Lords Landing Village Condominium Council of Unit Owners v. Continental Ins. Co.
520 U.S. 893 (1997)

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OCTOBER TERM, 1996

Syllabus

LORDS LANDING VILLAGE CONDOMINIUM COUNCIL OF UNIT OWNERS v. CONTINENTAL INSURANCE CO.

ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 96-1033. Decided June 2, 1997

Petitioner, a condominium owners' association, filed suit in Maryland state court to compel respondent insurer to pay a $1.1 million judgment it had obtained against respondent's insured, the condominium developer, for numerous defects in the complex. Under the insurance policy, only property damage caused by an "accident" was covered. Respondent removed the action to the Federal District Court based on diversity of citizenship. That court granted respondent summary judgment, and the Fourth Circuit affirmed, holding that, as a matter of Maryland law, a negligent act does not constitute an "accident." When petitioner subsequently learned that Maryland's highest court had recently decided, in Sheets v. Brethren Mutual Ins. Co., 342 Md. 634, 679 A. 2d 540, that a negligent act constitutes an "accident" under a liability insurance policy when the resulting damage took place without the insured's foresight or expectations, it asked the Fourth Circuit to recall or stay its mandate. The court denied the request, finding it "without merit."

Held: In these circumstances, it is proper for this Court to grant the certiorari petition, vacate the lower court's judgment, and remand the case (GVR) for further consideration. This order is in keeping with the Court's longstanding practice of vacating a court of appeals' decision based on a state-law construction that appears to contradict a recent decision of the highest state court. Sheets' explicit disapproval of the cases on which the Court of Appeals relied calls into question the correctness of that court's decision, and the ambiguous statement that petitioner's request to recall the mandate was "without merit" does not establish that the court actually considered and rejected the Sheets argument. The most likely ground on which the Fourth Circuit rested its denial of petitioner's motion is, as respondent contended, that it lacked authority to recall its mandate. Moreover, this Court has previously issued a GVR order where petitioners notified the Federal Court of Appeals of an intervening State Supreme Court's opinion in a second rehearing petition, which the Court of Appeals denied. See Huddleston v. Dwyer, 322 U. S. 232, 235 (per curiam).

Certiorari granted; vacated and remanded.


894

894 LORDS LANDING VILLAGE CONDOMINIUM COUNCIL OF UNIT OWNERS v. CONTINENTAL INS. CO.

Per Curiam

PER CURIAM.

In this diversity case, the holding of the federal appellate court below has been called into question by a recent decision of the highest state court in Maryland. We must decide whether it is appropriate, in these circumstances, for this Court to grant the petition for certiorari, vacate the judgment of the lower court, and remand the case (GVR) for further consideration.

Petitioner, an association of condominium owners, sued respondent in Maryland state court, seeking to compel respondent to pay a $1.1 million judgment it had obtained against respondent's insured, the developer of its condominium complex. In a previous action, a jury had held the developer liable for numerous defects in the complex, finding that the developer had made misrepresentations and breached various warranty obligations. Respondent had issued a general liability insurance policy covering the developer. The policy provided that respondent would pay "'those sums that [the developer] becomes legally obligated to pay as damages because of ... "property damage" to which this insurance applies.'" App. to Pet. for Cert. 2a. Under the policy, "property damage" was covered only if it was caused by an "accident."

Respondent removed the action to the United States District Court for the District of Maryland, based on the parties' diversity of citizenship. The District Court granted summary judgment in favor of respondent. On August 6, 1996, the Court of Appeals for the Fourth Circuit affirmed. The Court of Appeals held that, as a matter of Maryland law, an "accident" does not include the "natural and ordinary consequences of a negligent act." Id., at 4a (internal quotation marks omitted) (citing IA Construction Corp. v. T&T Surveying, Inc., 822 F. Supp. 1213, 1215 (Md. 1993) (quoting Ed. Winkler & Son, Inc. v. Ohio Casualty Ins. Co., 51 Md. App. 190, 194-195, 441 A. 2d 1129, 1132 (1982))). Because the damages awarded in the underlying action were for breach


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