St. Paul Mercury Insurance Company v. American Bank Holdings, Inc.

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-1559
ST. PAUL MERCURY INSURANCE COMPANY,
Plaintiff - Appellee,
v.
AMERICAN BANK HOLDINGS, INC.,
Defendant - Appellant,
and
AMIEL CUETO,
Defendant.
-------------------------
UNITED POLICYHOLDERS,
Amicus Supporting Appellant.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Roger W. Titus, Senior District Judge.
(8:09-cv-00961-RWT)
Argued: January 27, 2016 Decided: April 14, 2016
Before TRAXLER, Chief Judge, and WILKINSON and NIEMEYER, Circuit
Judges.
Affirmed by published opinion. Judge Niemeyer wrote the
opinion, in which Chief Judge Traxler and Judge Wilkinson
joined.

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ARGUED: Albert Joseph Mezzanotte, Jr., WHITEFORD, TAYLOR &
PRESTON, L.L.P., Baltimore, Maryland, for Appellant. Thomas
James Judge, Jr., LOSS, JUDGE & WARD, LLP, Washington, D.C., for
Appellee. ON BRIEF: Dwight W. Stone, II, WHITEFORD, TAYLOR &
PRESTON, L.L.P., Baltimore, Maryland, for Appellant. Brent H.
Olson, LOSS, JUDGE & WARD, LLP, Washington, D.C., for Appellee.
Lorelie S. Masters, Christopher R. Healy, PERKINS COIE LLP,
Washington, D.C.; Amy Bach, Dan Wade, UNITED POLICYHOLDERS, San
Francisco, California, for Amicus Curiae.

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NIEMEYER, Circuit Judge:
On June 18, 2008, American Bank Holdings, Inc., was served
with a complaint and summons that issued from a state court in
Belleville, Illinois. Because of an internal oversight,
however, American Bank did not respond to the summons, and the
court, on July 23, 2008, entered a $98.5 million default
judgment against it. Some eight months after receipt of the
summons, on February 25, 2009, American Bank notified its
insurance company -- St. Paul Mercury Insurance Company -- of
the lawsuit, and St. Paul Insurance denied coverage due to the
late notice. American Bank was thereafter able to have the
default judgment vacated and the lawsuit dismissed, but at an
expense of some $1.8 million.
In this action, which St. Paul Insurance filed to obtain a
declaratory judgment that it had no duty to pay for American
Bank’s defense, American Bank filed a counterclaim for a
declaratory judgment that it was indeed owed reimbursement for
its defense and for damages based on the amount of attorneys
fees and costs incurred both in the underlying action and in
this action.
On the parties’ cross motions for summary judgment, the
district court entered judgment for St. Paul Insurance. Among
other things, the court concluded that because American Bank did
not provide St. Paul Insurance with notice “as soon as

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practicable,” as required by the terms of its insurance policy,
and because the late notice caused St. Paul Insurance prejudice,
St. Paul Insurance was within its right to deny coverage. We
affirm.
I
On June 11, 2008, Amiel Cueto, a disbarred lawyer and
convicted felon who was acting pro se, filed an action in the
St. Clair County Circuit Court in Belleville, Illinois, against
American Bank and 10 other defendants, alleging that they
fraudulently failed to fund his $8 million sale of real property
to Lester J. Petty and Associates, Inc., causing the deal to
collapse. The complaint sought both compensatory and punitive
damages. Both American Bank and St. Paul Insurance agree,
however, that American Bank, as a holding company, did not
engage in any lending business as alleged and that, in any
event, it conducted no business in Illinois. Indeed, American
Bank, based in Maryland, asserts that it had nothing to do with
the Illinois transaction and suggests that the suit was
frivolous, if not fraudulent.
The complaint against American Bank and the summons were
served on June 18, 2008, on CT Corporation as the agent of
American Bank for receiving service of process in Maryland. The
next day, CT Corp. transmitted the papers to American Bank’s
office in Greenbelt, Maryland, addressed to American Bank’s CFO,

