Woodfin Equities Corp. v. Harford Mutual Insurance

DAVIS, Judge. This is an appeal from an August 28, 1995 order of the Circuit Court for Montgomery County granting an insurer’s motion for judgment in a declaratory relief action filed by an injured third party. The principle questions presented on this appeal are restated as follows: I. Should this Court deny the insurer’s motion to dismiss this appeal?

II

Do the injured third parties have standing to file a declaratory judgment action directly against the insurer?

III

Did the circuit court correctly determine that the insurer was not obligated to provide liability coverage under the terms of the CGL policy? ⁶²² IV. Did the circuit court correctly determine that the insurer was not prejudiced by the insured’s failure to notify the insurer of the claim of the injured third parties? To the first, second, and fourth questions, we respond in the affirmative. To the third question, we respond partially in the affirmative and partially in the negative.

As a result of the disposition of these questions, we affirm in part and reverse in part the judgment of the circuit court. 1 Accordingly, the case shall be remanded to the circuit court for further proceedings. FACTS This appeal involves a declaratory judgment action filed by injured third parties against an insurer for the purpose - of determining the extent of the insurer’s obligations under a CGL policy. Before we present the factual backdrop, we shall introduce the key players involved to aid in comprehending the interrelation of the parties in this case. Beginning with the principal actors, Woodfin Equities Corporation (Woodfin), Samuel A. Hardage (Hardage), and Hardage Construction Company (HCC) are the injured parties and appellants.

Appellants constructed a hotel in Rockville, Maryland, known as the Woodfin Suites Hotel (hotel). HCC was the general contractor for the project. Harford Mutual Insurance Company is the insurer and appellee. Appellee issued a comprehensive general liability (CGL) policy to its insured, Deerfield Engineering, Incorporated, (Deerfield Engineering or insured)—a mechanical subcontractor hired by appellants to provide all labor and materials and to do all things necessary for the installation and completion of the hotel’s heating, ventilation, and air conditioning (HVAC) system.

The insured’s owner is Donald Paulgaard. At different points in ⁶²³ time, the insured had offices in Austin and Marble Falls, Texas, and in Rockville, Maryland. Along with the insured, the Trane Company and Climate-master were involved in the construction of the hotel. According to appellants, Trane was the manufacturer of the HVAC systems that the insured installed, and Climatemaster participated in the manufacturing of the HVAC units and component parts.

The remaining entity is Deerfield, Incorporated—not to be confused with the insured. The role of Deerfield, Incorporated is pivotal, although its involvement is peripheral. Deerfield, Incorporated, is an electrical contracting company located in Kingsville, Maryland. According to Martin W. Lotz, Jr., its President and CEO, Deerfield, Incorporated, is not and never has been insured by appellee.

Furthermore, according to Lotz, Deerfield, Incorporated, was not involved in any way with the construction of the hotel. In January 1990, appellants, by a six-count complaint, sued Trane, Climatemaster, and Deerfield, Incorporated, in the Circuit Court for Montgomery County, for breach of contract, negligence, breach of express warranty, breach of implied warranty, breach of implied warranty of fitness for particular purpose, and strict liability. (The Trane litigation or Trane suit.) In the caption of the Trane complaint, Deerfield, Incorporated, is designated as an Austin, Texas corporation, and Martin W. Lotz, Jr. is designated as the person to be served with the complaint at his Kingsville address. According to the Trane complaint, the hotel opened its doors to the public on February 23, 1988.

Appellants alleged that, in March, 1988, the hotel began to experience problems with the HVAC system, and that, by June 1989, 130 HVAC units failed at least once, and continue to fail. Appellants claimed that Trane, Climatemaster, and Deerfield, Incorporated, were responsible for the failures in the HVAC system. In particular, appellants asserted that Deerfield, Incorporated, failed to install, service, and inspect properly the HVAC systems in the hotel. For example, according to appellants, Deerfield, Incorporated, failed to install a “suction screen ⁶²⁴ diffuser” and improperly positioned the “thermostat sensor bulb” on the units.

