Nat’l Union Fire Ins. Co. of Pittsburgh, PA. v. Fund for Animals, Inc., No. 18, September Term,
2016. Opinion by Greene, J.

INSURANCE LITIGATION—UNTIMELY NOTICE—ACTUAL PREJUDICE
An insured breaches an insurance contract when the insured does not provide timely notice of
a claim against it to the insurer in accordance with the insurance contract. Under § 19-110, an
insurer may disclaim coverage where the insured breaches the insurance policy, so long as the
insurer can establish by a preponderance of the evidence that the breach results in actual
prejudice to the insurer. The actual prejudice must be a consequence of the breach. The actual
prejudice element requires that the harm be more than possible, hypothetical, speculative, or
conjectural. This Court has found actual prejudice in instances where the insured’s breach has:
precluded the insurer from establishing a legitimate jury issue or presenting potentially
outcome-determinative evidence, hampered the insurer from presenting a credible defense, or
impeded an insurer’s right to involvement or participation in the litigation.

The Fund for Animals, Inc. (“FFA”) was insured under a liability policy issued by National
Union Fire Insurance Company of Pittsburgh, Pa. (“National Union”). This case involves three
actions: (1) the Endangered Species Act case (“ESA Case”), where FFA and other plaintiffs
sued Ringling Brothers and its owner, Feld Entertainment, Inc. (“Feld”) for the mistreatment
of elephants; (2) the RICO Case, where Feld sued FFA and the other plaintiffs from the ESA
Case for paying a witness to testify in order to establish standing to sue Feld in the ESA Case
and concealing those payments during discovery; and (3) the Coverage Case, where FFA sued
National Union for not providing coverage to FFA when it was sued by Feld in the RICO Case.

In the Coverage Case, National Union was not able to establish any evidence of actual prejudice
that it suffered as a result of the late notice from FFA of the RICO Case. The RICO Case was
stayed pending the outcome the ESA Case. The stay was lifted after judgment was granted in
favor of the defendant, Feld, in the ESA Case. The judge in the ESA Case made several adverse
findings against the plaintiffs and FFA. Under the doctrine of collateral estoppel, FFA would
be precluded from contesting the same adverse factual findings from the ESA Case in the RICO
Case. Those factual findings would be detrimental to FFA’s defense in the RICO Case or in
settlement negotiations, thus, prejudicing National Union. However, the insurer could not show
that the delayed notice of the RICO Case resulted in actual prejudice. The outcome of the ESA
Case and those adverse factual findings would not have changed had National Union been
notified earlier of the RICO Case. National Union had no right to intervene in, impact, or
influence the ESA Case. Therefore, it was not prejudiced in investigating, settling, or defending
the RICO claim. National Union was notified of the RICO Case before settlement, mediation,
or a trial had taken place in that action. Accordingly, we affirm the judgment of the Court of
Special Appeals.
Circuit Court for Montgomery County
Case No. 376268                             IN THE COURT OF APPEALS
Argued: October 13, 2016
                                                   OF MARYLAND

                                                           No. 18

                                                September Term, 2016

                                      ______________________________________

                                       NATIONAL UNION FIRE INSURANCE
                                        COMPANY OF PITTSBURGH, PA.

                                                             v.
                                          THE FUND FOR ANIMALS, INC.


                                           Barbera, C.J.
                                           Greene,
                                           Adkins,
                                           McDonald,
                                           Watts,
                                           Hotten,
                                           Getty,

                                                        JJ.
                                      ______________________________________

                                                Opinion by Greene, J.
                                      ______________________________________

                                           Filed: January 27, 2017
       In this case, Petitioner, National Union Fire Insurance Company of Pittsburgh, Pa.

(“National Union”), challenges the Court of Special Appeals’ holding that Respondent, the

Fund for Animals, Inc. (“FFA”), did not cause actual prejudice to National Union as a

result of providing late notice of a claim against FFA under a liability insurance policy

issued by National Union to FFA. See MD. CODE ANN., INS. § 19-110 (1997, 2011 Repl.

Vol., 2016 Supp.). This case relates to three actions: (1) the Endangered Species Act case

(“ESA Case”), where FFA and other plaintiffs sued Ringling Brothers and its owner, Feld

Entertainment, Inc. (“Feld”) for the mistreatment of Asian elephants in the Ringling

Brothers’ Circus; (2) the Racketeer Influenced and Corrupt Organizations Act case (“RICO

Case”), where Feld sued FFA and the other plaintiffs named in the ESA Case for improper

conduct, including paying a witness to testify in order to establish standing to sue Feld in

the ESA Case and concealing those payments during discovery; and (3) the Coverage Case,

where FFA sued National Union, its insurer, for not providing coverage to FFA when it

was sued by Feld in the RICO Case.