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in accordance with the standing instructions that it had
received from American Bank. As of that time, however, American
Bank’s CFO had left the employ of American Bank. An officer of
an American Bank subsidiary subsequently came across the papers
and forwarded them to American Bank’s local lawyer in late July
2008. But the lawyer claimed that he never received them. When
American Bank failed to respond to the Cueto suit, Cueto
obtained a default judgment on July 23, 2008, in the amount of
$7,390,855.10 in compensatory damages, $66,517,695.90 in
punitive damages, and $24,636,183.65 in attorneys fees, for a
total of $98,544,734.65.
More than six months later, Cueto began efforts to collect
on the default judgment in Maryland and elsewhere, sending the
relevant court papers to American Bank. American Bank received
them around February 13, 2009, and thereafter notified its
insurance broker, providing the broker with copies of the
papers. The broker in turn notified St. Paul Insurance by email
on February 25, 2009. This was the first point at which St.
Paul Insurance had any knowledge of the Cueto lawsuit, the
default judgment, or the collection efforts. St. Paul Insurance
acknowledged receiving the papers on February 26, 2009, and
explained that it “retain[ed] the right to raise any and all
coverage issues and to assert appropriate coverage defenses that
may apply during the course of our investigation.”

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American Bank’s general counsel Erik Bolog called St. Paul
Insurance’s claims counsel, Christopher Nelson, the next day, on
February 27, 2009. During the telephone call, Bolog asked
Nelson “if we were covered for this,” and Nelson responded
“yes.” During the ensuing investigation of the claim and
coverage for it, Nelson prepared draft letters dated March 13
and March 16, 2009, stating St. Paul Insurance’s position and
confirming that the Cueto complaint “involve[d] a Lending Act,”
for which the policy provides coverage, but “reserv[ing] the
right to deny coverage due to late notice.” On April 15, 2009,
St. Paul Insurance formally notified American Bank that St. Paul
Insurance was denying coverage due to a lack of timely notice.
The letter stated:
I have reviewed the Lawsuit and the Policy in order to
determine whether coverage is afforded. As we have
discussed, I regret to inform you that [St. Paul
Insurance] must decline coverage for this matter. As
you know, the Policy provides:
The Insureds shall, as a condition precedent
to their rights under this Policy, give to
the Insurer written notice of any Claim made
against the Insureds as soon as practicable,
but in no event later than: (a) sixty (60)
days after expiration of the Policy Year in
which the Claim was first made . . . .
* * *
Clearly, notice was not given to [St. Paul Insurance]
within the time provided for in the Policy and [St.
Paul Insurance] therefore must decline coverage on
this basis. In addition to the Bank’s failure to
comply with the Policy’s condition precedent to

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coverage, the Bank’s action, or inaction, has
prejudiced [St. Paul Insurance].
Before even notifying St. Paul Insurance of the Cueto suit,
American Bank retained the law firm of Bryan Cave in St. Louis,
Missouri, which filed unsuccessful motions in the Illinois state
court to vacate the default judgment and dismiss the Cueto
lawsuit. After American Bank then retained the Chicago firm of
Sidley Austin to oversee appeals, an Illinois state appellate
court held that the trial court did not have personal
jurisdiction over American Bank and accordingly dismissed the
Cueto suit, a ruling that Cueto did not appeal further.
American Bank estimated that it spent approximately $1.8 million
in its efforts to resist enforcement of the default judgment and
have the Cueto lawsuit dismissed.
During the course of the proceedings in Illinois, on June
1, 2009, Cueto sent a demand letter to American Bank, seeking a
settlement of his claims in exchange for payment of $10 million.
American Bank passed the letter on to St. Paul Insurance and
demanded that St. Paul Insurance settle the claim for an amount
“within the policy limits.” St. Paul Insurance, however,
repeated its denial of coverage. American Bank never accepted
Cueto’s settlement, instead pursuing its efforts to have the
default judgment overturned in court.

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St. Paul Insurance commenced this action for a declaratory
judgment that it had no duty to provide coverage to American
Bank because American Bank failed to provide it with timely
notice of the Cueto suit, as required by the policy. By an
amended complaint, it also contended that American Bank breached
its duty under the policy to defend the Cueto suit upon being
served with it. American Bank filed a counterclaim for a
declaratory judgment that it indeed had coverage under the
policy and for damages for reimbursement of its attorneys fees
and costs. In its counterclaim, American Bank advanced theories
of coverage based on waiver and estoppel. It also asserted a
statutory claim under Maryland law for a lack of good faith in
denying insurance coverage.
On the parties’ cross motions for summary judgment, the
district court granted judgment to St. Paul Insurance and denied
American Bank’s motion. It concluded that American Bank had
provided late notice of Cueto’s suit and that St. Paul Insurance
had suffered prejudice as a result. It also concluded that
American Bank breached its duty timely to defend the suit, also
resulting in prejudice to St. Paul Insurance. Finally, it
rejected American Bank’s claims of coverage based on waiver and
estoppel and its claim based on St. Paul Insurance’s lack of
good faith in denying coverage.

