                            UNITED STATES DISTRICT COURT
                            FOR THE DISTRICT OF COLUMBIA
____________________________________
                                    )
ROCKHILL INSURANCE COMPANY, )
                                    )
                  Plaintiff,        )
                                    )
      v.                            )                 Civil Action No. 18-2104 (ABJ)
                                    )
HOFFMAN-MADISON                     )
WATERFRONT, LLC, et al.,            )
                                    )
                  Defendant.        )
____________________________________)

                                  MEMORANDUM OPINION

       On September 10, 2018, plaintiff Rockhill Insurance Company (“Rockhill”) brought this

suit concerning the interpretation of a commercial general liability policy. Plaintiff seeks a

declaration that it does not owe a duty under the policy to defend or indemnify, Wharf

Horizontal REIT Leaseholder, LLC (“WHRL”), or a number of affiliated entities, Hoffman-

Madison Waterfront, LLC (“HMW”), Hoffman-Struever Waterfront, LLC (“HSW”), Wharf

District GP Joint Venture, LLC (“WDGPJV”), Wharf District Joint Venture, LLC (“WDJV”),

Wharf Horizontal REIT, LLC (“WHR”), and Wharf Fish Market REIT Leaseholder, LLC (“Fish

Market REIT”) (collectively, “developer defendants”), in a civil suit brought against the

developer defendants by commercial tenants located in the Southwest Waterfront area in the

District of Columbia. Compl. [Dkt. # 1] ¶ 1, 12. The underlying suit was filed in United States

District Court for the District of Columbia and is captioned, The Wharf, Inc., et al. v. The District

of Columbia, et al., 1:15-CV-01198-CKK (2015) (“Wharf Suit”). Id.

       Plaintiff Rockhill’s complaint raises three claims:

               •   Count I alleges that under the insurance policy, Rockhill “does not owe a duty
                   to defend or indemnify” the developer defendants in the underlying suit, and it
                   seeks “recoupment of attorneys’ fees, costs, and expenses paid by Rockhill in
                   defense of the Wharf Suit.” Compl. ¶ 77.

               •   Count II pleads in the alternative, that Rockhill is equitably “entitled to
                   recover . . . defense costs that are incurred in connection with non-covered
                   claims and issues.” Id. ¶ 79.

               •   Count III alleges that Rockhill has no duty to defend or indemnify individual
                   defendant Fish Market REIT because it is not an “‘insured under the Rockhill
                   Policy with respect to its own conduct, or the conduct of any ‘insured’ under
                   the Rockhill Policy, with respect to the Wharf Suit,” id. ¶ 83. It seeks
                   reimbursement of at least 50% of all defense costs incurred since Fish Market
                   REIT joined the Wharf Suit in February 2017, and contends that moving
                   forward, Fish Market REIT must share in defense costs or retain separate
                   defense counsel. Id. ¶¶ 85–88.
       Defendants filed an answer and counterclaim on November 16, 2018. Developer Defs.’

Answer to Rockhill’s Compl. & Countercl. [Dkt. # 17] (“Defs.’ Answer” or “Countercl.”).

They raise three counts in their counterclaim:

               •   Count I alleges that Rockhill entered into a subsequent separate “binding and
                   enforceable contract” with defendants in December 2015 (“December 2015
                   Agreement”), Countercl. ¶ 76, and that Rockhill breached the terms of that
                   agreement by refusing to pay certain defense costs incurred in the underlying
                   suit, id. ¶¶ 79–80, and “by attempting to control the defense.” Id. ¶ 81.

               •   Count II pleads that Rockhill breached its duty to defend the developer
                   defendants under the terms of the insurance policy by refusing to pay for
                   certain costs incurred in the underlying suit, demanding developer defendants
                   allocate costs between what Rockhill believes are covered and non-covered
                   claims, and by delaying payment of defense costs owed. Countercl. ¶¶ 85–89.

               •   Count III alleges that Rockhill breached the implied covenant of good faith
                   and fair dealing arising under both the Policy and the December 2015
                   Agreement. Countercl. ¶¶ 91–96.
       Now pending before the Court is plaintiff Rockhill’s motion for judgment on the

pleadings with respect to Counts I and III of its complaint and Counts I, II, and III of developer

defendants’ counterclaim. Rockhill’s Mot. for J. on the Pleadings [Dkt. # 24] (“Pl.’s Mot.”);

Mem. of P. & A. in Supp. of Pl.’s Mot. [Dkt. # 24-1] (“Pl.’s Mem.”). The developer defendants

opposed that motion, and cross-moved for judgment on the pleadings on Count I of Rockhill’s

                                                 2
complaint.   Developers’ Cross-Rule 12(c) Mot. for J. on Count I of Rockhill’s Compl.

[Dkt. # 25] (“Defs.’ Cross-Mot.”); Developers’ Consolidated Brief in Opp. to Pl.’s Mot. & in

Supp. of Cross-Mot. [Dkt. # 25-1] (“Defs.’ Cross-Mem.”). They did not cross-move on any of

the other counts in Rockhill’s complaint, or in their counterclaim. Id. The issues have been fully

briefed and are ripe for decision. 1 For the reasons stated below, plaintiff’s motion for judgment

on the pleadings is denied in part and granted in part, and defendants’ motion is granted in part

and denied in part. The Court finds that Rockhill owes a duty to defend under the insurance

policy WHRL, HMW, HSW, WDGPJV, WDJV, and WHR. Rockhill does not owe a duty to

defend Fish Market REIT under the policy. As to the December 2015 Agreement, the Court

finds that there remain questions of fact so judgment on the pleadings is not appropriate.


                                        BACKGROUND
I.     Factual Background

       On April 23, 2014, the District of Columbia assigned its landlord rights and duties on

several commercial barges located at the Municipal Fish Market on the District of Columbia’s

Southwest Waterfront to defendant WHRL. Compl. ¶ 2; Defs.’ Answer ¶ 2. That same day,

WHRL purchased a “Lessor’s Risk” commercial liability insurance policy insuring the

Municipal Fish Market located at 1100 Maine Avenue, S.W., Washington D.C. 20024. Compl. ¶

3; Defs.’ Answer ¶ 3; Ex. I to Compl. [Dkt. # 1-10] (the “Policy”) at RHIC000009. 2 The tenants

of the insured property operate three seafood businesses at the Municipal Fish Market. Compl. ¶

1; Defs.’ Answer ¶ 1.

1       See also Rockhill’s Consolidated Reply in Supp. of its Mot. & Resp. in Opp. to Defs.’
Cross-Mot. [Dkt. # 29] (“Pl.’s Reply”); Developers’ Reply in Further Supp. of Cross-Mot.
[Dkt. # 30] (“Cross-Reply”).

2      The Policy was renewed on April 23, 2015. Ex. B to Defs.’ Cross-Mot. [Dkt. # 25-3] at
1. This extended the Policy’s coverage until April 23, 2016. Id.
                                                 3
       On July 23, 2015 those tenants sued WHRL and HMW, alleging that the defendants’

major redevelopment project along the Southwest Waterfront disrupted their businesses and

breached their lease agreements, and they brought a number of tort claims arising out of the

defendants’ actions, including trespass and nuisance violations, among other claims. 3 Ex. A to

Pl.’s Compl. [Dkt. # 1-2] (“Wharf Compl.”) ¶¶ 229–73.

       On July 29, 2015, a few days after the Wharf Suit was filed, defendants HMW and

WHRL tendered their defense to Rockhill pursuant to the commercial general liability policy.

Countercl. ¶ 14; Rockhill’s Answer & Affirmative Defenses to the Developer Defs.’ Countercl.