       This appeal stems from the coverage dispute. The findings in the ESA Case were

adverse to FFA and could have been used against it in the RICO case; thus, prejudicing

FFA’s insurer, National Union. FFA argues that although notice of the RICO claim was

late under the policy, National Union, at best, could have “monitored” the ESA Case and

could not have intervened in, impacted, or influenced the ESA Case. Moreover, National

Union was notified of the RICO Case before settlement, mediation, or a trial had taken
place in the RICO action.        Therefore, late notification of the RICO Case1 was not

prejudicial to National Union. Accordingly, as a matter of law, National Union was not

prejudiced in investigating, settling, or defending the RICO claim as a result of any delay

in receiving notice of claims brought against the insured. Therefore, we affirm the

judgment of the Court of Special Appeals.

                   FACTUAL AND PROCEDURAL BACKGROUND

                                         Background

         The relevant facts are taken from evidence and testimony presented at trial. FFA, a

nonprofit organization dedicated to animal protection issues and an affiliate of the Humane

Society of the United States (“HSUS”), was insured under a liability policy issued by

National Union. The insurance was purchased to protect HSUS and its affiliates against

the risks of lawsuits and claims made against them. National Union issued a “Not–For–

Profit Individual and Organization Insurance Policy” to HSUS, which was in effect from

January 7, 2006 through June 8, 2008 (“the 2007 Policy”). This was a “claims-made-and-




     1
         The Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.
         §§ 1961–1968, which is directed at “racketeering activity”—defined in §
         1961(1) to encompass, inter alia, acts “indictable” under specific federal
         criminal provisions, including mail and wire fraud—provides in § 1964(c)
         for a private civil action to recover treble damages by any person injured in
         his business or property “by reason of a violation of section 1962.” Section
         1962(c) prohibits conducting or participating in the conduct of an enterprise
         “through a pattern of racketeering activity.”

Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 479, 105 S. Ct. 3275, 3276, 87 L. Ed. 2d 346,
348 (1985).
                                               2
reported-policy.”2 A “Claim” is defined in the policy to mean “(1) a written demand for

monetary relief or (2) a civil . . . proceeding for monetary . . . relief which is commenced

by: (i) service of a complaint or similar pleading[.]” ¶ 2. (b)(1)-(2)(i).

       The “Notice/Claim Reporting Provisions” section under Clause 7 of the insurance

policy states “[t]he Insureds shall, as a condition precedent to the obligations of the Insurer

under this policy, give written notice to the Insurer of any Claim made against an Insured

as soon as practicable and either: (1) anytime during the Policy Year . . . or (2) within 30

days after the end of the Policy Year . . . as long as such Claim is reported no later than 30

days after the date such claim was first made against an insured.” ¶ 7.(a)(1)-(2). “A Claim

shall be considered to have been first made against an Insured when written notice of such

Claim is received by any Insured[.]” ¶ 7.

       Further, pursuant to the policy, FFA was responsible for defending itself, and

National Union had a duty to advance defense costs. The insured’s right to tender its

defense i.e., transferring the obligation of the defense, and all costs associated with the

insurer terminates if not exercised within 30 days of the date the claim is first made

pursuant to Clause 7. ¶¶ 1 & 8. “Provided that the Insureds [including FFA] have complied


2
   The “claims-made-and-reported-policy” provided that claims made against FFA and
reported to National Union during the policy period would be covered by the policy. This
is distinct from a “claims-made” policy which only requires that a claim arise during the
policy period. This Court has held that § 19-110 applies to both types of policies.
“[Section] 19-110 mandates that notice provisions be treated as covenants, such that failure
to abide by them constitutes a breach of the policy sufficient for the statute to require the
disclaiming insurer to prove prejudice.” Sherwood Brands, Inc. v. Great Am. Ins. Co., 418
Md. 300, 326 n. 21, 13 A.3d 1268, 1284 n. 21 (2011) (“Notice provisions, even in claims-
made-and-reporting policies, must be deemed covenants such that failure to abide by them
constitutes a breach of the policy sufficient to make § 19-110 applicable to such policies.”).
                                               3
with the foregoing, the Insurer [National Union] shall be obligated to assume the defense

of the Claim . . . [o]nce the defense has been so tendered, the Insured [FFA] shall have the

right effectively to associate with the Insurer [National Union] in the defense of such

Claim, including, but not limited to negotiating a settlement.” ¶ 8.