The complaint asserts that, as a result of the conduct of Trane, Climatemaster, and Deerfield, Incorporated, appellants incurred considerable losses and expenses, including the loss of income from the unavailability of guest rooms, costs associated with the repair and replacement of pumps in the HVAC system, consultant fees for conducting tests and providing opinions as to the reasons for the HVAC failures, management time expended -with respect to customer relations and correcting the problems in the HVAC system, increased energy costs, loss of goodwill, and attorney’s fees and costs related to the Trane litigation. Appellants served Lotz with a summons ánd complaint for the Trane litigation. According to Lotz, since Deerfield, Incorporated, had nothing to do with the construction of the hotel, Lotz contacted appellants’ attorneys to advise that they had sued and served the -wrong company. Nonetheless, Lotz continued to receive various pleadings and related legal documents for some period of time.

Eventually, these papers stopped arriving at Lotz’s address, as a result of which Lotz was led to believe that appellants’ counsel had corrected their mistake. In addition to service upon Lotz, the record indicates that appellants apparently realized their error and had Paulgaard served. A September 24, 1991 Affidavit of Service of Process (on appellants’ counsel’s letterhead) states that Paulgaard was served with the Trane litigation papers on March 23, 1991. In depositions, however, Paulgaard claimed that he did not learn of the Trane suit until 1994.

At trial, appellants strenuously objected to the September 24, 1991 Affidavit of Service of Process, and took the position that Paulgaard did not know about the Trane suit until 1994. As shall become more clear below, it benefited appellants in a significant way if Paulgaard did not actually learn of the Trane suit until 1994, because appellee did not learn of the suit until June 1994 (from appellants’ counsel), and claimed—as a basis for denial of coverage—that Paulgaard breached his duty to notify appellee of the suit since Paulgaard knew about the suit ⁶²⁵ in 1991 but never informed appellee of it at that time or at anytime. In any event, neither the insured, nor Deerfield, Incorporated (as would be expected), answered the Trane complaint. On March 9, 1992, over two years after the Trane suit was filed, the Clerk of the circuit court issued a Notice of Default Order to “Deerfield Incorporated,” stating “that an Order of Default has been entered against you in the above entitled case on 3/2/92.” On May 8, 1992, the circuit court conducted an ex parte hearing for the purpose of determining damages against Deerfield, Incorporated.

At the conclusion of that hearing, the circuit court entered a default judgment against “Deer-field, Incorporated” for $168,102.84. Two years later, in May 1994, appellants allegedly “discovered” a Certificate of Insurance (certificate), indicating that appellee had previously issued a CGL policy to the insured. The insured is identified on the certificate as follows: Deerfield Engineering Donald Marvin Paulgaard 15 Dairyfield Court Rockville, Md 20852 HCC is designated as the certificate holder. In addition, the certificate explicitly states: THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER.

THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. Following the “discovery” of the certificate, appellants’ counsel wrote a letter to appellee dated June 14,1994, wherein appellants informed appellee of the discovery of the certificate and its claim against the insured. By that letter, appellants invited appellee to engage in settlement discussions and offered to open its files to appellee. Furthermore, the letter stated that, if appellee declined to settle the matter, appellants would vacate the default judgment for the purpose of attempt ⁶²⁶ ing to assess a new damages amount in light of the fact that appellants allegedly have continued to suffer losses from the HVAC failures—a course of action that would purportedly “expose [appellee] to potential damages of Two Million Dollars.” In response, appellee informed appellants’ counsel, by letter dated June 30, 1994, that “there will be no coverage available to Deerfield Engineering for this occurrence.

There are a number of coverage issues which contributed to this decision.” ■Subsequent to that exchange, appellants filed the instant declaratory judgment action in the Circuit Court for Montgomery County directly against appellee. The declaratory judgment action was filed on January 13, 1995—over two and one-half years after the date of the default judgment against “Deerfield, Incorporated,” over five years after the filing of the Trane suit, and over six and one-half years after the insured’s alleged failures. Appellants did not name, or attempt to join, the insured as a party to this declaratory judgment action. Indeed, the insured is noticeably absent as a party to these proceedings.