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From the district court’s judgment, American Bank filed
this appeal, contending (1) that it provided timely notice to
St. Paul Insurance; (2) that it complied with its duty to
defend; and (3) that material factual disputes remain with
respect to its waiver, estoppel, and bad faith claims,
precluding the entry of summary judgment against it.
II
American Bank contends first that, contrary to the district
court’s holding, it provided St. Paul Insurance with timely
notice of the suit because it provided St. Paul Insurance with
notice within days of when it first learned of the suit around
February 13, 2009. As American Bank argues, its “obligation to
notify St. Paul was not triggered until it had actual knowledge
of the Cueto action, shortly after February 12, 2009. Measured
from that time, [its] notice was not late.” (Emphasis added).
It argues further that the policy does not support the district
court’s ruling that “constructive notice via service of process
on the insured’s registered agent [on June 18, 2008]
constitute[d] actual notice for purposes of triggering [its]
obligation to notify St. Paul of a claim.” Finally, it reasons
that “common sense dictates that there can be no obligation to
notify St. Paul of a claim until the insured has actual
knowledge of it.”

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In making this lack-of-actual-notice argument, American
Bank fails to provide textual support based on the terms of the
St. Paul Insurance policy. Indeed, the term “actual knowledge”
is foreign to the notice provision contained in the policy. The
policy provision reads:
The Insureds shall, as a condition precedent to their
rights under this Policy, give to the Insurer written
notice of any Claim made against the Insureds as soon
as practicable, but in no event later than: (a) sixty
(60) days after expiration of the Policy Year in which
the Claim was first made . . . .
(Emphasis added). The term “Claim” as used in the provision is
defined to include, as relevant here, “a civil proceeding
against any Insured commenced by the service of a complaint or
similar pleading.” (Emphasis added). Thus, according to the
policy, the requirement to give notice is triggered not by
“actual knowledge” of a claim, but by “service of a complaint”
upon the insured. The two, however, are effectively the same in
the circumstances presented in this case.
Here, there is no dispute that the Cueto complaint was
served on CT Corp. on June 18, 2008, and that CT Corp. was
American Bank’s designated resident agent for receiving service
of process. Under Maryland law, every corporation must
designate a resident agent to receive service of process. See
Md. Code Ann., Corps. & Ass’ns § 2-108(a)(2). Maryland law also
provides that “[s]ervice of process on the resident agent . . .

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constitutes effective service of process . . . on the
corporation.” Id. § 1-401(a). Thus, service on CT Corp. on
June 18, 2008, effected service on American Bank, triggering
American Bank’s duty to notify St. Paul Insurance “as soon as
practicable” thereafter.
While the insurance policy does not use the term “actual
knowledge” to trigger the notice requirement, American Bank was
nonetheless also imputed, as a matter of law, with actual
knowledge as of June 18, 2008, under established principles of
Maryland agency law. Because a corporation is a fiction that
can have knowledge only through its agents, knowledge of an
agent acquired within the scope of the agency relationship is
imputable to the corporation. See Plitt v. Kellam, 160 A.2d
615, 619 n.4 (Md. 1960) (“The knowledge [of the agent that is]
imputed to the principal is considered actual knowledge”
(emphasis added)); see also Martin Marietta Corp. v. Gould,
Inc., 70 F.3d 768, 773 (4th Cir. 1995) (“Thus, under the rule of
imputation the principal is chargeable with the knowledge the
agent has acquired, whether the agent communicates it or not”
(applying Maryland law)). As such, on June 18, 2008, when CT
Corp. was served with process in the Cueto case -- process that
was physically transmitted to American Bank the next day --
American Bank, as a corporation, had “actual knowledge” of the
lawsuit. Thus, while we reject the premise of American Bank’s