[Dkt. # 20] (“Rockhill Answer”) ¶ 14. Rockhill disclaimed the duty to defend them in the Wharf

Suit and rejected their tender. Countercl. ¶ 15; Rockhill Answer ¶ 15. Defendants HMW and

WHRL asked the insurance company to reconsider its position in a letter dated September 11,

2015. Countercl. ¶ 16; Rockhill Answer ¶ 16. Specifically, defendants asked that Rockhill

provide a defense under “Coverage B” of the Policy. Countercl. ¶ 16; Rockhill Answer ¶ 16

       Rockhill agreed. On or about October 9, 2015, Rockhill sent a letter to defendants HMW

and WHRL in which it agreed to defend them in the Wharf Suit pursuant to a reservation of

rights. Ex. E to Compl. [Dkt. # 1-6] (“Oct. 9, 2015 Rockhill Letter”). The letter provided in

relevant part:

                 Rockhill’s continued handling of this matter is not an admission of any
                 kind on the part of Rockhill. No act by a Rockhill representative while
                 investigating, negotiating a settlement of the claim, or defending the
                 Lawsuit should be construed as waiving any company rights. Rockhill
                 reserves its rights under the Policy to deny coverage to HMW, WHRL, or
                 anyone else claiming coverage under this policy.




3     The Wharf, Inc., BRW, Inc, and Salt Water Seafood, Inc. are the underlying plaintiffs in
the Wharf Suit. See Wharf Compl.
                                                4
Id. at 2. The letter further explained that “based on the facts as we understand them, coverage is

uncertain right now or may be significantly limited,” id., and that “[a]fter careful review” the

insurance company believed that “only the ‘personal advertising offense’ relative to ‘wrongful

eviction from, wrong entry into, or the invasion of the right of private occupancy’ [was]

implicated” under Coverage B. Id. at 7. The letter also informed HMW and WHRL that the

insurance company had retained the law firm of Leder & Hale, PC to represent them in the

Wharf Suit. Id. at 2.

       Shortly thereafter, Rockhill adjustor Leslie Bowles, who was assigned to the claim,

participated on a conference call with defendants’ counsel, Pillsbury, who had been representing

HMW and WHRL in the Wharf Suit. Countercl. ¶ 20; Rockhill Answer ¶ 20. The parties

dispute what happened on the call. According to defendants, Bowles and the Pillsbury attorneys

negotiated the terms of a new agreement by which defendants would be allowed to proceed with

their counsel of choice, Pillsbury, but the insurance company would pay past and future defense

costs at the lower Laffey rates. Countercl. ¶ 23. Defendants allege that under this agreement

“Rockhill would fund the entirety of the defense of the Wharf Suit,” Id. ¶ 24, “without any

reservation of rights regarding the duty to defend.” Id. ¶ 1. According to defendants, the new

agreement was “memorializ[ed]” in a December 1, 2015 email exchange between Bowles and a

Pillsbury attorney. Id. ¶ 1 n.1; Ex. A to Defs.’ Countercl. [Dkt. # 17-1] (“December 2015

Agreement”).

       Rockhill insists that “[a]t no point did Rockhill or the developer defendants discuss or

agree that the reservations pursuant to which the defense was provided would be altered,

withdrawn, or otherwise waived.” Rockhill Answer ¶ 23. But it acknowledges that it did agree




                                                5
“that the defense provided under the reservation of rights could be provided through

[defendants’] choice of counsel at agreed-upon rates.” Id.

       In February 2016, Pillsbury sent Rockhill invoices for defense costs incurred between

July 2015 through December 2015 at Laffey Matrix rates, and Rockhill paid those invoices in

full. Countercl. ¶ 29; Rockhill Answer ¶ 29.

       Defendant WHRL filed a counterclaim in the Wharf Suit on March 29, 2016, Compl. ¶

33; Defs.’ Answer ¶ 33, and on May 9, 2016, it amended its counterclaim, alleging that the

commercial tenants breached their leases and that as their landlord, it is entitled to evict them.

Compl. ¶ 35; Defs.’ Answer ¶ 35; Ex. D to Compl. [Dkt. # 1-5].

       Pillsbury continued to send invoices to Rockhill, but the insurance company began

raising concern about the costs of pursuing counterclaims in the Wharf Suit, and it deducted

certain amounts from invoices during the billing period of May 2016 through October 2016.

Countercl. ¶¶ 31–32; Rockhill Answer ¶¶ 31–32.

       While the Wharf Suit was underway, on or about October 31, 2016, defendant WHRL

assigned its interest in the commercial leases to a separate entity, defendant Fish Market REIT.

Compl. ¶ 36, Defs.’ Answer ¶ 36. WHRL then moved to join the new landlord of the leases,

Fish Market REIT, in the Wharf Suit as a defendant and counterclaim plaintiff, and that motion

was granted on February 12, 2017 by the district court. Compl. ¶ 37; Defs.’ Answer ¶ 37.

       On February 27, 2017, days after Fish Market REIT joined the suit, Rockhill’s counsel

sent a letter to defendants “supplement[ing]” its initial October 9, 2015 letter. Ex. F to Compl.

[Dkt. # 1-7] (“Feb. 27, 2017 Rockhill Letter”) at 1. In the letter, Rockhill listed a number of

issues raised in the Wharf Suit that in its view were not covered by the Policy and it advanced

several proposals to limit or terminate the insurance company’s funding of the litigation,



                                                6
including an “equitable allocation of future defense costs between covered and non-covered

claims” or a “policy buy-back.” Id. at 2–3. Rockhill expressed a desire to work with defendants

to find a resolution to the dispute, but it informed them that if no accord was reached, court

proceeding may be necessary. Id. at 3.

       The supplemental letter included a “coverage analysis” explaining why the plaintiffs’

claims in the Wharf Suit were “likely” outside of the policy’s coverage, id. at 6–8, and why the

policy did not cover the costs of prosecuting counterclaims. Id. at 8–9. The letter also stressed

that the newly-added defendant, Fish Market REIT, did not qualify as an insured. Id. at 8. The

supplemental letter repeated the insurance company’s reservation of rights: “Nothing in this

letter should be construed as waiving any defenses raised in Rockhill’s initial letter or

otherwise.” Id. at 6.

       Three of the defendants, HMW, WHRL, and Fish Market REIT, responded by letter on

April 22, 2017, contending that Rockhill owed them a duty to defend against the entire Wharf

Suit under both the Policy and the separate December 2015 Agreement. Ex C. to Defs.’ Cross-

Mot. [Dkt. # 25-4] (“April 22, 2017 Defs.’ Letter”) at 1–8. In the letter, they also acknowledged

that Fish Market REIT is not an insured under the Policy: “You correctly point out that Wharf

Fish Market REIT Leaseholder (“WFMRL”) is not [Rockhill’s] insured.” Id. at 6. But they took

the position that Rockhill “cannot escape responsibility for defense costs on the ground that some

defense work also benefits entities that are not insured of the developer defendants’

counterclaim.” Id. at 7.

       On April 26, 2017, the underlying plaintiffs filed a Second Amended Complaint in the

Wharf Suit, naming other affiliates of HMW, WHRL, and Fish Market REIT – that is,

WDGPJV, WHR, HSW, and WDJV, as additional defendants. Compl. at ¶ 38; Defs.’ Answer ¶



                                                7
38. The Third Amended Complaint, which is now the operative complaint in the Wharf Suit,

followed in September 2017. Compl at ¶ 39; Defs.’ Answer ¶ 39.

       The Third Amended Complaint alleges that in April 2014 the District assigned its rights

as landlord to WHRL, an alter ego of HMW. Wharf Compl. ¶¶ 8, 61. The underlying plaintiffs

claim that “[u]nder the terms of each lease, [they] are entitled to exclusive use of certain water

frontages to operate open air fish markets and a seafood deli,” and that they “also have the right

to access and use the Common Area.” Id. ¶ 106. The Common Area is “designated for general

use, convenience, and benefit of the commercial tenants in the area and their customers on the

Municipal Fish Market (e.g. restrooms, parking areas, driveways, walkways, loading and

unloading for deliveries).” Id. ¶ 47.

       The underlying plaintiffs allege, among other things, that the developer defendants

breached the terms of their leases through repeated unauthorized encroachments onto the

Municipal Fish Market, Wharf Compl. ¶ 248, and that developer defendants violated their

property rights through trespass and nuisance violations.        See id. ¶¶ 263, 268 (alleging

defendants “wrongfully excercis[ed] ownership, dominion, and control over portions of the

Municipal Fish Market,” and that defendants’ activities have interfered with plaintiffs’ “private

use and enjoyment of their leased property”).