In their complaint for declaratory judgment, appellants recited the foregoing facts and set forth the stated damages. Of particular interest is that appellants identify the insured as “Deerfield, Incorporated,” and state that they have obtained a default judgment against Deerfield, Incorporated. Finally, the complaint requests the circuit court to grant, inter alia, the following relief: (1) “Declare that coverage be established under” appellee’s CGL policy; (2) “Declare that coverage be afforded to Deerfield under” appellee’s CGL policy “for the damages arising from Deerfield’s installation of the HVAC systems”; (3) “Declare [appellee’s] duty to defend”; and (4) “Declare that [appellants] may seek a direct action against [appellee] for the amount of the Default Judgment and for all other damages resulting from its insured’s wrongdoing.” In response to appellants’ complaint, appellee filed an answer on January 31, 1995, setting forth a number of defenses. One such defense was that the terms of the CGL policy did ⁶²⁷ not obligate appellee to provide insurance coverage in this case.

In addition, appellee defended on the ground that appellants allegedly lacked standing because they are not “insureds” under the CGL policy. Notably, appellee denied that it issued an insurance policy to “Deerfield, Incorporated.” Furthermore, appellee defended against the complaint on the ground that the insured failed to notify appellee of the claim pursuant to the terms of the CGL policy, and that this failure caused substantial prejudice to appellee. Meanwhile, during a February 21, 1995 hearing in the Trane litigation before Judge Mason, the circuit court dismissed Woodfin’s and HCC’s actions against the remaining parties, Trane and Climatemaster, because of the forfeiture of Woodfin’s corporate charter. During that hearing, the circuit court ruled that it was unable to determine “at this time” whether Hardage’s action should also be dismissed by virtue of the forfeiture of the corporate charter.

Accordingly, the circuit court scheduled a motions hearing for April 27, 1995 to consider further argument on the matter. Unfortunately, there is no evidence in the record indicating the disposition of Hardage’s claims. The record, however, contains representations by the parties that all of the claims of the plaintiffs in the Trane litigation were dismissed. The important thing, for purposes of this appeal, is not when final judgment disposing of all claims against all parties was actually entered in the Trane litigation, but that final judgment was entered in the Trane litigation no earlier than February 21, 1995.

For the sake of convenience, we shall proceed as if final judgment was entered on that date. In the instant declaratory judgment action, following its answer, appellee filed a motion for summary judgment in April 1995. Therein, appellee argued that it was entitled to judgment on three grounds. First, appellee argued that, because Deerfield, Incorporated is not appellee’s insured, appellee owes no obligation to appellants with respect to the judgment that appellants obtained against that entity.

Second, appellee argued that it was entitled to judgment “due to the complete lack of notice given to it until nearly two years ⁶²⁸ after the entry of a Default Judgment,” and that this delay in notice constituted actual prejudice under Maryland case law. Finally, appellee asserted that the CGL policy does not protect against the acts alleged in the Trane complaint. In this latter regard, appellee argued that appellee is not obligated to provide coverage because: (1) the claim does not involve “property damage” arising out of an “occurrence,” as those terms are defined in the CGL policy, and (2) certain coverage exclusions existed. On June 1, 1995, appellee’s motion for summary judgment was denied.

The matter proceeded to trial on June 28, 1995. At trial, two witnesses testified for appellants, and eleven exhibits were introduced into evidence (six by appellants and five by appellee). Appellants’ first witness was Peter Kruse, a representative from the Hardage Group—the entity that owns HCC and Woodfin. Kruse explained that the insured was employed to install the HVAC and plumbing system for the hotel.

Kruse testified that the HVAC units began to fail. Kruse responded in the affirmative when asked whether the HVAC failures arose as a result of the insured’s faulty installation of the units. According to Kruse, the failures resulted from “a number of acts that were performed [by the insured], including” rupturing or fracturing capillary tubes in the units during installation and placing the temperature-sensing bulb in the wrong position. Kruse stated that as the units failed they had to be replaced throughout the hotel.

According to Kruse, replacement caused damage to the walls and carpeting of the hotel. Kruse stated that damages also included loss of room occupancies, replacement of the HVAC units, consultants’ fees, management time, and loss of goodwill. Appellants also called Robert F. Ohler, Jr. to testify. Ohler is appellee’s claims manager.

