Brooks v. Housing Authority

BARBERA, J. We decide in this case whether the Housing Authority of Baltimore City (“HABC”) enjoys governmental immunity from suits in tort if it has exhausted the limits of its commercial insurance policy in payment of prior claims. The case comes to us from the grant of summary judgment in favor of the HABC, the respondent, in a lead paint action brought by the petitioner, Devonte A. Brooks (“Brooks”). The HABC argued that, under Maryland’s “Housing Authorities” law, Md.Code (1957, 2003 Repl.Vol.), Art. 44A, 1 as construed by Jackson v. Housing Opportunities Comm’n of Montgomery County, 289 Md. 118 , 422 A.2d 376 (1980), it enjoys governmental immunity from suit because it exhausted the limits of its liability insurance policy. The Circuit Court for Baltimore City agreed that, under Jackson , the HABC’s governmental immunity was waived only up to the limits of its insurance coverage.

The court concluded, moreover, that it was undisputed that the HABC had insurance coverage at the time the cause of action arose but, by the time Brooks filed suit, the coverage was exhausted. The court therefore ruled that the HABC was entitled to summary judgment. Brooks noted an appeal to the Court of Special Appeals, which affirmed the judgment in an unreported opinion. For the reasons we shall explain, we reverse.

We hold that Article ⁶⁰⁸ 44A, when read in its entirety, effects a complete waiver of governmental immunity from suit. By so holding we necessarily repudiate our language in Jackson stating the contrary. 289 Md. at 130 , 422 A.2d at 382 . I. Brooks was born on November 4, 1993. Since then, he has lived with his mother in Baltimore City public housing, operated by the HABC.

Brooks developed elevated blood lead levels, which he alleges resulted from his exposure to lead-based paint in the housing where he resided. Brooks, through his mother, Kimberly Wright, filed suit against the HABC on March 15, 2004. Brooks alleged negligence and violations of the Maryland Consumer Protection Act (“CPA”), Md.Code (1975, 2000 Repl.Vol.), §§ 13-301-13-501 of the Commercial Law Article (“CL”), and sought damages resulting from his injuries. 2 The HABC filed a motion for summary judgment, arguing that its immunity from suit was waived only to the limits of its commercial insurance policy, which was exhausted by the time of Brooks’s suit. The commercial insurance policy (hereafter the “Policy”) to which the HABC referred was purchased by the HABC in 1993 from the Housing Authority Risk Retention Group (“HARRG”).

The Policy was for three years, running from June 1, 1993 through June 1,1996. Subsection H of the Policy contained a “Lead Based Paint Liability” rider, insuring the HABC liability coverage against “ ‘bodily injury’ arising from the ingestion of or exposure to lead-based paint” occurring after June 1, 1988. The Policy had an annual coverage limit of $500,000 per occurrence and in the aggregate, on a “claims-made basis,” and included a $25,000 per-claim deductible. The Policy was ⁶⁰⁹ subject to reduction for payment of claims, judgments, settlements, legal defense, and related costs.

The “Special Conditions” subsection of the lead-based paint liability rider provided that, if the lead-based paint coverage were cancelled, the HABC was entitled to obtain either a 3-month or a 15-month extension of coverage (commonly known as a “reporting tail”). The 3-month reporting tail would ensue automatically upon the cancellation date, without an additional premium paid. The 15-month reporting tail was available upon written request within 30 days of cancellation and payment of an additional premium to be determined by HARRG. Under the terms of the rider, any lead-based paint claims arising during the period of the reporting tail would be covered under the terms and conditions of the last annual coverage period during which coverage was in place.

The Policy also provided that, if during an annual coverage period and any reporting tail the HABC were to supply HARRG written notice that the HABC “[became] aware of any circumstances which may subsequently give rise to a claim being made against [the HABC] ... for damages arising out of the ingestion of or exposure to lead-based paint,” then a claim relating to those circumstances and later brought against the HABC would be considered to have been made during the coverage period when the written notice was received. On April 18, 1996, HARRG cancelled the lead-paint coverage rider in the Policy, effective immediately. After properly notifying HARRG of its intention to do so, the HABC purchased the 15-month reporting tail through July 18, 1997, and paid the additional premium of $74,880.27. The HABC thereby continued, through July 18, 1997, the $500,000 aggregate coverage limit provided during the 1995-96 annual coverage period.

Raymond A. L’Altrelli is the Insurance/Risk Manager for the HABC. In May 1997, Mr. L’Altrelli provided HARRG a list of names and other pertinent information concerning 73 children who had elevated blood lead levels (EBLs). Brooks, whose elevated blood lead level had been submitted to the ⁶¹⁰ HABC by city health authorities in April 2006, was among the children listed in the HABC’s submission to HARRG. The following month, the HABC sent a second list to HARRG.