       Rockhill followed up with two letters to Fish Market REIT dated January 15, 2018 and

February 16, 2018, demanding that it contribute 50% of defense costs incurred since it joined the

Wharf Suit on February 13, 2017. Ex. G to Compl. [Dkt. # 1-8] (“January 15, 2018 Rockhill

Letter”); Ex. H to Compl. [Dkt. # 1-9] (“February 16, 2018 Rockhill Letter”). The letter states

that if no agreement is reached, “Rockhill reserves its right to request court allocation as to the




                                                8
equitable distribution of defense costs, fees, and expenses.” January 15, 2018 Rockhill Letter at

2.

                                   STANDARD OF REVIEW

       Federal Rule of Civil Procedure 12(c) authorizes a party to move for judgment on the

pleadings at any time “after the pleadings are closed – but early enough not to delay trial.” Fed.

R. Civ. P. 12(c). Pleadings include any “copy of a written instrument that is an exhibit to a

pleading.” Fed. R. Civ. P. 10(c). Here, the parties have attached to their pleadings copies of

their correspondence, the insurance policies, the purported December 2015 Agreement, and the

Third Amended Complaint in the underlying suit, among other documents. See Exs. A–J to

Compl. [Dkt. # 1-2 to 1-11]; Ex. A to Countercl. [Dkt. # 17-1]; Exs. B–C to Defs.’ Cross-Mot.

[Dkt. # 25-3 to 25-4]. For the purpose of resolving the pending motions, the Court may only

consider the contents of the pleadings. 4

       As the D.C. Circuit recently observed, “judgment on the pleading is rare,” and because it

“provides judicial resolution at an early stage of a case, the party seeking . . . [it] shoulders a

heavy burden of justification.” Dist. No. 1, Pac. Coast Dist., Marine Eng’rs Beneficial Ass’n,

AFL-CIO v. Liberty Mar. Corp., 933 F.3d 751, 760 (D.C. Cir. 2019) (“Liberty Mar.”). Parties

are entitled to pretrial judgment on the pleadings “if the moving party demonstrates that no

material fact is in dispute and that it is entitled to judgment as a matter of law.” Schuler v.

PricewaterhouseCoopers, LLP, 514 F.3d 1365, 1370 (D.C. Cir. 2008), quoting Peters v. Nat’l

R.R. Passenger Corp., 966 F.2d 1483, 1485 (D.C. Cir. 1992). When analyzing a motion for

judgment on the pleadings, the Court must “accept as true the allegations in the opponent’s



4      If the court considers “matters outside of the pleadings . . . the motion must be treated as
one for summary judgment under Rule 56,” after giving the parties a “reasonable opportunity to
present all the material that is pertinent to the motion.” Fed. R. Civ. P. 12(d).
                                                9
pleadings, and as false all controverted assertions of the movant.” Liberty Mar., 933 F.3d at 761,

quoting Haynesworth v. Miller, 820 F.2d 1245, 1249 n.11 (D.C. Cir. 1987) (collecting cases),

abrogated on other grounds by Hartman v. Moore, 547 U.S. 250 (2006). The Court must “view

the facts presented in the pleadings and the inferences to be drawn therefrom in the light most

favorable to the nonmoving party.” Peters, 966 F.2d at 1485, quoting Jablonski v. Pan Am.

World Airways, Inc., 863 F.2d 289, 290–91 (3d Cir. 1988). “Under this standard, ‘a judgment on

the pleadings is not appropriate’ if there are ‘issues of fact which if proved would defeat

recovery,’ ‘even if the trial court is convinced that the party opposing the motion is unlikely to

prevail at trial.’” Liberty Mar., 933 F.3d at 761, quoting Wager v. Pro, 575 F.2d 882, 884 (D.C.

Cir. 1976).

                                          ANALYSIS


Choice of Law

       Both parties presume that District of Columbia of law applies. That presumption is

correct for two reasons. District of Columbia law is appropriate in this case because the place of

performance and the insured risk is in the District of Columbia. Adolph Coors Co. v. Truck Ins.

Exch., 960 A.2d 617, 620 (D.C. 2008). Additionally, insurance law dictates that courts interpret

the allegations in an underlying lawsuit based on where the suit was filed. Travelers Indem. Co.

of Illinois v. United Food & Commercial Workers Int’l Union, 770 A.2d 978, 988 (D.C. 2001)

(“Travelers”) (applying District of Columbia law to interpret the insurance contract but not the

allegations in the underlying suit which was filed in South Carolina). Therefore, the Court will

interpret both the insurance policy and the underlying lawsuit under District of Columbia law.




                                               10
Construction of Insurance Contracts & Duty to Defend

       In the District of Columbia, “[a]n insurance policy is a contract between the insured and

the insurer, and in construing it [a court] must first look to the language of the contract.”

Travelers, 770 A.2d at 986, quoting Cameron v. USAA Prop. & Cas. Ins. Co., 733 A.2d 965, 968

(D.C. 1999). When interpreting an insurance contract, the Court must construe “ambiguities . . .

against the insurer and in favor of ‘the reasonable expectations of the purchaser of the policy.’”

Chase v. State Farm Fire & Cas. Co., 780 A.2d 1123, 1127 (D.C. 2001), Smalls v. State Farm

Mut. Auto. Ins. Co., 678 A.2d 32, 35 (D.C. 1996). Under this principle, if a Court finds that a

term “is reasonably open to two constructions, the one most favorable to the insured will be

adopted.” Id. However, an insurance contract is not “ambiguous merely because the parties do

not agree on the interpretation of the contract provision in question.” Byrd v. Allstate Ins.

Co., 622 A.2d 691, 695–94 (D.C. 1993). The D.C. Court of Appeals has held that “[p]olicy

language    is    not   genuinely   ambiguous     unless   it   is   susceptible   of   more   than

one reasonable interpretation,” and it has instructed courts not to “indulge in forced

constructions to create an obligation against the insurer.”          Chase, 780 A.2d at 1127–28

(emphasis in original) (internal citation omitted).

       The duty to defend is determined by comparing the allegations in the underlying

complaint against the terms of the insurance policy. Cont’l Cas. Co. v. Cole, 809 F.2d 891, 896

(D.C. Cir. 1987). This is referred to the as the “eight corners rule.” Fogg v. Fidelity Nat’l Title

Ins. Co., 89 A.3d 510, 515 (D.C. 2014) (“[O]ur jurisdiction, like the majority of jurisdictions,

adheres to the ‘eight corners rule.’”). Under District of Columbia law:

                 If the [underlying] complaint states a cause of action within the coverage
                 of the policy, the insurance company must defend. Any doubt as to
                 whether the cause of action falls within the terms of the policy must be
                 resolved in the insured’s favor.

                                                 11
Cont’l Cas., 809 F.2d at 895, citing Boyle v. National Casualty Co., 84 A.2d 614, 615–16 (D.C.

1951).

         “An insurer’s duty to defend is conceptually distinct from and legally independent of its

duty to indemnify, that is, its obligation to pay a judgment.” Salus Corp. v. Cont’l Cas. Co., 478

A.2d 1067, 1069 (D.C. 1984); Stevens v. United Gen. Title Ins. Co., 801 A.2d 61, 67 (D.C.

2002). “The duty to defend is broad, requiring the defense of all claims even if only one

potentially falls within the terms of the policy.” Council For Responsible Nutrition v. Hartford

Cas. Ins. Co., No. 06-cv-1590, 2007 WL 2020093, at *3 (D.D.C. July 12, 2007), citing Cont’l

Cas., 809 F.2d at 895; see also Commonwealth Lloyds Ins. Co. v. Marshall, Neil & Pauley, Inc.,

32 F. Supp. 2d 14, 18 (D.D.C. 1998) (collecting cases). Also, while the duty to defend depends

only on allegations in the complaint, the duty to indemnify depends upon the truth of those

allegations. S. Freedman & Sons, Inc. v. Hartford Fire Ins. Co., 396 A.2d 195, 197 (D.C. 1978).