Ohler acknowledged that appellee undertook no investigation into the facts of the loss beyond reviewing appellants’ Trane complaint. Indeed, Ohler agreed that, apart from what was alleged in that complaint,, he had no knowledge about the manner in which the HVAC system was installed, nor. the manner in which the HVAC goods were handled. In this regard, Ohler stated, based on his review of ⁶²⁹ that complaint, “I have determined that there wasn’t coverage for any of the damages sought or the claims sought by [appellants].” Ohler acknowledged that appellants offered to vacate the default judgment, but maintained that that would not have cured the prejudice that appellee suffered from the late notice of the claim. Ohler admitted that appellee equated the passage of time with prejudice.

Significantly, Ohler further stated that appellee had the opportunity to interview Paulgaard regarding the claim, but chose not to do so. In addition, Ohler testified that, even if the alleged damages could be considered property damage under the CGL policy, various coverage exclusions in the CGL policy existed, under which appellee could properly deny coverage. At the conclusion of appellants’ case, on June 28, 1995, appellee moved for judgment pursuant to Maryland Rule 2-519, essentially reiterating those arguments asserted on its motion for summary judgment. 2 From the bench, the circuit court ruled that appellee was not prejudiced, believing that appellee had proper notice of the claim. The circuit court, however, granted appellee’s motion for judgment on the ground that appellee was not obligated to provide coverage under the terms of the CGL policy.

In this regard, the circuit court stated that its ruling was based on its “careful perusal” of the CGL policy and appellants’ Trane complaint. In granting judgment, the circuit court did not address appellant’s standing argument. The June 30, 1995 docket entry reflecting the circuit court’s grant of judgment from the bench, reads: ⁶³⁰ COURT (BEARD, J.) FINDS IN FAVOR OF DEFE-DANT [sic] HARFORD MUTUAL INSURANCE COMPANY AGAINST PLAINTIFF WOODFIN EQUITIES CORPORATION, SAMUEL A. HARDAGE AND HARDAGE CONSTRUCTION COMPANY. ORDER TO BE SUBMITTED.

Consistent with this docket entry, a written order embodying the circuit court’s grant of judgment from the bench was entered on the docket by the clerk on August 28, 1995. That order reads: UPON CONSIDERATION OF [appellee’s] Motion for Judgment pursuant to Maryland Rule 2-519, the arguments of counsel with respect to said Motion on June 28,1995, and the evidence presented by the [appellants] at trial in this matter on June 28,1995, and for good cause shown, it is this 24th day of August, 1995, hereby; ORDERED that [appellee’s] Motion is GRANTED. From this grant of judgment in appellee’s favor, appellants appeal to this Court. DISCUSSION I Before addressing the merits of this appeal, we must dispose of appellee’s motion to dismiss this appeal.

Appellee argues that this appeal must be dismissed because appellants did not timely file their Notice of Appeal pursuant to Maryland Rule 8-202(a) (1996), which provides that “the notice of appeal shall be filed within 30 days after entry of the judgment or order from which the appeal is taken.” “ ‘Entry’ ... occurs on the day when the clerk of the lower court first makes a record in writing of the judgment, notice, or order on the file jacket, on a docket within the file, or in a docket book, according to the practice of that court, and records the actual date of the entry.” Md.Rule 8-202(f). In the instant case, appellants’ Notice of Appeal was filed on July 26, 1995—less than 30 days after the circuit ⁶³¹ court’s bench ruling granting appellee’s motion for judgment, but before August 28, 1995, the date on which the clerk entered the circuit court’s written order on the docket. According to appellee, therefore, appellants’ notice of appeal was ineffective because it was prematurely filed before the entry of the circuit court’s final order, and, therefore this Court lacks jurisdiction, and the appeal must be dismissed. We disagree.

As appellants correctly point out, they timely noted their appeal to this Court by virtue of Maryland Rule 8-602(d), which provides: A notice of appeal from a ruling, decision, or order that would be appealable upon its entry on the docket, filed after the announcement of the ruling, decision, or order by the trial court but before entry of the ruling, decision, or order on the docket, shall be treated as filed on the same day as, but after, the entry on the docket. See Waller v. Maryland Nat’l Bank, 332 Md. 375 , 380 n. 2, 631 A.2d 447 (1993) (“Had a confirmatory order been filed by the trial court after its oral ruling, and after the appeal had been noted, the appeal could have been saved by the use of Maryland Rule 8—602(d).”). Under a plain reading of Rule 8-602(d), in light of the procedural events following the circuit court’s bench ruling, we are required to treat appellants’ notice of appeal as timely filed. II Next, we must address appellee’s argument that appellants lacked standing to assert a declaratory judgment action directly against appellee.