       Although, the coverage dispute relates to both the ESA Case and the RICO Case,

we primarily address the Coverage Case in this appeal. The other two cases are relevant

because they form the basis as to why National Union believes it was actually prejudiced,

enabling it to disclaim coverage under its policy. The ESA Case is a case in which FFA

was the plaintiff and adverse factual findings and a judgment were entered against FFA.

Those adverse findings could have been raised against FFA in the RICO Case on grounds

of collateral estoppel. National Union had no duty to defend FFA in the ESA Case because

National Union provided defense coverage and FFA was acting as a plaintiff in the ESA

Case. Therefore, National Union could not have affected the outcome of the ESA

proceedings. In the RICO Case, FFA was sued by Feld, a defendant in the ESA Case, for

misconduct that allegedly occurred during the prosecution of the ESA Case. In the

Coverage Case, FFA sued its insurer, National Union, for failing to provide coverage to it.

National Union disclaimed coverage on the grounds that it received late notice of the RICO

Case. It further claimed that had National Union known earlier it could have stepped in

and “monitored” or advised FFA in the ESA Case. Intervention, National Union claims,

would have prevented the adverse factual findings which prejudiced FFA’s defense in the

RICO Case.



                                             4
       In the ESA Case, FFA, an organizational plaintiff, along with other organizational

plaintiffs and an individual plaintiff, Thomas Rider, sued Ringling Brothers and its owner,

Feld. While the ESA Case was pending, Feld brought the RICO Case against FFA and the

other organizational plaintiffs for allegedly bribing the individual plaintiff to falsely testify

and commit other criminal acts, in order to establish standing to sue Feld. Feld sought to

recover damages in the form of attorneys’ fees and costs incurred in defending the ESA

Case. FFA did not notify National Union of the RICO claim until over two years after the

claim had been filed. By that time, the court in the ESA Case had ruled in favor of the

defendant, Feld, on the ground that the ESA organizational plaintiffs, including FFA,

lacked standing.     The court also made several factual findings, including that the

organizational plaintiffs had paid the individual plaintiff for testimony that was false and

that those payments were concealed during discovery. National Union denied coverage on

the grounds that FFA failed to provide timely notice. Subsequently, FFA brought the

Coverage Case against National Union, which in turn defended on the grounds that it was

prejudiced by the late notice. National Union claimed actual prejudice because it believed

FFA was precluded, in the RICO Case, from contesting many of the facts found by the

court in the ESA Case as those facts undermined any defense FFA might have raised.

                     The ESA Case (Not Covered by the 2007 Policy)

       The ESA Case was brought in 2000 in the United States District Court for the

District of Columbia before the Honorable Emmet G. Sullivan. The ESA Case was not

covered by the 2007 Policy because the Policy provided coverage to FFA in defense of

claims made against it by another party, not in the case where FFA was the plaintiff. FFA,

                                               5
the American Society for the Prevention of Cruelty to Animals (“ASPCA”), the Animal

Welfare Institute (“AWI”), and Thomas Rider sued Feld and Ringling Brothers for

declaratory and injunctive relief, alleging Ringling Brothers’ mistreated Asian elephants in

its circus training techniques, violating the Endangered Species Act, 16 U.S.C. § 1531 et

seq.

       The suit was brought under § 1540(g), the citizen-suit provision of the ESA, which

requires standing under the “case or controversy” provision of Article III of the United

States Constitution, meaning at least one plaintiff must make a showing:

       (1) that the plaintiffs have suffered an “injury in fact”—an invasion of a judicially
       cognizable interest which is (a) concrete and particularized and (b) actual or
       imminent, not conjectural or hypothetical; (2) that there be a causal connection
       between the injury and the conduct complained of—the injury must be fairly
       traceable to the challenged action of the defendant, and not the result of the
       independent action of some third party not before the court; and (3) that it be likely,
       as opposed to merely speculative, that the injury will be redressed by a favorable
       decision.

Bennett v. Spear, 520 U.S. 154, 167, 117 S. Ct. 1154, 1163, 137 L.Ed.2d 281, 298 (1997)

(citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–561, 112 S. Ct. 2130, 2136, 119

L.Ed.2d 351, 364 (1992)).