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argument that it was required by the policy to give notice only
after it received “actual knowledge” of the suit, we nonetheless
conclude that, as a matter of law, American Bank received actual
knowledge of the suit on June 18, 2008, when its authorized
agent, CT Corp., was served with process.
American Bank seeks to avoid these conclusions by claiming
that the suit papers, which were addressed and delivered to the
desk of its CFO, were not effectively served on it because, as
of that time, its CFO had departed from its employ. But this
argument overlooks the fact that the papers were delivered to
American Bank by CT Corp. in the manner that American Bank had
previously instructed. The most that American Bank’s argument
accomplishes is to reveal the fact that the suit papers were not
routed internally so as to get promptly into the hands of its
counsel. As the district court found, “through a variety of
corporate screw-ups, significant suit papers that should have
gotten immediate attention didn’t.” But internal “corporate
screw-ups” provide no basis to excuse American Bank’s failure to
give St. Paul Insurance timely notice of the Cueto suit after
being validly served with process.
Alternatively, American Bank contends that, in providing
St. Paul Insurance with notice on February 25, 2009, it
effectively satisfied the policy’s notice provision because the
policy authorizes a notice either “as soon as practicable” or by

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60 days after the expiration of the policy year on October 1,
2008, i.e., by November 29, 2008. Focusing on the second
option, it argues that its failure to satisfy the November 29
deadline was of no legal moment because, by then, the July 2008
default judgment had already been entered, making the difference
between a “timely” notice by November 29, 2008, and notice on
February 25, 2009, insignificant, as St. Paul Insurance could
not have suffered prejudice, as required by Maryland law, if its
position would have been the same on November 29, 2008, and
February 25, 2009.
This argument, however, rests on a misreading of the notice
provision contained in the policy. While American Bank suggests
that the notice provision gives it two alternative deadlines for
providing notice -- either “as soon as practicable” or “sixty
(60) days after expiration of the Policy Year” -- this
interpretation is not supported by the text. The notice
provision reads, “The Insureds shall . . . give to the Insurer
written notice of any Claim . . . as soon as practicable, but in
no event later than . . . sixty (60) days after expiration of
the Policy Year.” (Emphasis added). The policy’s notice
provision thus defines a single deadline for providing notice,
i.e., “as soon as practicable,” and the required notice can
never be later than 60 days after the expiration of the policy
year. This is indicated by the language, “but in no event later

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than.” In short, American Bank had a continuing duty to provide
notice as soon as practicable, so long as the as-soon-as-
practicable notice did not come later than 60 days after the
policy term, and it failed to comply with that duty here.
American Bank argues against this interpretation further by
contending that St. Paul Insurance never took the single-
deadline position as its own until its reply brief at the
summary judgment stage, suggesting that St. Paul Insurance
forfeited the argument. The record, however, does not support
American Bank’s assertion. In its complaint, St. Paul Insurance
quoted the policy provision requiring notice as soon as
practicable. It then alleged that, because that provision was
not complied with, the condition precedent to coverage was not
satisfied. And again, in its opening brief in support of
summary judgment, St. Paul Insurance quoted the policy provision
and argued, “Had St. Paul been provided with notice as soon as
practicable, it could have ensured that defense counsel was
properly retained and timely filed an appropriate motion to
dismiss for lack of personal jurisdiction.” (Emphasis added).
Then, during oral argument before the district court, counsel
for St. Paul Insurance again stated:
With respect to late notice, that’s the second duty
that was breached by [American Bank]. Under the
notice provision, they have to provide notice as soon
as practicable. And under case law back in 2009 and
case law now, the as-soon-as-practicable provision has

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always, generally in most states, [required] proof of
prejudice, whereas the latter part of the notice
provision, where it says notice within sixty days of
the expiration of the policy has been considered a
claims-made provision that has to be enforced
strictly. [American Bank] did not provide notice as
soon as practicable.
(Emphasis added). In ruling on the motions for summary
judgment, moreover, the district court relied only on the “as
soon as practicable” language to define the notice requirement,
analyzing it in conjunction with American Bank’s contractual
duty to defend. It concluded that “as soon as practicable”
meant in sufficient time to file a response in court on behalf
of American Bank “within the time set by the Illinois court
system for responding to lawsuits,” in this case, 30 days after
service. American Bank’s argument that St. Paul Insurance
forfeited its argument for a single deadline simply cannot be
maintained.
In any event, notwithstanding American Bank’s efforts to
constrict St. Paul Insurance’s position with its forfeiture
argument and thereby limit the scope of our review, our ultimate
task is to review the district court’s judgment and the relevant
policy language on which the judgment was based. The district
court held that American Bank failed to provide notice as soon
as practicable, and the policy supports that ruling, describing,
as we hold, a single as-soon-as-practicable deadline for
providing notice, so long as the notice is not more than 60 days

