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Law360 (May 26, 2021, 3:51 PM EDT ) A Maryland college's claims against Continental Casualty Co. and an insurance broker are better suited for state court, a federal judge ruled Wednesday, sending back the case over the college's losses tied to government shutdown orders during the coronavirus pandemic.
U.S. District Judge Richard D. Bennett said McDaniel College Inc.'s case should proceed in the Circuit Court for Baltimore County where it was originally filed. Continental and its parent company, CNA Financial Corp. can't prove that the college's insurance broker was fraudulently joined, the judge said.
The brokers, Riggs Counselman Michaels & Downs Inc., or RCM&D, argued that they shouldn't have been added to the college's suit over losses tied to the closure of the campus during the pandemic. But Judge Bennett said the insurers had a heavy burden of proof, which they didn't meet, as to the Maryland broker's joinder.
"Maryland law has recognized a cause of action against insurance brokers when clients have been denied coverage they sought to obtain through their brokers," Judge Bennett said. "There is certainly more than a 'glimmer of hope' that McDaniel College could prevail against" Riggs Counselman.
McDaniel College filed suit in December, claiming the insurers must cover the lost revenue from room and board, leasing out spaces and food and beverage sales at campus events for its more than 1,700 students. The college also spent money on cleaning and disinfecting the campus, according to the suit.
McDaniel College also blamed the brokers for failing to secure the appropriate insurance coverage.
In fighting the college's bid to remand, the insurers argued the negligence and breach of contract and breach of fiduciary duty claims against RCM&D are based upon a required court ruling of no coverage.
But Judge Bennett said courts have heard claims against an insurance broker and insurer within the same case. There is the possibility McDaniel College can win on its claims against RCM&D, the judge held, sending the case back to state court based on the broker's presence.
Out of nine business interruption suits filed in Maryland federal and state courts, two have already been tossed, according to data from the University of Pennsylvania's COVID Coverage Litigation Tracker.
In April, a Maryland federal judge ruled a car auction company's pandemic-related losses weren't covered. The car auction company couldn't show it lost use of its facility, according to the federal judge, as government orders allowed car dealerships to remain open as essential businesses during the pandemic.
Representatives for the college and the insurers didn't immediately respond to requests for comment Wednesday.
The college is represented by Albert J. Mezzanotte Jr. and Ioana Kastellorizios of Whiteford Taylor & Preston LLP.
The insurers are represented by Michael P. O'Day and A. Neill Thupari of DLA Piper.
The case is McDaniel College Inc. v. Continental Casualty Co. et al., case number 1:21-cv-00505, in the U.S. District Court for the District of Maryland.
--Additional reporting by Daphne Zhang. Editing by Neil Cohen.
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