       Mr. Rider alleged he was emotionally attached to the elephants because he had

worked for Ringling Brothers for two years, tended the elephant barns, worked as a

“handler”, and referred to them as his “girls.” He claimed that he had witnessed their

mistreatment by the Ringling Brothers’ employees. Further, he explained that he wished

to visit the elephants again and work with them, but could not because he feared he would

experience aesthetic and emotional injury from witnessing their scars and behavioral tics.


                                              6
       Feld filed a motion to dismiss for lack of Article III standing asserting Mr. Rider

did not suffer any cognizable and redressable injury and thus the plaintiffs, including FFA,

could not establish standing. The district court granted the motion to dismiss. That decision

was appealed to the United States Court of Appeals for the District of Columbia Circuit,

which reversed and held there was a cognizable and redressable injury.3 ASPCA v. Ringling

Bros. and Barnum & Bailey Circus, 317 F.3d 334 (D.C. Cir. 2003).

       In August 2007, Feld filed the RICO Case (discussed previously) as a separate

action against FFA and the other organizational plaintiffs. While the RICO Case was

pending, the ESA Case was tried as a bench trial and lasted for six weeks, from February

through March of 2009. In December of 2009, the district court entered judgment in favor

of Feld and held that the plaintiffs failed to establish Article III standing. Accordingly, the

court determined that it lacked jurisdiction and declined to reach the merits of whether Feld

violated the ESA. ASPCA v. Feld Entertainment, Inc., 677 F. Supp. 2d 55, 91, 97–98

(D.D.C. 2009). The court made findings of fact and rejected Mr. Rider’s testimony,

concluding he was “essentially a paid plaintiff and fact witness who is not credible.” 677

F. Supp. 2d at 67. The court also found that since March of 2000, Mr. Rider’s sole source

of income was coming from payments made by animal rights advocates, including the

organizational plaintiffs. 677 F. Supp. 2d at 72. It was determined that payments were


3
  Although FFA and the other plaintiffs appear to have won their case on appeal to the
District of Columbia Circuit, it is unclear from the record why on remand the plaintiffs
dismissed that case without prejudice. In place of the original case, the plaintiffs filed a
new lawsuit making the same allegations against Feld and Ringling Brothers. The Animal
Protection Institute joined the new lawsuit as a plaintiff.

                                              7
made directly to him from the law firm representing the plaintiffs, Meyer, Glitzenstein &

Crystal (“MGC”) and indirectly from grants from the Wildlife Advocacy Project (“WAP”),

a non-profit run by two partners in MGC. 677 F. Supp. 2d at 74. The court found:

       [T]he primary purpose is to keep Mr. Rider involved with the litigation,
       because he is the only plaintiff who alleges a personal and emotional
       attachment to the elephants and an aesthetic injury based on the alleged
       mistreatment he claims to have witnessed while working for [Feld].

677 F. Supp. 2d at 79. Further, the court determined that the plaintiffs used the United

States mail system to make payments. 677 F. Supp. 2d at 77. Moreover, those payments

“were not disclosed initially in discovery, by both omissions and affirmatively false

statements.” 677 F. Supp. 2d at 83. (As discussed below, these findings are all relevant to

the RICO Case because they form the basis for a violation of the RICO statute, and mail

and wire fraud.). On appeal, the Court of Appeals for the District of Columbia Circuit

affirmed the district court’s findings. See ASPCA v. Feld, 659 F.3d 13 (D.C. Cir. 2011).

       In March of 2013, Judge Sullivan granted Feld’s motion as a prevailing party for

attorneys’ fees (filed in April 2012), under a fee-shifting provision of the ESA. 16 U.S.C.

§ 1540(g)(4). He further found that the ESA Case was “meritless, frivolous, and vexatious”

and directed the parties to submit recommendations for further proceedings to determine

the amount of attorneys’ fees Feld had incurred.

                     The RICO Case (Covered by the 2007 Policy)

       As mentioned in the above discussion, during the ESA case, Feld filed the RICO

Case in the United States District Court for the District of Columbia in August of 2007 as

a separate action naming the organizational plaintiffs from the ESA Case, including FFA,


                                            8
as defendants. Feld alleged that the RICO defendants engaged in illegal acts in the ESA

Case, including paying Mr. Rider over $100,000 to falsely testify to establish emotional

injury from the alleged mistreatment of elephants and attempting to conceal payments that

were in the form of bribes, illegal gratuities, mail fraud, wire fraud, money laundering, and

obstruction of justice. Feld sought damages in attorneys’ fees and costs incurred in

defending the ESA Case.