We conclude that appellants had proper standing. In their reply brief to this Court, appellants intimate, without much explanation, that the issue of standing may not now be raised. As our factual recitation indicates, appellee has raised the issue of standing at every procedural juncture in this case. As a result, appellants’ argument cannot be based on an alleged failure to raise this issue in the proceedings below.

Furthermore, appellee’s failure to file a ⁶³² cross-appeal on this issue does not preclude us from considering it. As the Court of Appeals recognized: Where a party has an issue resolved adversely in the trial court, but ... receives a wholly favorable judgment on another ground, that party may, as an appellee and without taking a cross-appeal, argue as a ground for affirmance the matter that was resolved against it at trial. This is merely an aspect of the principle that an appellate court may affirm a trial court’s decision on any ground adequately shown by the record. Offutt v. Montgomery County Bd. of Educ., 285 Md. 557 , 564 n. 4, 404 A.2d 281 (1979) (citations omitted).

In any event, “we consider the issue of standing as falling within the category of cases, in addition to jurisdiction, that an appellate court may address although it was not raised by a party.” Commission on Human Relations v. Anne Arundel County, 106 Md.App. 221, 236 , 664 A.2d 400 (1995). Having determined that the issue of standing is properly before this Court; we now explain why appellants had standing to file the instant declaratory judgment action. We agree with appellee that, before an injured party may sue an insurer directly, the injured party must first obtain a judgment against the insured and that judgment must be returned unsatisfied, or the insured must refuse to pay it. In Butler v. Liberty Mut.

Ins. Co., 36 Md.App. 684, 685 , 375 A.2d 576 (1977), the plaintiff was injured while a passenger in a vehicle insured by the insurance company. The injured passenger sued the driver of the vehicle, but the insurance company denied coverage. Id. at 685-86 , 375 A.2d 576 .

While the tort action was pending, the injured passenger filed a declaratory judgment action against the insurance company to resolve the issue of insurance coverage. Id. The insured was joined as defendant in the declaratory judgment proceedings. Id. at 685 , 375 A.2d 576 .

We affirmed the circuit court’s dismissal of the injured passenger’s declaratory judgment action on the ground that the passenger’s action could not be legally maintained. Id. at ⁶³³ 692, 375 A.2d 576 . In so doing, we concluded that, “until and unless [the passenger] obtains a judgment against ... the insured and that party refuses to pay the judgment,” an actual controversy would not exist under Maryland’s version of the Uniform Declaratory Judgments Act. Id.

(citing Md.Code Ann., Cts. & Jud.Proc. § 3-409(a) (1974)). See also Md.Code Ann., Cts. & Jud.Proc. § 3^409(a) (1995) (“a court may grant a declaratory judgment or decree in a civil case, if it will serve to terminate the uncertainty or controversy giving rise to the proceeding, and if: (1) An actual controversy exists between contending parties; (2) Antagonistic claims are present between the parties involved which indicate imminent and inevitable litigation; or (3) A party asserts a legal relation, status, right, or privilege and this is challenged or denied by an adversary party, who also has or asserts a concrete interest in it.”). In addition to being reaffirmed in Anne Arundel County v. Ebersberger, 62 Md.App. 360, 369 , 489 A.2d 96 (1985), the rule in Butler was implicitly recognized in Benning v. Allstate Ins. Co., 90 Md.App. 592, 595-96 , 602 A.2d 233 (1992).

In Benning , the plaintiff was injured while a passenger in a car driven by her sister, the insured. Id. at 594 , 602 A.2d 233 . Rather than sue her sister, the plaintiff filed a declaratory judgment action against her sister’s insurer, seeking to establish that the household exclusion in her sister’s policy did not apply. Id.

The insurer moved for dismissal on the ground that the plaintiff lacked standing to bring the action under Butler. Id. In addition, the insured filed a motion to intervene in the case, asserting that she wanted the insurer to compensate the plaintiff, but did not want the plaintiff to sue her. Id. at 595 , 602 A.2d 233 .

Both the insurer’s motion to dismiss and the insured’s motion to intervene came before the trial court. Id. The plaintiff conceded that the insurer’s motion was well founded and that, had she known of Butler , she would not have filed the declaratory judgment action. Id.