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after the policy term. The defining characteristic of that
notice obligation is notice given “as soon as practicable.”
In sum, when American Bank was served with the complaint
and summons in the Cueto suit on June 18, 2008, its duty to
notify St. Paul Insurance was triggered. Yet, it did not
provide St. Paul Insurance with notice until eight months later,
on February 25, 2009. No one can credibly argue that that lapse
of time was “as soon as practicable.” As a result, American
Bank’s notice to St. Paul Insurance was not timely.
American Bank maintains correctly, however, that even if it
failed to provide notice as soon as practicable, Maryland law
still requires that St. Paul Insurance “establish[] by a
preponderance of the evidence that the lack of . . . notice has
resulted in actual prejudice to [it].” Md. Code Ann., Ins.
§ 19-110 (emphasis added). The Maryland Court of Appeals has
recognized that “[i]t is very difficult to fashion a workable
‘one size fits all’ standard” to define actual prejudice.
Allstate Ins. Co. v. State Farm Mut. Auto. Ins. Co., 767 A.2d
831, 841 (Md. 2001). But under the facts before it, which
involved an insured’s lack of cooperation rather than late
notice, the Maryland Court of Appeals interpreted § 19-110’s
prejudice requirement to hold that the insurer suffered actual
prejudice when “there was a credible defense to be presented and

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. . . [the insured’s] non-cooperation precluded State Farm from
even presenting that defense.” Id. at 844.
In this case, the district court concluded that American
Bank’s late notice precluded St. Paul Insurance from exercising
its contractual rights, as stated in the policy, to participate
in American Bank’s defense and advance credible defense
strategies before the default judgment was entered. It
explained:
Had the insured not breached its obligation [to give
timely notice and] to defend, this would have been a
relatively trivial matter [based on a lack of personal
jurisdiction] and, by any standards -- with apologies
to Potter Stewart, I know it when I see it -- this is
prejudice.
Even though American Bank had the contractual duty to
provide its own defense, for which it would, under the policy,
be reimbursed by St. Paul Insurance, the policy nonetheless
provides that St. Paul Insurance “shall have the right and shall
be given the opportunity to effectively associate with, and
shall be consulted in advance by, [American Bank] regarding:
(a) the selection of appropriate defense counsel; (b)
substantive defense strategies, including decisions regarding
the filing and content of substantive motions; and (c)
settlement negotiations.” (Emphasis added). American Bank’s
late notice denied St. Paul Insurance the opportunity to
participate in the selection of counsel, to speak with counsel,

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and to discuss credible defense strategies for dismissing
Cueto’s suit before the default judgment. St. Paul Insurance
was also denied the opportunity to involve itself in considering
the possibility of settlement negotiations with Cueto prior to
the default judgment and prior to the expenditure of $1.8
million incurred by American Bank to vacate it. When a late
notice precludes an insurer from exercising meaningful
contractual rights provided to it by the policy -- in this case,
all the contractual rights -- we agree with the district court
that the insurer has suffered actual prejudice.
Accordingly, we affirm the district court’s judgment
concluding that St. Paul Insurance was entitled, by reason of
late notice, to deny insurance coverage to American Bank for the
Cueto suit. Because we conclude that American Bank’s notice was
untimely and caused prejudice, we need not address St. Paul
Insurance’s alternative argument that American Bank should also
be denied coverage because it breached its contractual duty
timely to defend the Cueto action.
III
American Bank also contends that St. Paul Insurance waived
or is estopped from asserting its late-notice defense to
coverage and that the district court erred in granting St. Paul
Insurance summary judgment with respect to these arguments. It

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relies mainly on a telephone conversation initiated by its
general counsel, Erik Bolog, with St. Paul Insurance’s claims
counsel, Christopher Nelson, on February 27, 2009, during which
Nelson stated, according to American Bank, that insurance
coverage existed for the Cueto suit. American Bank claims that
it relied on this representation “in deciding to continue
litigating the Cueto Action, whereas it would have pursued early
settlement if St. Paul had instead declined coverage.”
The district court, relying on the absence of evidence
showing that American Bank changed its position, rejected
American Bank’s arguments, stating, “I don’t see any basis on
this summary judgment record, with all of the inferences given
in favor of American Bank Holdings, that there was any change of
position in reliance upon that or any prejudice to American Bank
Holdings to the extent that I credit the notion that someone
said, ‘You’re covered,’ and then changed their mind.” We agree
with the court’s conclusion for multiple reasons.
With respect to waiver, the record facts do not support any
finding of an intentional waiver by St. Paul Insurance of its
late-notice defense. The record shows that American Bank’s
insurance broker forwarded the Cueto suit papers by email to St.
Paul Insurance on February 25, 2009, telling St. Paul Insurance
that American Bank was “no[t] involved or related to any of the
entities or individuals that are listed.” The broker also