That list, too, contained Brooks’s name. Mr. L’Altrelli stated in the letter that accompanied the first list that the “referenced EBL’s are to be noted as occurrences only (since claims may never be filed).” (Emphasis in original.) He added that the HABC understood that, by supplying HARRG with written notice, HARRG would “afford coverage and defense under the current Policy provisions” should claims subsequently be filed by any of the children on the list. The HABC did not purchase lead-based paint liability coverage beyond the date of expiration of the reporting tail, July 18, 1997. The Lawsuit We have said that Brooks, through his mother, filed suit against the HABC in March 2004.

The HABC timely answered and thereafter moved for summary judgment. The HABC argued that Brooks’s claim was reported to HARRG under the 1995-96 Policy year, pursuant to the 15-month reporting tail, and, as of September 19, 2003, the $500,000.00 coverage for lead-based claims was exhausted. The HABC maintained that Article 44A waives its governmental immunity only up to the available limits of its insurance policy. The HABC relied on the holding of Jackson , which states that the “combination of’ the relevant statutory provisions “effects, by necessary and compelling implication, a limited waiver of the defense of sovereign immunity to the extent of permitting recovery only out of any sum payable on behalf of the HOC (Housing Opportunities Commission) by its insurer under applicable liability coverage.” 289 Md. at 130 , 422 A.2d at 382 .

In support of summary judgment, the HABC submitted, inter alia, an affidavit by HARRG’s Regional Claims Manager attesting that Brooks’s potential claim was reported in the 1995-96 Policy year and, as of September 19, 2003, the $500,000 limit of coverage was exhausted. ⁶¹¹ Brooks opposed the summary judgment motion on the ground that the HABC was not entitled to invoke governmental immunity in this case. Brooks argued that the language in Jackson to the effect that the statute creates only a partial waiver of immunity is dicta because it was not necessary to the decision in that case. Brooks further argued that the court should treat the facts of his case more like the cases at issue in Gibson v. Housing Auth. of Baltimore City, 142 Md.App. 121, 131 , 788 A.2d 234, 240 , cert. denied, 369 Md. 182 , 798 A.2d 554 ; vacated sub nom Housing Auth. of Baltimore City v. Smalls, 369 Md. 224 , 798 A.2d 579 (2002). 3 Gibson presented the question whether the HABC could assert governmental immunity for lead-based paint claims that arose when the HABC was not covered by a liability insurance policy. The intermediate appellate court answered “no” to that question, analyzing the issue as follows: HABC argues that its failure to carry statutorily required liability insurance for “all risks and hazards” will prevent the agency from being able to satisfy a judgment rendered in favor of the children and thus the HABC is immune from suit.

If such a practice would be allowed, governmental agencies would be able to manufacture their own immunity simply by allowing their insurance to lapse. In instances where the legislature has mandated that the governmental agency carry insurance to allow for payment of successful suits brought against the agency, the autogenous of immuni ⁶¹² ty would fly in the face [of] the legislative intent without submitting to it and create inequitable results. We will not allow such inequities to occur. Therefore, in instances where the legislature has created a waiver from immunity for a governmental entity and required that insurance be obtained for liabilities resulting from its governmental conduct, that entity cannot fabricate its own immunity [] by failing to insure against those liabilities.

Gibson, 142 Md.App. at 131 , 788 A.2d at 240 . Brooks argued, by extension of the logic underpinning Gibson , that the HABC attempted to manufacture its immunity by under-insuring itself and therefore was not entitled in his case to the defense of government immunity. The Circuit Court interpreted Jackson and Gibson to hold that, “if [the HABC] did not fail to insure, it is not required to take additional action to provide for payment of a claim.” The court therefore saw the issue on summary judgment to be “whether there is any dispute of material fact about” whether the HABC “failed to take appropriate measures to obtain insurance coverage given the facts reasonably available to it.” The court reviewed the parties’ exhibits offered in support of and in opposition to the motion, and concluded that “there is no basis for a dispute that [the] HABC failed to provide sufficient insurance, thereby forfeiting its immunity.” Accordingly, the court granted summary judgment in favor of the HABC. Brooks appealed to the Court of Special Appeals.

While the appeal was pending in that court, Brooks filed a petition for writ of certiorari. We denied the petition. Brooks v. Housing Auth. of Baltimore City, 396 Md. 12 , 912 A.2d 648 (2006). The appeal proceeded in the Court of Special Appeals, and in due course a divided panel of that court affirmed the judgment.

Brooks v. Housing Auth. of Baltimore City, No. 06-1815, slip op. at 20 (Md.Ct.Spec.App. Dec. 18, 2006). The panel majority concluded, as had the Circuit Court, that the HABC’s immunity from suit was waived only up to the limits of its insurance ⁶¹³ coverage, and such limits were exhausted by the time Brooks filed suit. Id. at 16 . The panel majority further concluded that the record does not support “a reasonable inference that the HABC knowingly was taking steps to under-insure itself in an effort to avoid liability for claims that might exceed Policy limits,” as Brooks had argued.