Accordingly, “if the allegations of a plaintiff’s complaint may bring the claim within the

coverage of the defendant's policy, the insurance company must honor its duty to defend, even if

ultimately relieved of any duty to indemnify.” Sherman v. Ambassador Ins. Co., 670 F.2d 251,

259 (D.C. Cir. 1981). “[I]t is appropriate to examine the complaint for all plausible claims

encompassed within the complaint and to ascertain whether the allegations of the complaint state

a cause of action within the policy coverage and give fair notice to the insurer that the insured is

being sued upon an occurrence which gives rise to a duty to defend under the terms of the

policy.” Am. Cont’l Ins. Co. v. Pooya, 666 A.2d 1193, 1197 (D.C. 1995).

         At this stage, the Court has been called upon only to determine the duty to defend.




                                                 12
I.       ROCKHILL’S COMPLAINT

         a. Count I

         Rockhill alleges in Count I of its complaint that it “does not owe a duty to defend or

indemnify the developers,” under the terms of the Policy, and that it is “entitled to recoupment of

attorneys’ fees, costs, and expenses paid by Rockhill in defense of the Wharf Suit.” Compl. ¶ 77.

Both Rockhill and defendants moved for judgment on the pleadings related to (1) the duty to

defend and (2) recoupment. Pl.’s Mem. at 3; Defs.’ Cross-Mem. at 39.          For the reasons that

follow, the Court finds that Rockhill owes the insured defendants, WHRL, HMW, HSW,

WDGPJV, WDJV, and WHR, a duty to defend under the Policy, and that it is not entitled to the

recoupment of defense costs from the insured defendants. This ruling does not apply to Fish

Market REIT, which the Court finds is not insured under the Policy. See Section I, b (“Count

III”).

         i.   Duty to Defend: Coverage B, Personal and Advertising Injury Liability

         The insured bears the burden of showing that the underlying complaint comes within the

policy’s grant of coverage, and the insurer bears the burden of showing that an exclusion under

the policy applies. Cameron v. USAA Prop. & Cas. Ins. Co., 733 A.2d 965, 969 (D.C. 1999).

         In their cross-motion, defendants contend that the trespass (Count VIII), nuisance (Count

IX), tortious interference with prospective business advantage (Count X), and unjust enrichment

claims (Count XI), fall within the scope of the Policy’s Coverage B. Defs.’ Cross-Mem. at 39.

         The provision in the Policy entitled “Coverage B Personal and Advertising Injury

Liability” provides:

                We will pay those sums that the insured becomes legally obligated to pay
                as damages because of “personal and advertising injury” to which this
                insurance applies. We will have the right and duty to defend the insured
                against any “suit” seeking those damages.

                                                13
Policy at RHIC000029.

       The “Definitions” section of the Policy defines “personal and advertising injury” as

“injury, including consequential ‘bodily injury,’ arising out of one or more of the following

offenses”

               a. False arrest, detention or imprisonment;

               b. Malicious prosecution;
               c. The wrongful eviction from, wrongful entry into, or invasion of the
               right of private occupancy of a room, dwelling or premises that a person
               occupies, committed by or on behalf of its owner, landlord or lessor;
               d. Oral or written publication, in any manner, of material that slanders or
               libels a person or organization or disparages a person's or organization's
               goods, products or services;
               e. Oral or written publication, in any manner, of material that violates a
               person’s right of privacy;
               f. The use of another's advertising idea in your “advertisement”; or
               g. Infringing upon another's copyright, trade dress or slogan in your
               “advertisement”.
Policy at RHIC000038.

       Defendants contend that the allegations in the Wharf Suit implicate subsection (c)

because the trespass, nuisance, tortious interference, and unjust enrichment counts “are all

focused upon the [the underlying plaintiffs’] allegation that the Developers encroached upon

their possessory interests under the alleged leases, and have deprived them of their right to quiet

enjoyment of their alleged leasehold interests.” Defs.’ Cross-Mem. at 39.

       Since the Wharf Suit does not allege a “wrongful eviction,” the Court finds that the

potentially applicable offenses under subsection (c) are: “wrongful entry into, or invasion of the

right of private occupancy of a room, dwelling or premises that a person occupies, committed by




                                                14
or on behalf of its owner, landlord or lessor.” 5 Policy at RHIC000038. The term “wrongful

entry into,” “guarantee[s] tenants that their rights of physical possession will not be violated.”

Beltway Mgmt. Co. v. Lexington-Landmark Ins. Co., 746 F. Supp. 1145, 1150 (D.D.C. 1990).

The phrase “invasion of the right of private occupancy” has been interpreted by courts to cover a

“broad range” of claims “arising from a landlord’s deprivation of a tenant’s rights,” including the

warranty of habitability, which ensures that that the leased premises are fit for use. Id. at 1153–

54 (D.D.C. 1990) (collecting cases).

       The Court finds that the trespass count in the Wharf Suit, Count VIII, contains allegations

that potentially “aris[e]” from the “wrongful entry into, or invasion of the right of private

occupancy.” Policy at RHIC000038. The trespass count alleges that defendants violated the

underlying plaintiffs’ “possessory interest” in their designated lots and the Common Area of the

Municipal Fish Market by blocking entrances to and from the Municipal Fish Market, blocking

access to plaintiffs’ electricity panel, blocking access to dumpsters which created a “health and

safety issue,” and by impeding deliveries from vendors, among other acts. Wharf Compl. ¶ 262.

The underlying plaintiffs claim that “these encroachments resulted in [d]eveloper [d]efendants

wrongfully exercising ownership, dominion, and control over portions of the Municipal Fish

Market.” Id. ¶ 263. Therefore, the trespass count squarely falls within the scope of Coverage B,

and the Court need not go any further in addressing the other counts because under District of

Columbia law simply finding that one claim in the underlying suit “potentially falls within the

policy” is sufficient to give rise to a duty to defend against all claims. Council for Responsible

Nutrition, 2007 WL 2020093, at *3.



5      The complaint alleges that defendants “attempt[ed]” to evict the underlying plaintiffs.
Wharf Compl. ¶¶ 11, 159. But that is not the same as actual wrongful eviction so this offense is
not implicated.
                                                15
        For the reasons stated, the Court finds that the insured defendants have met their burden

of showing that the underlying complaint comes within the policy’s grant of coverage, and now

Rockhill bears the burden of showing that an exclusion under the Policy applies.

        ii.    Lessor’s Risk

        The business description on the declarations page of the Policy is “Lessor’s Risk.”

Policy at RHIC000005. Rockhill contends that this is in effect a limiting term, and the Policy

“covers risks commonly associated with a landlord’s premises,” not “disputes over a multi-

billion-dollar development” project. Pl.’s Mem. at 14. The insurer emphasizes the fact that the

defendants’ “$2-billion redevelopment project” is not mentioned in the Policy, and it argues that

the Policy was meant to cover the insureds in their capacity as landlords, not developers. Pl.’s

Mem. 14–17; Pl.’s Reply at 8. Defendants insist that the Wharf Suit falls within “Lessor’s Risk”

insurance because it is a dispute between landlords and their tenants over premises covered by

the Policy. Cross-Mem. at 20. Defendants distinguish the Wharf Suit from a “construction” suit

in which a plaintiff seeks damages for a defectively constructed structure. Id.

        The Court finds that coverage must be determined in accordance with the express terms

of the Policy, which do not include the limiting principles the insurer invokes here. The Policy

provides “commercial general liability coverage,” with specifically identified exclusions, none of

which supply the limitation Rockhill would have the Court read into the document.             It is

undisputed that the Municipal Fish Market (1100 Maine Ave., S.W.), is listed as an insured

property in the Policy’s “Location Schedule.”        Policy at RHIC000009.        And, the Policy’s

“Limitation of Coverage to Designated Premises or Project” does not enumerate “commonly

associated risks,” as plaintiff suggests. See Policy at RHIC000056. Instead, it broadly provides

that:



                                                16
                This insurance applies only to “bodily injury”, “property damage”,
                “personal and advertising injury” and medical expenses arising out of:
                The ownership, maintenance or use of the premises shown in the Schedule
                and operations necessary or incidental to those premises . . . 6
Id. Here, the claims of “personal and advertising injury,” as the term is defined in the Policy,

arise out of defendants’ “ownership, maintenance or use of the premises” shown in the Location

Schedule. See Wharf Compl. ¶¶ 262, 269 (alleging defendants blocked an entrance to the

Municipal Fish Market, blocked or altered pedestrian foot traffic, sectioned off portions of the

parking lot).