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advised St. Paul Insurance that American Bank had hired the law
firm of Bryan Cave in St. Louis to represent it. Responding the
next day, February 26, St. Paul Insurance acknowledged receipt
of the email, stating that it “retain[ed] the right to raise any
and all coverage issues and to assert appropriate coverage
defenses that may apply during the course of our investigation.”
On the following day, February 27, 2009, American Bank’s
general counsel Bolog called St. Paul Insurance’s claims counsel
Nelson to discuss the suit. As of that time, American Bank had
already retained Bryan Cave to represent it in the Cueto suit,
and Bryan Cave had already filed a motion on American Bank’s
behalf to vacate the $98.5 million default judgment. Bolog
stated in his deposition that he called because of the big
problem he had, especially because the judgment was so large and
the suit was so frivolous. In this context, he asked whether
American Bank was “covered for this,” and Nelson responded
“yes.” Taken in context, this statement related to whether the
type of claim described by Bolog would fall under the policy and
did not respond or even relate to a late-notice question. The
conversation, according to Bolog, went as follows:
My recollection of the call with Mr. Nelson was that I
called him and told him we had a problem. It was a 98
million-dollar judgment against us.
The judgment was in my mind disturbing for numerous
factors, most importantly being that [American Bank]
had never done any business whatsoever in Illinois,

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had no relationship whatsoever to the transaction,
which was part of the underlying claim, that somehow a
by now I know convicted felon who had done 7 and a
half years for fraud and other related issues upon a
court had obtained a 98 million-dollar judgment
against [American Bank] for something [American Bank]
had no involvement in nor did [American Bank’s
subsidiary] for that matter have any involvement in,
that the judgment on its face was certainly corrupt,
that somehow 66 million dollars in punitive damages
had been awarded into a trust on behalf of St. Clair
County, and this judge allowed this person who had
been disbarred and spent 7 and a half years in prison
for frauds upon the court to be the trustee, to be
able to use those funds for whatever purpose he so
chose, including settling the compensatory part of the
claim, and then awarded 30 some-odd million dollars in
legal fees to a law firm that entered its appearance
the day after the judgment had been entered. I found
all that to be disturbing to say the least.
Then I’ve learned of course that the plaintiff was a
former trial lawyer who was a convicted felon. I
advised him that this felon’s brother was the chief
judge of this court, that the associate judge,
Gleeeson, who was the judge that signed this order,
somehow needed the approval of the brother to become a
tenured judge, and that from all accounts from
newspapers and all the information I could gather, St.
Clair County, Illinois, was known as a judicial
cesspool and that questionable judgments and verdicts
happened there on a regular basis.
I asked him if we were covered for this. He said,
yes. He did not equivocate. He did not say, we’re
taking a look at it. I have no recollection of any
type of ambivalence in his position.
(Emphasis added). Remarkably, this conversation did not include
any discussion of notice, nor did it indicate that St. Paul
Insurance was waiving any late-notice defense. Indeed, the
record makes clear that St. Paul Insurance intended to preserve
a late-notice defense, as further evidenced during the next two

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weeks, when it drafted at least two letters stating that as its
position. In each draft, it recited the facts and then
explained, “Although it appears that the Claim involves a
Lending Act [for which Lender Liability Coverage was afforded by
the policy], it is not clear whether notice was given to [St.
Paul Insurance] as soon as practicable. [St. Paul Insurance]
reserves the right to deny coverage due to late notice.” On
April 15, 2009, at the conclusion of its investigation, St. Paul
Insurance sent American Bank a letter formally denying coverage
for a lack of timely notice.
In this context, there was no waiver of the late-notice
defense. Maryland Law requires that waiver be “an actual
intention to relinquish an existing right, benefit, or
advantage, with knowledge, either actual or constructive, of its
existence, or such conduct as to warrant an inference of such
intention to relinquish.” Creveling v. GEICO, 828 A.2d 229, 243
(Md. 2003) (emphasis added) (internal quotation marks omitted)
(quoting GEICO v. Grp. Hosp. Med. Servs., 589 A.2d 464, 466 (Md.
1991)).
If Bolog’s testimony is accurate -- and, at this stage we
assume that it is -- it appears that Nelson’s affirmation of
coverage was referring to no more than the nature of the claim
as a Lending Act and the Lender Liability Coverage provided by
the policy, as noted in Nelson's draft letters. In no manner

