travelers”) (applying
District of Columbia law to interpret the insurance contract
but not the allegations in the underlying suit which was
filed in South Carolina). Therefore, the Court will interpret
both the insurance policy and the underlying lawsuit under
District of Columbia law.
of Insurance Contracts & Duty to Defend
District of Columbia, “[a]n insurance policy is a
contract between the insured and the insurer, and in
construing it [a court] must first look to the language of
the contract.” Travelers, 770 A.2d at 986,
quoting Cameron v. USAA Prop. & Cas. Ins. Co.,
733 A.2d 965, 968 (D.C. 1999). When interpreting an insurance
contract, the Court must construe “ambiguities . . .
against the insurer and in favor of ‘the reasonable
expectations of the purchaser of the policy.'”
Chase v. State Farm Fire & Cas. Co., 780 A.2d
1123, 1127 (D.C. 2001), Smalls v. State Farm Mut. Auto.
Ins. Co., 678 A.2d 32, 35 (D.C. 1996). Under this
principle, if a Court finds that a term “is reasonably
open to two constructions, the one most favorable to the
insured will be adopted.” Id. However, an
insurance contract is not “ambiguous merely because the
parties do not agree on the interpretation of the contract
provision in question.” Byrd v. Allstate Ins.
Co., 622 A.2d 691, 695-94 (D.C. 1993). The D.C. Court of
Appeals has held that “[p]olicy language is not
genuinely ambiguous unless it is susceptible of more than one
reasonable interpretation, ” and it has
instructed courts not to “indulge in forced
constructions to create an obligation against the
insurer.” Chase, 780 A.2d at 1127-28 (emphasis
in original) (internal citation omitted).
duty to defend is determined by comparing the allegations in
the underlying complaint against the terms of the insurance
policy. Cont'l Cas. Co. v. Cole, 809 F.2d 891,
896 (D.C. Cir. 1987). This is referred to the as the
“eight corners rule.” Fogg v. Fidelity
Nat'l Title Ins. Co., 89 A.3d 510, 515
(D.C. 2014) (“[O]ur jurisdiction, like the majority of
jurisdictions, adheres to the ‘eight corners
rule.'”). Under District of Columbia law:
If the [underlying] complaint states a cause of action within
the coverage of the policy, the insurance company must
defend. Any doubt as to whether the cause of action falls
within the terms of the policy must be resolved in the
Cont'l Cas., 809 F.2d at 895, citing Boyle
v. National Casualty Co., 84 A.2d 614, 615-16 (D.C.
insurer's duty to defend is conceptually distinct from
and legally independent of its duty to indemnify, that is,
its obligation to pay a judgment.” Salus Corp. v.
Cont'l Cas. Co., 478 A.2d 1067, 1069 (D.C. 1984);
Stevens v. United Gen. Title Ins. Co., 801 A.2d 61,
67 (D.C. 2002). “The duty to defend is broad, requiring
the defense of all claims even if only one potentially falls
within the terms of the policy.” Council For
Responsible Nutrition v. Hartford Cas. Ins. Co., No.
06-cv-1590, 2007 WL 2020093, at *3 (D.D.C. July 12, 2007),
citing Cont'l Cas., 809 F.2d at 895; see
also Commonwealth Lloyds Ins. Co. v. Marshall, Neil &
Pauley, Inc., 32 F.Supp.2d 14, 18 (D.D.C. 1998)
(collecting cases). Also, while the duty to defend depends
only on allegations in the complaint, the duty to indemnify
depends upon the truth of those allegations. S. Freedman
& Sons, Inc. v. Hartford Fire Ins. Co., 396 A.2d
195, 197 (D.C. 1978). Accordingly, “if the allegations
of a plaintiff's complaint may bring the claim within the
coverage of the defendant's policy, the insurance company
must honor its duty to defend, even if ultimately relieved of
any duty to indemnify.” Sherman v. Ambassador Ins.
Co., 670 F.2d 251, 259 (D.C. Cir. 1981). “[I]t is
appropriate to examine the complaint for all plausible claims
encompassed within the complaint and to ascertain whether the
allegations of the complaint state a cause of action within
the policy coverage and give fair notice to the insurer that
the insured is being sued upon an occurrence which gives rise
to a duty to defend under the terms of the policy.”
Am. Cont'l Ins. Co. v. Pooya, 666 A.2d 1193,
1197 (D.C. 1995).
stage, the Court has been called upon only to determine the
duty to defend.
alleges in Count I of its complaint that it “does not
owe a duty to defend or indemnify the developers, ”
under the terms of the Policy, and that it is “entitled
to recoupment of attorneys' fees, costs, and expenses
paid by Rockhill in defense of the Wharf Suit.” Compl.
¶ 77. Both Rockhill and defendants moved for judgment on
the pleadings related to (1) the duty to defend and (2)
recoupment. Pl.'s Mem. at 3; Defs.' Cross-Mem. at 39.
For the reasons that follow, the Court finds that Rockhill
owes the insured defendants, WHRL, HMW, HSW, WDGPJV, WDJV,
and WHR, a duty to defend under the Policy, and that it is
not entitled to the recoupment of defense costs from the
insured defendants. This ruling does not apply to Fish Market
REIT, which the Court finds is not insured under the Policy.
See Section I, b (“Count III”).
Duty to Defend: Coverage B, Personal and Advertising Injury
insured bears the burden of showing that the underlying
complaint comes within the policy's grant of coverage,
and the insurer bears the burden of showing that an exclusion
under the policy applies. Cameron v. USAA Prop. &
Cas. Ins. Co., 733 A.2d 965, 969 (D.C. 1999).
their cross-motion, defendants contend that the trespass
(Count VIII), nuisance (Count IX), tortious interference with
prospective business advantage (Count X), and unjust
enrichment claims (Count XI), fall within the scope of the
Policy's Coverage B. Defs.' Cross-Mem. at 39.
provision in the Policy entitled “Coverage B Personal
and Advertising Injury Liability” provides:
We will pay those sums that the insured becomes legally
obligated to pay as damages because of “personal and
advertising injury” to which this insurance applies. We
will have the right and duty to defend the insured against
any “suit” seeking those damages.
“Definitions” section of the Policy defines
“personal and advertising injury” as
“injury, including consequential ‘bodily