       Indeed, the Wharf Suit is at its core a landlord-tenant dispute, so there is no inconsistency

between the designation “Lessor’s Risk” on the first page of the Policy, and the claims raised in

the litigation. See Wharf Compl. ¶¶ 1 n.1, 142–58 (referring to defendants as the “landlord” and

alleging that defendants violated their property rights under their leases through a series of

unauthorized encroachments that caused them harm and disrupted their businesses).

        iii.    “Persons” under Coverage B’s Personal and Advertising provisions

       Next, Rockhill argues that the Wharf Suit does not involve a “personal and advertising”

injury because the underlying plaintiffs are not natural persons, but rather corporations. Pl.’s

Mem. at 17–20. It notes that subsection (c) of the definitions of “personal and advertising

injury” covered by the Policy applies to “premises that a person occupies.” Id. at 17, citing

Policy at RHIC000029–30, 38 (emphasis added), and that the policy consistently distinguishes

between “persons” and “organizations.”      Pl.’s Mem. at 19; Pls.’ Reply at 12. For example,

subsection (d) of the definition of “personal and advertising injury” references “material that




6       The Policy would also cover “‘bodily injury,’ ‘property damage,’ ‘personal and
advertising injury’ and medical expenses arising out of . . . [t]he project show in the Schedule,”
Policy at RHIC000056, but there is no “project” identified in this policy.
                                                17
slanders or libels a person or organization or disparages a person’s or organization’s goods,

products, or services.” Policy at RHIC000038.

       Defendants insist that courts have long considered corporations to be “persons” under the

law, and that a contrary conclusion would render Rockhill’s insurance coverage illusory. Cross-

Mem. at 22–28. They posit that the phrase “persons or organizations” is simply meant to capture

entities that are not recognized as “persons” under the law, meaning entities that are neither

natural persons nor corporations. Id. at 23.

       The Policy does not define the term “person.” Under District of Columbia law, the Court

must give an undefined insurance policy term “the meaning which common speech imports,”

unless it is “obvious” that the terms are “intended to be used in a technical connotation.” In re

Estate of Corriea, 719 A.2d 1234, 1239 (D.C. 1998). The Court must “determine what a

reasonable person in the position of the parties would have thought the disputed language

meant.” Interstate Fire & Cas. Co. v. Washington Hosp. Ctr. Corp., 758 F.3d 378, 383 (D.C.

Cir. 2014), quoting Travelers, 770 A.2d at 986.        “In conducting that inquiry, District of

Columbia courts routinely consult dictionary definitions of disputed terms.” Id.

       In Interstate Fire & Casualty Company, the D.C. Circuit relied upon the American

Heritage Dictionary and Black’s Law Dictionary to interpret the term “employee.” Id. at 384. It

found “Black’s Law [Dictionary] to be helpful in construing insurance policies under District of

Columbia law,” and it observed that, “District of Columbia courts routinely rely on Black’s Law

definitions in the insurance context.” Id. at 384 (collecting cases). Thus, the Court will consult

both sources here.

       According to Black’s Law Dictionary, the term “person” is defined as 1) a “human being

. . . also termed natural person”; 2) “the living body of a human being”; and 3) an “entity (such



                                                18
as a corporation) that is recognized by law as having most of the rights and duties of a human

being.” Black’s Law Dictionary (11th ed. 2019). The American Heritage Dictionary also

defines a “person” as a “corporation” in the “law” context. American Heritage Dictionary (5th

ed. 2019).

       That is unsurprising given the long history of courts recognizing corporations as persons

under the law. See Trs. of Dartmouth Coll. v. Woodward, 17 U.S. 518 (1819) (describing

corporations as artificial persons protected under the Contract Clause of the Constitution); United

States v. Amedy, 24 U.S. 392, 412 (1826) (holding that the term “person” in insurance fraud

statute includes artificial persons like corporations); Clinton v. City of New York, 524 U.S. 417,

454 (1998), citing 1 U.S.C. § 1 (explaining “insofar as the word is concerned, Congress speaks

English like the rest of us:” and has defined “person” to “include corporations, companies,

associations, firms, partnerships, societies, and joint stock companies, as well as individuals”);

Mohamad v. Palestinian Auth., 566 U.S. 449, 452–55 (2012) (holding that the term “person” can

include both an individual or artificial entities like corporations and therefore, use of the term

“individual” in the Trafficking Victims Protection Act was intended to specify a natural person);

see also Citizens United v. Fed. Election Comm’n, 558 U.S. 310, 391–92 (2010) (individual

person’s right to free speech under the First Amendment includes the right to speak in

association with other individual persons in a business corporation).

       The Court acknowledges that some ambiguity arises out of the use of the term “person”

in subparagraphs “c” and “e” of the definitions of “personal and advertising injury,” particularly

given that the same section uses the phrase “person or organization” in subparagraph “d,” and the

word “another” in subparagraphs “f” and “g.” Policy at RHIC000038. It is fair to suggest that

considering the section as a whole, this distinction could give rise to an inference that



                                                19
subparagraph “c” was meant to refer to the type of harm that only a natural person would suffer,

as in subparagraphs a, b, and e, and that this is further supported by the name of the coverage

category: “personal and advertising injury.” Id. (emphasis added).

       But in light of the clear precedent that requires a court to interpret ambiguous language in

favor of the insured, see Quadrangle Dev. Corp. v. Hartford Ins. Co., 645 A.2d 1074, 1075 (D.C.

1994) (citation omitted) (“If there are a number of reasonable readings of a policy provision, the

insured is entitled to the one favoring coverage.”), Rockhill’s interpretation of the language

cannot prevail, particularly since both sides were well aware that this was a commercial policy.

But again, this Court is not ruling on the ultimate indemnification obligation; only if the claims

on their face potentially fall within the Policy. Consequently, the Court concludes that when

defendants purchased the Policy, they reasonably believed that the term “person” applied to their

corporate tenants. 7 The Court finds that the underlying corporate plaintiffs are “persons” under

the Policy’s “personal and advertising” provision.

      iv.    The Breach of Contract Exclusion

       Plaintiff Rockhill contends that the “breach of contract” exclusion applies to the trespass,

conversion, nuisance, unjust enrichment, and tortious interference claims in the Wharf Lawsuit

because they arise “indirectly” from the breach of a contract. Pl.’s Mem. at 20–23. 8 Defendants

argue that “personal and advertising” liability “clearly contemplates coverage for the wrongful

eviction of a tenant by a landlord, even though such an action by its nature has its roots in


7      Plaintiff Rockhill cites Athridge v. Aetna Cas. & Sur. Co., 351 F.3d 1166, 1172 (D.C.
Cir. 2003) for the proposition that the term “person” in the insurance context means natural
persons, not business entities. Pl.’s Mem. at 17. But that mischaracterizes the holding. In that
case the Court held that the term “any person” encompassed the phrase “family member;” it did
not address whether it also included a corporation.
8      Defendants do not dispute that this exclusion applies to the contract counts in the Wharf
Suit. See generally Cross-Mem.
                                                20
contract.” Defs.’ Cross-Mem. at 29, citing Brown v. Travelers Aetna Prop. Cas. Cop., 187 F.3d

646 (9th Cir. 1999). The Court agrees with defendants with respect to the trespass claim and it

need not go further.

       The Policy’s “Breach of Contract Exclusion” reads as follows:

               This insurance does not apply, nor do we have a duty to defend any claim
               or “suit” for “bodily injury”, “property damage” or “personal and
               advertising injury” arising directly or indirectly out of the following:
               a. Breach of express or implied contract;
               b. Breach of express or implied warranty; [or]
               c. Fraud or misrepresentation regarding the formation, terms or
               performance of a contract . . .
Policy at RHIC000023 (emphasis added).

       Rockhill argues that the phrase “arising . . . indirectly out of” should be broadly construed

to exclude all of the tort claims, because the damages sought are necessarily predicated on the

breach of lease agreements, which are a type of contract. Pl.’s Mem. at 22. But if the Court

were to accept that interpretation, it would render subsection (c) of the coverage for personal and

advertising injury to be meaningless.