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could Nelson’s response be construed as an actual intention to
waive the late-notice defense. And there is no basis to infer
waiver from Nelson’s conduct. Moreover, because St. Paul
Insurance had the suit papers for only a day, it would not be
reasonable to conclude that it had conducted an investigation
and intentionally decided in the conversation on February 27,
2009, to waive any late-notice defense.
American Bank also relies on a telephone conversation on
March 16, 2009, in which St. Paul Insurance’s claims counsel
allegedly told American Bank representatives that American Bank
could not settle the Cueto suit without St. Paul Insurance’s
consent, allegedly implying coverage. But, again, that
conversation did not relate to the late-notice issue, nor did it
in any way indicate a waiver of the notice requirement. To the
contrary, at the time the statement was made, St. Paul Insurance
was still considering whether to provide coverage with a
reservation of rights to deny coverage due to late notice, as
indicated in the draft letters dated March 13 and March 16,
2009. While St. Paul Insurance ultimately decided to deny
coverage, the record facts do not, to any extent, support
American Bank’s claim that this March 16 conversation manifested
St. Paul Insurance’s intent to waive its right to assert a late-
notice defense to coverage.

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The same record facts also require rejection of American
Bank’s estoppel argument. Under Maryland law, “[o]ne asserting
the benefit of an estoppel must have been misled to his injury
and have changed his position for the worse.” Rubinstein v.
Jefferson Nat’l Life Ins. Co., 302 A.2d 49, 52 (Md. 1973)
(emphasis added). We again see no evidence in the record that
would permit a reasonable jury to conclude that American Bank
actually changed its position for the worse in reliance on its
conversations with St. Paul Insurance representatives.
American Bank contends that, had it known that St. Paul
Insurance would deny coverage in April 2009, it would have
sought a settlement, mediation, or other resolution of the Cueto
suit in February or March 2009. But no reasonable jury could
credit such claims. Indeed, Bolog’s conversation with Nelson
and American Bank’s early retention of Bryan Cave suggest that,
based on its assessment that the suit was frivolous and
apparently corrupt, American Bank was not thinking of settlement
or an alternative dispute resolution at all. Moreover, there is
no evidence that if it had sought a settlement, it would have
received a more favorable outcome than it actually received --
i.e., vacating the default judgment and dismissing the case at a
cost of some $1.8 million. In fact, the only evidence of
settlement was Cueto’s later offer to settle for $10 million,
which American Bank refused to accept. In short, American

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Bank’s estoppel argument amounts to pure speculation. See
Creveling, 828 A.2d at 247 (refusing to find an estoppel when
the “prejudice or detrimental reliance suffered . . . [was]
purely speculative”).
We therefore conclude that the district court properly
rejected American Bank’s waiver and estoppel arguments.
IV
Finally, American Bank contends that St. Paul Insurance
failed to act in good faith in denying coverage for the Cueto
claim, in violation of Maryland statutory law. See Md. Code
Ann., Cts. & Jud. Proc. § 3-1701. We conclude that this claim
was properly dismissed.
Section 3-1701(d)(1)(i) provides that the statutory claim
for failure to act in good faith applies to civil actions in
which the insured seeks a determination of whether coverage
actually exists under an insurance policy, and § 3-1701(e)
requires a finding “in favor of the insured” on that coverage
question. See Md. Code Ann., Cts. & Jud. Proc. §§ 3-1701(d), 3-
1701(e). In view of our ruling that the district court did not
err in concluding that American Bank failed to satisfy a
condition precedent of coverage by failing to give timely
notice, American Bank cannot satisfy the statutory requirement
under § 3-1701(e) that there be a finding in favor of the

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insured that coverage actually existed. We therefore affirm the
district court’s summary judgment on this claim.
* * *
For the reasons given, the judgment of the district court
is
AFFIRMED.

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