Id. There being no dispute of material fact on that issue, the panel majority held that the HABC was immunized from suit and, consequently, was entitled to summary judgment on Brooks’s negligence claim. 4 Id. at 20 . The panel also addressed Brooks’s CPA claim and concluded that the claim was analogous to the common law torts of fraud or negligent misrepresentation, against which the HABC was entitled to assert governmental immunity. Id. at 26-27 .

We granted certiorari to answer six questions, only four of which Brooks has pursued in his brief. 5 For purposes of ⁶¹⁴ discussion, we condense those questions into a single, overarching question: Did the Circuit Court err in granting summary judgment in favor of the HABC on the ground that it was immune from the claims brought by Brooks because it was insured for the applicable period of time, notwithstanding that its coverage limits were exhausted? II. “The doctrine of sovereign immunity from suit, rooted in the ancient common law, is firmly embedded in the law of Maryland.” Katz v. Wash. Suburban Sanitary Comm’n, 284 Md. 503, 507 , 397 A.2d 1027, 1030 (1979). In Maryland, the doctrine applies to the State and its agencies.

Id. The doctrine also applies to local governments and their agencies when tortious conduct arises out of governmental, rather than proprietary or corporate, functions. Housing Auth. of Baltimore City v. Bennett, 359 Md. 356, 359 , 754 A.2d 367, 368 (2000). Therefore, the doctrine is “perhaps, more accurately characterized as ‘governmental immunity.’ ” Austin v. City of Baltimore, 286 Md. 51, 53 , 405 A.2d 255, 256 (1979); accord Mayor and City Council of Baltimore v. Whalen, 395 Md. 154, 163 , 909 A.2d 683, 688 (2006).

The General Assembly has the authority to waive governmental immunity either directly or by necessary implication. Katz, 284 Md. at 507-08 , 397 A.2d at 1030 . The test for ascertaining whether and to what extent governmental immunity is waived has two prongs: “[A] legislative waiver of sovereign [or governmental] immunity is ineffective unless specific legislative authority to sue the agency has been given, and unless there are funds available for the satisfaction of the judgment, or power reposed in [an] agency for the raising of funds necessary to satisfy a recovery against it.” Id. at 513 , 397 A.2d at 1033 . Stated another way, “[a] waiver of sover ⁶¹⁵ eign or governmental immunity from suit generally requires that two conditions be met.

First, the Legislature must authorize suits for damages, and, second, there must be provision for the payment of judgments.” Kee v. State Highway Admin., 313 Md. 445, 455 , 545 A.2d 1312, 1317 (1988).

III

The Pa,rties’ Contentions Whether the Circuit Court was correct in granting summary judgment in favor of the HABC turns on the question of whether that court correctly decided that the HABC was immune from Brooks’s suit. 6 The parties, not surprisingly, are at odds on the answer to that question. Brooks leads with the contention that the Circuit Court erred in concluding that the General Assembly intended only a partial waiver of housing authorities’ immunity from suit. He argues that Article 44A, viewed in its entirety, evidences a complete waiver of immunity from suits in tort, and the language of Jackson stating the contrary is dicta that is incorrect and should not be followed. Brooks further argues, in the alternative, that even if Article 44A effects only a partial waiver of immunity up to the limits of applicable insurance, as Jackson states, there is a dispute of material fact concerning whether the HABC, by under-insuring, “manufactured” its immunity.

Brooks argues that, assuming the HABC is engaged in a governmental function when maintaining and operating public housing, it failed in this instance to fulfill the statutory mandate to “insure or provide for insurance ... against any risks or hazards”; consequently, the HABC is not immune from suit. Brooks adds as a final argument the threshold contention that the HABC is not immune from suit ⁶¹⁶ because, as a “landlord” operating a housing project that “only benefits a specially qualified group of low income tenants, and does not benefit the welfare of the whole public, the HABC is engaging in a proprietary function, not a governmental function.” The HABC counters that Jackson correctly holds that the General Assembly waived housing authorities’ governmental immunity only up to the limits of liability insurance coverage. The HABC, acknowledging that it is a local government agency (not a state agency), argues that its functions are governmental and the immunity it thereby enjoys was waived only to the limits of its available insurance coverage. The HABC further argues that, because there is no dispute of material fact that the liability coverage it purchased was exhausted by the time Brooks filed suit, it is immune from suit.

Consequently, in the view of the HABC, the court properly granted summary judgment in its favor.