       When interpreting the terms of an insurance contract, the Court must consider “the

reasonable expectations of the purchaser of the policy.” Chase, 780 A.2d at 1127. Defendants

reasonably believed that the policy covered personal and advertising liability that arose indirectly

from a lease since subsection (c) specifically includes “wrongful eviction,” and the “invasion of

the right of private occupancy” committed by a “landlord or lessor.” Policy at RHIC000038.

Plus, the insured’s business description on the first page of the Policy is “Lessor’s Risk.” Id. at

RHIC000005. For these reasons, the Court will decline to apply an exclusion that would make

coverage illusory. See Caglioti v. Dist. Hosp. Partners, Lp, 933 A.2d 800, 811 (D.C. 2007),

citing Retail Clerks Int’l Ass’n Local No. 455, AFL-CIO v. N. L. R. B., 510 F.2d 802, 806 (D.C.

                                                21
Cir. 1975) (“It is a settled rule of contract interpretation that contract language should not be

interpreted to render the contract promise illusory or meaningless.”).

       v.    The “Knowing and Intentional” Exclusion

       Next, plaintiff Rockhill argues that “each of the underlying plaintiffs’ claims is premised

on non-covered intentional misconduct.” Pl.’s Mem. at 23. Coverage B specifically excludes:

               “Personal and advertising injury” caused by or at the direction of the
               insured with the knowledge that the act would violate the rights of another
               and would inflict “personal and advertising injury”.
Policy at RHIC000030. The parties agree that under this exclusion, it is not enough for conduct

to be intentional, it must have been committed knowing that it violated a property right. Defs.’

Cross-Mem. at 31–32; Pl.’s Reply at 20–21.

       Although trespass is an intentional tort under District of Columbia law, it only requires

“an intentional intrusion of a person or thing upon property that invades and disrupts the owner’s

exclusive possession of that property.” Garay v. Liriano, 943 F. Supp. 2d 1, 25 (D.D.C. 2013),

citing Morgan v. Barry, 12 Fed. App’x 1, 3 (D.C. Cir. 2000) (applying District law). Intent to

violate property rights is not required. The same is true of nuisance claims in the District. See

McDonald’s USA, LLC v. Craft, 263 F. Supp. 3d 56, 63 (D.D.C. 2017).

       Rockhill concedes this point but insists that the particular allegations in the Wharf Suit

accuse defendants of knowingly violating the commercial tenants’ property rights. Pl.’s Reply at

21. It points out that the underlying complaint alleges that the District of Columbia and the

developer defendants “entered into a conspiracy to run the [p]laintiffs out of the Municipal Fish

Market by destroying [p]laintiffs’ businesses.” Wharf Compl. ¶ 3. Rockhill argues that because

“purposeful intent – or ‘conscious desire’ to achieve a ‘result’ – is the essence of conspiracy,”




                                                22
those claims fall under the “knowing violation exclusion.” Pl.’s Mem. at 23–24, quoting U.S. v.

Childress, 58 F.3d 693, 707–08 (D.C. Cir. 1995).

       The Court disagrees. When determining whether to apply an exclusion based on the

allegations of the underlying complaint, courts ask whether an allegation amounts to mere

“puffing,” and is otherwise “not essential to the complaint.” Cont’l Cas., 809 F.2d at 897,

quoting Sachs v. St. Paul Fire and Marine Ins. Co., 303 F. Supp. 1339, 1341 (D.D.C. 1969).

Here, there is no “conspiracy” count brought against the defendants, so that allegation is not

essential, and the conduct alleged under the trespass count, encompasses both intentional and

unintentional acts and it does not allege that the defendants knowingly violated the tenants’

property rights. See Wharf Compl. ¶¶ 266, 273.

       For these reasons, the Court finds that there is at least one claim that falls within the

Coverage B section of the Policy that is not barred by any express exclusion. Accordingly, based

on the allegations in the Wharf Suit and the Policy, the Court finds that Rockhill has a duty to

defend the insured defendants.

      vi.   Recoupment

       In Count I of its complaint, Rockhill sought a declaration that it “does not owe a duty to

defend or indemnify the [d]efendants,” and to recover “attorneys’ fees, costs, and expenses

incurred in defense of non-covered claims.” Compl. ¶ 77. Since the Court has found that

Rockhill owes the insured defendants a duty to defend, it will deny Rockhill’s motion for

judgment on this count.    Pl.’s Mem. at 29.        It is well-established that even if one claim

potentially falls within the terms of the policy, the insurance company is obligated to defend

against all of the claims. Council For Responsible Nutrition, 2007 WL 2020093, at *3, citing

Cont’l Cas., 809 F.2d at 895; see also Commonwealth Lloyds Ins., 32 F. Supp. 2d at 18


                                               23
(collecting cases). So reimbursement of “covered” and “non-covered” claims is not permissible

when a Court finds there is a duty to defend. 9

        b. Count III

        In Count III of its complaint, Rockhill claims that it “does not owe a duty to defend or

indemnify” the current landlord, defendant Fish Market REIT, because it is not an insured under

the Policy. Compl. ¶¶ 87–88. It seeks a declaration to that effect and reimbursement of at least

50% of all defense costs incurred since Fish Market REIT was added as a party to the Wharf Suit

in February 2017. Id. ¶¶ 85, 88. Rockhill also asks the Court to order that Fish Market REIT be

defended going forward by separate counsel at its own cost, and that counsel keep any billing for

work done for the non-insured entity separate from any other work on the case. Pl.’s Reply. at

29, citing Compl. ¶ 88. Rockhill moved for judgment on the pleadings on this count; defendants

did not. Therefore, the Court must “view the facts presented in the pleadings and the inferences

to be drawn therefrom in the light most favorable” to defendants. Peters, 966 F.2d at 1485.

        Here, defendants concede that Fish Market REIT is not insured under the Policy. In their

cross-motion, defendants included a set of “facts which must be accepted as true for purposes of

ruling on Rockhill’s motion.” Defs.’ Cross-Mem. at 4. It contained a list of defendants in the



9      The Fourth Circuit reached a similar conclusion in Perdue Farms Incorporated v.
Travelers Casualty and Surety Company of America 448 F.3d 252, 258 (4th Cir. 2006) holding
that:

                Under Maryland’s comprehensive duty to defend, if an insurance policy
                potentially covers any claim in an underlying complaint, the insurer, as
                Travelers did here, must typically defend the entire suit, including non-
                covered claims. Properly considered, a partial right of reimbursement
                would thus serve only as a backdoor narrowing of the duty to defend, and
                would appreciably erode Maryland’s long-held view that the duty to
                defend is broader than the duty to indemnify.

Id. at 258 (internal citations omitted).
                                                  24
Wharf Suit that are insured under the Policy, and defendant Wharf Fish Market REIT was not

included. Id. at 4–5. And in an April 22, 2017 letter attached to the defendants’ cross-motion,

defendants admit that Fish Market REIT is a non-insured party. See April 22, 2017 Defs.’ Letter

at 6 (“You correctly point out that Wharf Fish Market REIT Leaseholder (“WFMRL”) is not

[Rockhill’s] insured.”). In response to Rockhill’s motion, defendants simply contend that Fish

Market REIT’s “presence in the Wharf Lawsuit does not absolve Rockhill of its contractual

obligation to defend against the entire litigation.” Cross-Mem. at 33–39. That is a separate

issue.

         Rockhill’s Coverage B establishes a “duty to defend the insured against any ‘suit’

seeking . . . damages” due to “personal and advertising injury.”           Policy at RHIC000029.

(emphasis added). Based on the Court’s review of the Policy, and accepting the defendants’

allegations as true, as it must at this stage, the Court finds that Fish Market REIT is not a named

insured or an additional insured under the terms of the Policy. Therefore, Rockhill does not owe

it a duty to defend, and judgment will be entered in favor of plaintiff Rockhill on this issue.

         What happens next is less clear.      Rockhill seeks to recover defense costs already

expended from Fish Market REIT. In its motion, Rockhill argues that “equity dictates that

Rockhill is entitled to 50% of all defense costs incurred and paid since the true lessor party-in-

interest, Fish Market REIT voluntarily joined the Wharf Suit on February 13, 2017.” Pl.’s Mem.

at 32. Rockhill also requests that the Court order Fish Market REIT to “be defended going

forward by separate counsel at its own funding, and keep separate any billing for work done for

the non-insured entity.” Pl.’s Reply at 29.