The circuit court then granted the insurer’s motion to dismiss, and decided not to address the insured’s motion to intervene because the grant of the insurer’s motion resulted in no case ⁶³⁴ existing in which the insured could intervene. Id. Both the plaintiff and insured appealed to this Court, where the plaintiff again conceded that Butler controlled her case, and did not challenge the soundness of that decision. Id.

Therefore, we dismissed the plaintiffs appeal. Id. at 596, 602 A.2d 233 . 3 Apart from the rule in Butler, Md.Ann.Code art. 48A, § 481 (1994) supports the principle that an injured party may proceed against the insurer only after obtaining a judgment against the insured. This section provides: No liability insurance policy issued in this State shall contain any requirement for the payment of liability or loss under the policy, by the assured, but all such policies shall provide in substance ... that if an execution upon any final judgment against the assured is returned unsatisfied, in whole or in part, in an action brought by the injured ... then an action may be maintained by the injured ... against the insurer under the terms of the policy for the amount of any judgment recovered in such action, not exceeding the amount of the policy, and every such policy shall be construed to so provide, anything in such policy to the contrary notwithstanding. Id. 4 The Court of Appeals determined that this provision “does not contemplate a direct action against the insurer by a tort claimant in advance of some determination of liability on ⁶³⁵ the part of the insured in the pending action.” Gorman v. St. Paul Fire & Marine Ins.

Co., 210 Md. 1, 7 , 121 A.2d 812 (1956). See also In re Harbor Towing Corp., 335 F.Supp. 1150, 1155 (D.Md.1971) (In Maryland, under § 481, no direct action may be maintained against the insurer unless the injured party obtains a judgment against the insured and the judgment is returned unsatisfied). Cf. Bean v. Allstate Ins.

Co., 285 Md. 572, 577 , 403 A.2d 793 (1979) (Under § 481, a judgment creditor has no cause of action against an insurer directly for sums above the policy limits). In light of the foregoing, therefore, appellee is correct that, before an injured party may maintain a direct action against an insurer, the injured party must obtain a judgment against the insured, and that judgment must be returned unsatisfied or the insured must refuse to pay the judgment. We disagree with appellee, however, with the manner in which it applies this principle to the facts of the instant case. With respect to the first part of the principle (i.e., obtaining a judgment against the insured), appellee asserts that appellants have not obtained a judgment against the insured.

Rather, according to appellee, the default judgment that appellants obtained is against Deerfield, Incorporated—“a completely unrelated entity.” While we concur that Deerfield, Incorporated is not the “named insured” under the C6L policy, we reject appellee’s view that the default judgment is not against the insured. The default judgment, although in the name of Deerfield, Incorporated, is a valid judgment against the insured. Long ago, the Court of Appeals announced: There is no doubt, that where a party is sued by a wrong name, and he appears to the suit and does not plead the misnomer in abatement, and judgment is rendered against him in the erroneous name, execution may be issued upon it in that name, and levied upon the property and effects of the real defendant; but there is some conflict in the decisions, whether the same result will follow if he does not appear, and the judgment is obtained by default. The weight of authority, however, is that this makes no differ ⁶³⁶ ence, and if the writ is served on the party intended to be sued, and he fails to appear and plead in abatement, and suffers judgment to be obtained by default, he is concluded, and in all future litigation may be connected with the suit or judgment by proper averments.

First Nat’l Bank of Baltimore v. Jaggers, 31 Md. 38, 47 (1869). In Jaggers , a garnishee bank resisted a judgment creditor’s attempt to attach the assets and credits of its customer, “Wales B. Lounsbury,” because the judgment was against “William B. Lounsbury.” Id. at 46-47 . The Court rejected the garnishee bank’s position because the creditor, intending to sue “Wales,” served ‘Wales,” and, since. ‘Wales” did not appear, obtained a default judgment against him, but in the incorrect name of “William.” Id. See also 1 A.C. Freeman, Law of Judgments § 414, at 901 (5th ed. 1925) (where there is service upon the correct party, but judgment is obtained in an incorrect name, the judgment is nonetheless effective against the correct party).