IV

To determine which position is correct, we begin with an examination of § 1-301 of Article 44A, which is central to the disposition of this case. It provides: An authority shall constitute a public body corporate and politic, exercising public and essential governmental functions, and having all the powers necessary or convenient to carry out and effectuate the purposes and provisions of this article, including the following powers in addition to others herein granted: (1) To sue and be sued, to have a seal and to alter the same at pleasure, to have perpetual succession, to make and execute contracts and other instruments necessary or convenient to the exercise of the powers of the authority, and to make and from time to time amend and repeal bylaws, rules and regulations not inconsistent with this article, and to carry into effect the powers and purposes of the authority; ⁶¹⁷ (4) To make rent subsidy payments to or on behalf of persons of eligible income; to lease or rent any dwellings, houses, accommodations, lands, buildings, structures, or facilities embraced in any housing project and, subject to the limitations contained in this article, to establish and revise the rents or charges therefor; to own, hold, and improve real or personal property; to purchase, lease, obtain options upon, acquire by gift, grant, bequest, devise, or otherwise any real or personal property or interest therein; to sell, lease, exchange, transfer, assign, pledge, or dispose of any real or personal property or any interest therein; to insure or provide for the insurance of any real or personal property or operations of the authority against any risks or hazards; to procure insurance or guarantees from the State or federal government of the payment of any debts or parts thereof (whether or not incurred by said authority) secured by mortgages on any property included in any of its housing projects; (5) To invest any funds held in reserves or sinking funds, or any funds not required for immediate disbursement, in property or securities in which savings banks may legally invest funds subject to their control; to purchase its bonds at a price not more than the principal amount thereof and accrued interest, all bonds so purchased to be canceled; (10) To borrow money or accept grants or other financial assistance from the local, State, or federal government and accept grants from nongovernmental sources for or in aid of any housing project within its area of operation, to take over or lease or manage any housing project or undertaking constructed, financed, or owned by the local, State, or federal government, and to these ends, to comply with such conditions and enter into such mortgages, trust indentures, leases, or agreements as may be necessary, convenient, or desirable. It is the purpose and intent of this article to authorize every authority to do any and all things necessary or desirable to secure the financial aid or cooperation of the local, State, or federal ⁶¹⁸ government in the undertaking, construction, maintenance, or operation of any housing project by such authority; and (11) To exercise all or any part or combination of powers herein granted. Article 44A, § 1-301 (emphasis added).

We discussed the origins of this law in Jackson . We noted that the General Assembly enacted the law in anticipation of, and to take advantage of, the provisions of the United States Housing Act of 1937, ch. 896, 50 Stat. 888 , now 42 U.S.C. §§ 1401-1440 (1976). Jackson, 289 Md. at 121 , 422 A.2d at 377 . The federal Act created a program designed “for slum clearance and provision for persons whose incomes are too low to enable them to live in other than insanitary or unsafe conditions.” Id.

(quoting Matthaei v. Housing Auth. of Baltimore City, 177 Md. 506, 509 , 9 A.2d 835, 836 (1939)). By Chapter 517 of the Acts of 1937, the General Assembly added Article 44A to the Code of Public Laws. The statute adhered closely to the terms of the federal law. Matthaei, 177 Md. at 509-10, 9 A.2d at 836 .

A housing authority was created in each city having a population of over 1,000 and in each county of the state. See Md.Code (1937), Art. 44A, §§ 3, 4, 22; Jackson, 289 Md. at 121 , 422 A.2d at 377 . That law made each housing authority “a public body corporate and politic,” but it was necessary that each local authority declare its need for a housing authority. Jackson, 289 Md. at 121 , 422 A.2d at 377 (citations omitted).

The precise issue presented in Jackson was whether the Housing Opportunities Commission (“HOC”) could raise the defense of governmental immunity in a personal injury action brought against it for negligence in failing to maintain the safety of the premises of a housing project. The HOC filed a preliminary motion asserting government immunity, arguing in the alternative that it was operating “as a state agency, or as a local agency exercising totally governmental functions.” Id. at 120 , 422 A.2d at 377 . The plaintiffs, an injured child and his father, argued that the HOC maintained liability ⁶¹⁹ insurance that constituted a recognized “exception” to the doctrine of governmental immunity. Id.

The Circuit Court for Montgomery County granted the motion of the HOC, and the Court of Special Appeals affirmed. Jackson v. Housing Opportunities Comm’n of Montgomery County, 44 Md.App. 304, 317, 408 A.2d 1337, 1344 (1979). We granted certiorari to answer “the sole question presented by the appellants[,]” which was whether the General Assembly, by enacting Article 44A, had effected “a waiver of sovereign immunity, either express or implied.” Jackson, 289 Md. at 120 , 422 A.2d at 377 . To answer that question, we examined the statute, by reference to the two-pronged Katz test. 7 We concluded that the first prong of the Katz test— requiring specific legislative authority to sue the agency — was “clearly satisfied in this case.

A housing authority has power ‘[t]o sue and be sued.’ The power is unqualified.” Id. at