         Again, defendants do not contest that Fish Market REIT is a non-insured party, and they

focus their argument instead on whether recoupment of defense costs is a recognized right in this



                                                 25
jurisdiction when a court determines that there is no duty to defend or that only some claims are

potentially covered by the insurance contract. Defs.’ Cross-Mem. at 35–37; Cross-Reply at 20–

21. Defendants are correct that there is no recognized right to recover defense costs in this

jurisdiction from insureds, and that several courts have rejected this proposition based on the

broad nature of the duty to defend. See, e.g, Perdue Farms Inc. 448 F.3d at 258 (4th Cir. 2006).

But that principle is absent here, since Fish Market REIT is not an insured, and Rockhill does not

owe it a duty to defend.

       The Court was unable to find District of Columbia cases that address the issue of

allocation of defense costs between insured and non-insured parties in a single suit. However,

the New York Supreme Court’s ruling in Health-Chem Corporation v. National Union Fire

Insurance Company of Pittsburgh is instructive on this point. 559 N.Y.S.2d 435, 437 (Sup. Ct.

1990). In that case the court analyzed whether an insurance company had a right to “‘allocate’

the expenses incurred, between those [parties] which are covered by the insurance policy, and

those which are not.” Id. The Court found that:

               allocation is permitted if factually possible. [The insurance company] is
               only liable for the expenses of defending certain defendants. If additional
               expenses were incurred in defense of the action on behalf of the non-
               covered defendants, there is no reason why [the insurance company]
               should be required to pay such expenses. To put it another way, the
               coverage afforded by the policy should not now be expanded.

Id. 559 N.Y.S.2d at 438. In that case, the court found that there remained issues of fact as to

what amount was properly ascribable to the defense of the non-covered defendant in a suit in

which the covered and non-covered parties were represented by the same law firm. Id. The

Court ordered further discovery, specifically of the law firm’s billing records. Id.

       Here, the Court finds that Rockhill has not supplied the Court with evidence that would

enable it to determine whether it is factually possible to allocate defense costs between the


                                                 26
insured and non-insured defendants. And it certainly has not supplied evidence to justify its 50%

figure. Rockhill points outs that the complaint alleges certain misconduct that occurred in 2017,

after Fish Market REIT became the landlord, and after the policy coverage had expired. Pl.’s

Reply at 28, citing Wharf Compl. ¶¶ 187–93. It argues that such misconduct is attributed solely

to Fish Market REIT; id., and that may be so. But that does not explain how the defense costs

expended to this point can be segregated. The counts are levied against all of the developer

defendants, see Wharf Compl. ¶¶ 221–90, and the underlying plaintiffs do not distinguish

between the various defendants in the suit, who they refer to collectively as “developer

defendants” or the “landlord,” or each others’ “alter egos.” Wharf Compl. ¶ 1 n.1. Moreover,

one cannot tell from the pleadings alone whether, or to what extent, the defense efforts have been

directed at the claims arising in 2017.

       Rockhill contends it is entitled to 50% of the defense costs incurred since Fish Market

REIT joined the suit but it has not supplied the Court with any documentation to support that

allocation. Pl.’s Mem. at 31–32. It vaguely argues that its proposal is “equitable” because Fish

Market REIT is the current landlord, and it stands to be impacted by the injunctive relief sought

by the underlying plaintiffs. Pl.’s Reply at 7. That is plainly insufficient.




                                                 27
       Because plaintiff has not put forth an adequate framework to segregate costs incurred

between insured and non-insured parties, and it has provided no evidence to support the 50%

allocation it seeks, the Court will deny this portion of its motion without prejudice to

reconsideration based on an additional submission.

       Further, defendant has not provided justification for the Court to insert itself in the issue

of defendants’ selection of counsel; to the extent any lawyer representing Fish Market REIT

and/or any other developer defendant can segregate time spent on matters related to Fish Market

REIT alone in its billing records, it should do so. But plaintiff Rockhill’s request for judgment

on the pleadings will be denied with respect to this portion of Count III of its complaint.

II.    DEFENDANTS’ COUNTERCLAIMS

       a. Count I (The December 2015 Agreement)

       Rockhill has moved for judgment on the pleadings on all three of defendants’

counterclaims. Since defendants are the non-moving parties, the Court must assume the truth of

their factual allegations and draw any positive inference in their favor when resolving the issues.

       In Count I of their counterclaim, defendants allege that the “December 2015 Agreement

is a binding and enforceable contract,” Countercl. ¶ 76, and that “Rockhill has breached the

December 2015 Agreement by refusing to pay the defense costs that have been incurred in

defense of the Wharf Suit, and by incorrectly claiming that it does not have to pay for the costs

of defending certain claims, as well as the costs of mounting the counterclaim.” Id. ¶ 79.

Additionally, they allege “Rockhill has breached the December 2015 Agreement by deducting

amounts that it claims are not reimbursable due to Rockhill’s ‘guidelines,’” id. ¶ 80, and “by

attempting to impose arbitrary and capricious obligations upon Pillsbury for approval of strategic

decisions and defense related costs (such as compensation of experts).” Id. ¶ 81.



                                                 28
         Rockhill firmly rejects defendants’ claim that it promised to fund the entirety of the

defense of the Wharf Suit without a reservation of rights in December 2015. Pl.’s Mem. at 32.

Rockhill insists that it is entitled to judgment as a matter of law because “even taking the facts

pled in the Counterclaim as true, there are no allegations suggesting that the parties ever

mentioned treating the December 2015 Agreement as superseding Rockhill’s detailed [Initial

Reservation of Rights].” Id.

         But that is precisely what defendants allege in their counterclaim. Defendants allege that

Rockhill entered into the December 2015 Agreement where it agreed to “defend the [d]eveloper

[d]efendants against the entire Wharf Suit,” Countercl. ¶ 1, and “[t]hat agreement was made by

Rockhill without any reservation of rights regarding the duty to defend.” Id. According to

defendants, the December 2015 Agreement was negotiated by Rockhill adjustor Leslie Bowles

and defendants’ counsel, Pillsbury, during a conference call. Id. ¶ 22. They allege that during

the conference call, Bowles “confirmed” that Rockhill’s denial of coverage was “improper,” and

that defendants were “entitled to defense costs, at Pillsbury’s normal rates for representation,

from the date of the initial tender of defense through the date that Rockhill reversed its position

and accepted defense of the Wharf Suit.” Id. ¶¶ 22–23. The parties then struck a bargain: the

developer defendants “would forego their right of full reimbursement of the defense costs,”

id. ¶ 23, accepting the lower Laffey rates, and in turn, “Rockhill would waive its right to control

the defense and select counsel in favor of the [d]eveloper [d]efendants’ right to direct their own

defense with their chosen counsel (Pillsbury).” Id. According to defendants’ counterclaim, after

the phone conversation, the agreement was memorialized in a December 1, 2015 email exchange

between Bowles and a Pillsbury attorney. Id. ¶ 26. That email exchange is reproduced in full

below:



                                                 29
              From: Bowles, Leslie
              To: McNamara, Michael S.
              Cc: Miller, David L.
              Subject: RE: Wharf DC Mediation Schedule
              Date: Tuesday, December 1, 2015 6:44:53 PM
              Attachments: image002.png image003.png image004.jpg


              Hi Michael,
              No problem at all, as I believe you did pass this info along to me already. Either
              that or I am psychic, because I knew it wasn’t happening. I wasn’t planning on
              being in DC on December 18th. If you think I’ll add real value by attending, let me
              know. But my guess is you guys can just update me after the fact.

              Thanks for agreeing to the Laffey matrix. Are your billing folks able to send
              revised billing for the work you’ve done since the initial tender to Rockhill, so I
              can get you paid?