To be sure, the insured and Deerfield, Incorporated are two distinct entities. • In this case, however, after apparently learning from Lotz that Deerfield, Incorporated was not involved in the construction of the hotel, appellants did serve Paulgaard with the Trane suit papers—as appellee throughout this litigation has so strenuously argued had occurred. Although the Affidavit of Service of Process (typed on appellants’ counsel’s letterhead) indicates that Paulgaard was served with the Trane- initial pleadings on March 23, 1991, appellants maintained at trial that Paulgaard did not have notice of the Trane suit until 1994. An affidavit of service in proper form is prima facie evidence that a party has been served. McGinnis v. Rogers, 262 Md. 710, 737 , 279 A.2d 459 (1971).

Paulgaard’s deposition testimony that he could not recall whether he was served in 1991 is insufficient to rebut the presumption that he had been served. In addition, appellants did not raise, (although they could have), a legitimate objection to the form of the affidavit of service (it was filed some .six months after service. See Md.Rule 2-126(a)). Therefore, for purposes of this appeal, the return of service is in proper form.

Moreover, ⁶³⁷ despite the fact that appellee is advancing the lack of standing argument, appellee has strenuously maintained throughout this litigation that Paulgaard was served in 1991 with the Trane suit papers, e.g., appellee successfully admitted the affidavit into evidence. Under these circumstances, we may conclude as a matter of law that Paulgaard was served with the Trane pleadings in March of 1991. All parties acknowledge that the insured (Deerfield Engineering) is the correct party and that Deerfield, Incorporated has nothing to do with the alleged insurance loss involved in this case. Moreover, Paulgaard acknowledged that the insured is the subcontractor who worked on the hotel’s HVAC system.

Therefore, even though the insured and Deerfield, Incorporated are two separate entities, this is not a case of mistaken identity or “misjoinder,” but rather is a case involving a mere “misnomer.” See, e.g, McSwain v. Tri-State Transp. Co., 301 Md. 363 , 483 A.2d 43 (1984) (Because the real defendant had notice of the case all along, and therefore, was not prejudiced by the plaintiff’s naming of the incorrect defendant as the real defendant—and despite the fact that the incorrect defendant was an existing and distinct entity having nothing to do with the lawsuit—the erroneous designation was a misnomer, as opposed to a misjoinder). Since this is a misnomer situation, the insured could not legally avoid the default judgment on the technical ground that the judgment is in the incorrect name. To the contrary, consistent with Jaggers , the default judgment is a valid judgment against the insured, i.e., the real defendant in the Trane litigation.

See 67A C.J.S. Parties § 165 (1978) (“When service of process is effected under a misnomer upon a party intended by plaintiff to be sued and the defendant is fairly apprised that it is the party the action was intended to affect, the court has jurisdiction over the defendant.”). Accordingly, the default judgment in the name of “Deerfield, Incorporated” is a valid judgment and is effective against the insured. With respect to the second part of the above standing principle (i.e., the judgment against the insured must be ⁶³⁸ returned unsatisfied or the insured must refuse to pay the judgment), we reject appellee’s argument that appellants lacked standing because they allegedly failed to enforce the judgment. In this regard, appellee asserts that Kruse’s testimony indicates that “no real efforts were made” to enforce the judgment.

We draw a very different conclusion from Kruse’s testimony. Kruse explained that appellants hired a private investigator to search for assets of the insured, but that none could be found. Kruse further explained that it could not attempt to attach the insured’s assets because appellants could not find any such assets. Moreover, Paulgaard testified in his deposition that the insured’s assets were sold in 1988, and that, after closing the company, he left the United States and moved to Canada, where he currently resides.

Indeed, Paulgaard was well aware of the default judgment, but evidenced no inclination that he intended to satisfy it on behalf of the insured. In fact, Paulgaard’s position was that the insured did not cause appellants’ loss. In short, the evidence was overwhelming that the insured was judgment proof. Nonetheless, appellee points out that appellants “did not file any documents with respect to attempting to satisfy the, judgment.” Under these circumstances, however, the evidence was conclusive that to do so would have been an exercise in futility, as well as a monumental waste of money.

