Lords Landing Council v. Continental Ins. Co., 520 U.S. 893 (1997)

Lords Landing Village Condominium Council of Unit Owners

v. Continental Insurance Company
No. 96-1033

Decided June 2, 1997
520 U.S. 893

ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FOURTH CIRCUIT

Syllabus

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 no 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.