              Thanks again for working with us on this. And I look forward to our continued
              relationship.
              Kind regards,
              Leslie
              From: McNamara, Michael S. [mailto:michael.mcnamara@pillsburylaw.com]
              Sent: Tuesday, December 01, 2015 5:23 PM
              To: Bowles, Leslie
              Cc: Miller, David L.
              Subject: FW: Wharf DC Mediation Schedule
              Leslie,
              I’m terribly sorry but I just realized, to my horror, that I didn’t send this to you.
              Our mediation is no longer set for December 17-18. It has been rescheduled for
              late January. And we have a pre- meeting with the mediator on December 18. It
              would be good if you could attend that with us. If you still have December 18 on
              your calendar, presumably you are available and in DC then.

              Separately, I owe you a response on rates. We are ok with the Laffey matrix you
              suggested. Could we schedule a short call for tomorrow or Thursday to discuss
              the logistics? I’m available from 11:00am until 4:00 Eastern time. In the
              meantime, we’ll get you a list of our team and their experience levels so you’ve
              got the rate range.
              Regards, Michael

Ex. A to Defs.’ Countercl. [Dkt. # 17-1].




                                                      30
        According to defendants, these emails memorialized the terms of a contract in which

Rockhill agreed to fund the entirety of defense without reservation of rights. Countercl. ¶ 1. The

counterclaim itemizes the terms of the December 2015 Agreement as follows: “(1) Rockhill

agreed to waive its right to select counsel for the [d]eveloper [d]efendants; (2) the [d]eveloper

[d]efendants agreed to waive their right to be fully reimbursed for the substantial work already

undertaken by its chosen counsel – Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”) – at

Pillsbury’s regular rates; and (3) Rockhill agreed to pay for Pillsbury’s time (both for previous

work and for work going forward) at “Laffey Matrix” rates.” Id. ¶ 1.

       The problem with defendants’ counterclaim is that those terms are plainly not reflected in

the cursory email exchange that simply states that the parties reached some agreement with

respect to Laffey rates. See Ex. A to Countercl. [Dkt. # 17-1]. Defendants contend that the rest

of the terms are essentially implied, and that the evidence of the phone call with Bowles and the

documents in the claim file illuminate the terms of the agreement. Cross-Reply at 2.

       Rockhill concedes that it agreed to “pay independent counsel at Laffey Matrix rates,” but

it contends that, “[a]t no point did Rockhill or the [d]eveloper [d]efendants discuss or agree that

the reservations pursuant to which the defense was provided would be altered, withdrawn, or

otherwise waived, or that the usual and customary processing and payment practices of Rockhill

would be altered, ignored, or specially accommodated for any of the [d]eveloper [d]efendants or

their uninsured affiliates.” Rockhill Answer ¶ 21 (emphasis added). In other words, the parties

acknowledge that they entered into an additional agreement, but they dispute the nature and

terms of the December 2015 Agreement and what happened on the call with Bowles.




                                                31
       Given the inconsistencies in the allegations about the content of the phone call and the

fact that the supposedly memorializing email says little, the Court is unable to rule as a matter of

law on the pleadings alone that anything was agreed upon except possibly the fact that the

developers could use Pillsbury and that Rockhill would pay Laffey rates going forward. Since

the terms of the December 2015 Agreement are unclear, the Court is unable to determine

whether it was breached as a matter of law, and these claims must move forward.

       Rockhill’s arguments give rise to serious concerns about whether the defendants will be

able to prove that an adjustor single-handedly waived the company’s reservation of rights,

modified a policy that states that any modifications must be in writing, and agreed to fund the

entirety of the defense in a phone call and an email that says nothing of the sort. But as the D.C.

Circuit recently stressed, even when the “court is convinced that the party opposing the motion is

unlikely to prevail at trial,” judgment on the pleadings is not appropriate if there are “issues of

fact.” Liberty Mar., 933 F.3d at 761, quoting Wager, 575 F.2d at 884. Accordingly, the Court

will deny Rockhill’s motion on Count I of the counterclaim.

       b. Count II (The Policy)

       In Count II of their counterclaim, defendants allege that Rockhill breached its duty to

defend under the Policy by, “refusing to recognize that it is obligated to cover the costs of the

[d]eveloper [d]efendants’ defense of all claims asserted against them in the Wharf Suit as well as

the inextricably interwoven costs relating to the strategy of defending the lawsuit by asserting

counterclaims against the [underlying plaintiffs].” Countercl. ¶ 87. They further allege that,

Rockhill breached its duty to defend by intentionally delaying payments of defense costs, id. ¶

89, and by demanding that defendants allocate defense costs between what Rockhill believes are

covered and non-covered claims. Id. ¶ 88.



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       Rockhill moved for judgment on the pleading on this count, arguing that since it does not

owe a duty defend, it necessarily did not breach that duty. Pl.’s Mem. at 36. Since the Court has

found that plaintiff does owe a duty to defend the insured defendants under the Policy, it will

deny Rockhill’s motion in part, but it will grant the motion in part as to defendant Fish Market

REIT, the non-insured defendant.

       c. Count III (The Policy and the December 2015 Agreement)

       In Count III of the counterclaim, defendants allege that Rockhill breached the implied

covenant of good faith and fair dealing underlying both the Policy and the December 2015

Agreement by failing to carry out its contractual duties. Countercl. ¶¶ 92–96. Again, Rockhill

moves for judgment on the pleadings, arguing that it does not owe the defendants a duty to

defend. Pl.’s Mem. at 36–37. Regarding the claim under the Policy, the Court will deny

plaintiff’s motion for judgment as to the insured defendants, since Rockhill owes them a duty to

defend, but it will grant the motion as to Fish Market REIT, the non-insured defendant. The

motion is denied concerning the December 2015 Agreement because questions of fact remain on

whether that agreement gave rise to a duty to defend the developer defendants.

                                        CONCLUSION

       For the reasons stated, the Court enters the following rulings:

                                ROCKHILL’S COMPLAINT

Count I:

   •   As to the duty to defend under the Policy, the Court DENIES plaintiff Rockhill’s motion
       on Count I of its complaint, and GRANTS the defendants’ cross-motion, finding that
       Rockhill has a duty to defend the insured developer defendants, WHRL, HMW, HSW,
       WDGPJV, WDJV, and WHR, under the Policy.

   •   As to the right to recoup defense costs under the Policy, the Court DENIES plaintiff
       Rockhill’s motion on Count I of its complaint, and GRANTS the defendants’ cross-


                                                33
       motion, finding that Rockhill is not entitled to recover from the insured developer
       defendants costs incurred in their defense.

   •   This ruling does not address, the remaining claim under this Count, whether Rockhill
       owes a duty to indemnify the developer defendants.

Count III:

   •   As to the duty to defend Fish Market REIT, the Court GRANTS plaintiff Rockhill’s
       motion on Count III of its complaint, and finds that Fish Market REIT is a non-insured
       and Rockhill does not owe it a duty to defend under the Policy.

   •   As to Rockhill’s entitlement to 50% recoupment of defense costs from Fish Market
       REIT, the Court DENIES plaintiff Rockhill’s motion on Count III of its complaint
       without prejudice because it has not shown that segregation of defense costs is possible,
       and it has not provided documentary support for the allocation it seeks.

   •   As to the order that Fish Market REIT be defended by separate counsel at its own
       funding, and that it keep separate any billing for work done for the non-insured entity, the
       Court will DENY the request for an order that Fish Market REIT must retain separate
       counsel, but if counsel remains, it must segregate hours expended on work related to Fish
       Market REIT alone in its ongoing billing.

                            DEFENDANTS’ COUNTERCLAIMS

Count I:

   •   As to the breach of the terms of the 2015 Agreement, the Court DENIES plaintiff
       Rockhill’s motion.

Count II:

   •   As to the breach of the duty to defend under the Policy, the Court DENIES plaintiff
       Rockhill’s motion as to the developer defendants. The Court GRANTS this motion as to
       Fish Market REIT, the uninsured defendant.




                                               34
Count III:
   • As to the breach of the implied covenant of good faith and fair dealing, the Court
       DENIES plaintiff Rockhill’s motion as to the developer defendants. The Court
       GRANTS this motion as to Fish Market REIT, the uninsured defendant.

      A separate Order will issue.




                                        AMY BERMAN JACKSON
                                        United States District Judge

DATE: September 30, 2019




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