This evidence of total insolvency, in our view, is sufficient to satisfy the requirement that the judgment against the insured must be returned unsatisfied, or that the insured must refuse to pay it, before the injured party may directly sue the insurer. We hold, therefore, that, because appellants obtained a valid judgment against the insured, and in light of the fact that they presented sufficient evidence that the judgment was worthless, the circuit court did not err by failing to grant appellee’s motion for judgment with respect to the issue of whether appellants had standing to file the instant, declaratory action. 5 ⁶³⁹ Ill Having denied appellee’s motion to dismiss, and having determined that appellants have standing, we now must decide whether the circuit court correctly determined that appellee was not obligated to provide liability coverage under the terms of the CGL policy. As a preliminary matter, we shall present an overview of the legal principles relating to CGL policies and shall set forth the principles governing our review of the circuit court’s determination. A 1 It is fair to say, for the most part, that, in the insurance industry, CGL policy provisions are generally standard.

The CGL policy in the instant case provides that appellee will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of A. bodily injury or B. property damage to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend ■any suit after the applicable limit of the company’s liability has been exhausted by payment of judgments or settlements. ⁶⁴⁰ For the sake of convenience, we shall refer to this provision as the general coverage provision. Under the CGL policy, “property damage” is defined as (l) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period. The term “occurrence” is defined as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.” In addition to the foregoing provisions, the CGL policy contains several exclusions, the following of which are pertinent on this appeal: This insurance does not apply: $$$$$$ (m) to loss of use of tangible property which has not been physically injured or destroyed resulting from (1) a delay in or lack of performance by or on behalf of the named insured of any contract or agreement, or (2) the failure of the named insured’s products or work performed by or on behalf of the named insured to meet the level of performance, quality, fitness or durability warranted or represented by the named insured; but this exclusion does not apply to loss of use of other tangible property resulting from the sudden and accidental physical injury to or destruction of the named insured’s products or work performed by or on behalf of the named insured after such products or work have been put to use by any person or organization other than an insured. ⁶⁴¹ (n) to property damage to the named insured’s products arising out of such products or any part of such products. The term “named insured’s products” is defined by the CGL policy as “goods or products manufactured, sold, handled or distributed by the named insured----” Of further interest is a Broad Form Comprehensive General Liability Endorsement to the CGL policy.

Included in the endorsement is exclusion VI(A)(3), which reads: with respect to the completed operations hazard and with respect to any classification stated in the policy or in the company’s manual as “including completed operations”, to property damage to work performed by the named insured arising out of such work or any portion thereof, or out of such materials, parts or equipment furnished in connection therewith. We shall refer to this exclusion as the completed operations exclusion. The term “completed operations hazard” includes property damage arising out of operations or reliance upon a representation or warranty made at any time with respect thereto, but only if the ... property damage occurs after such operations have been completed or abandoned and occurs away from premises owned by or rented to the named insured. ‘Operations’ include materials, parts or equipment furnished in connection therewith. Maryland courts, as well as courts from other jurisdictions, have on several occasions subjected the above policy provisions to judicial interpretation. “A hallmark of the comprehensive general liability policy is that it insures against injury done to a third party’s property, in contradistinction to an ‘all-risks’ policy also covering losses sustained by the policy holder.” Bausch & Bomb, Inc. v. Utica Mut.

Ins. Co., 330 Md. 758, 783 , 625 A.2d 1021 (1993). The policy exclusions enumerated above are often referred to as “business risks exclusions.” Century I Joint Venture v. United States Fidelity & Guar. Co., 63 Md.App. 545, 553 , 493 A.2d 370 , cert. denied, 304 Md. 297 , 498 A.2d 1183 (1985).

In Century I, we noted: ⁶⁴² Courts have uniformly held that the purpose of exclusions such as these, for damages to the insured’s work product or work project out of which an accident arises, is to remove any obligation of the. insured to pay for the repair or replacement of the policyholder’s own defective work or defective product. Conversely, it is equally well established that such business risk exclusions permit coverage for damages to other property or for other accidental loss caused by the defective product or defective work. Id. (citations omitted).

Thus, the CGL policy insures against the risk that the insured’s products or work—once relinquished or completed— will cause damage to property other than to the insured’s product or completed work. Id. (quoting Roger C. Henderson, Insurance Protection for Products Liability and Completed Operations—What Every Lawyer Should Know, 50 Neb.L.Rev. 415, 441 (1970)). Stated differently, CGL policy coverage compensates for physical damage to the property of