       The complaint and summons in the RICO Case were served on FFA in September

2007. However, National Union was not notified by FFA of the RICO Case when the

complaint was served, nor at any time during the 2007 Policy period (before June 8, 2008).

In November 2007, Judge Sullivan, in the RICO Case, granted the defendants’

“Motion to Temporarily Stay All Proceedings” pending the resolution of the ESA Case and

indicated that

       [g]iven that the ESA Action is still ongoing, and because [Feld] has no choice
       but to continue to defend the ESA suit regardless of the outcome of its RICO
       claim, [Feld’s] damages [in the form of attorneys’ fees and costs incurred in
       defending the ESA Case] are unascertainable at this point.

Feld Entertainment, Inc. v. ASPCA, 523 F. Supp. 2d 1, 4 (D.D.C. 2007). It was not until

January 15, 2010 that the court lifted the stay in the RICO Case. This was approximately

one month after Feld had prevailed in the ESA Case.

       On March 1, 2010, Roger Kindler, general counsel for HSUS and its affiliates

(including FFA) gave their insurance broker notice of Feld’s amended complaint in the

RICO Case. The letter stated HSUS and its affiliates demand coverage under the National

Union Policy for the 2010 term year (“the 2010 Policy”), which was substantially similar


                                             9
to the 2007 Policy (FFA was an “Additional Insured” on the 2010 Policy as well as the

2007 Policy). The insurance broker forwarded the notice and copy of the amended

complaint to National Union. National Union’s claims administrator, Chartis, requested

the original complaint in the RICO Case. Mr. Kindler forwarded a copy of the original

complaint to Chartis and also notified it that the RICO Case had been stayed by the district

court pending the outcome of the ESA Case and that the district court had scheduled

mediation for both cases in June.

       On May 26, 2010, Chartis sent a letter to HSUS and FFA disclaiming coverage both

under the 2010 and 2007 Policies because the RICO claim was made against FFA in 2007

and notice was not given during the 2007 Policy term (from January 7, 2006 through June

8, 2008). Mr. Kindler responded, on June 16, 2010, and contested the disclaimer. He

explained that there was “on-going, formal mediation in the District of Columbia involving

all parties, that ha[d] the potential of resolving the nest of claims between Feld [] and the

charities and individuals named in the Amended RICO Complaint” and “[i]f the mediation

fails, the parties and their insurance carriers [were] looking forward to, it is safe to say,

years of intense litigation and the associated costs. Chartis should not be sitting on the

sidelines.” National Union did not respond and chose not to get involved in the RICO

Case. FFA hired attorneys, engaged in mediation, filed a motion to dismiss the amended

RICO complaint, pursued (unsuccessfully) an interlocutory appeal from the denial of the

motion to dismiss, and was involved in discovery for over six months.

       In March of 2013, Judge Sullivan granted Feld’s motion for attorneys’ fees in the

ESA Case and directed the parties to submit recommendations for the appropriate amount

                                             10
of fees and to determine whether further proceedings were necessary. In early 2014, FFA

and the other organizational defendants in the RICO Case and Feld engaged in settlement

negotiations. In May 2014, Feld settled its claim for $15.75 million. In addition, Feld

agreed to dismiss, with prejudice, the RICO Case as well as the pending claim for

attorneys’ fees in the ESA Case.        FFA’s share of the settlement responsibility was

approximately $2.54 million.

                                    The Coverage Case

       Before Judge Sullivan ruled on Feld’s motion for attorneys’ fees in the ESA Case

and while the RICO Case was pending, FFA filed suit (“Coverage Case”), from which this

appeal stems, against National Union in the Circuit Court for Montgomery County on

September 6, 2012. FFA alleged that National Union breached the 2007 Policy by

disclaiming coverage in the RICO Case.

       National Union argued that Virginia law applied, which provided that late notice

alone was sufficient to support disclaiming coverage and moved for summary judgment in

July of 2014. On December 11, 2014, the court denied the motion and ruled that Maryland

law applied. Further, the court explained that under § 19-110, to disclaim coverage based

on late notice of the RICO Case, National Union had to prove by a preponderance of the

evidence that it suffered actual prejudice due to the late notice. See § 19-110. In addition,

because National Union did not present evidence in support of its motion to show that,

“had [it] been given earlier notice, it would have joined the ESA trial team and changed

the result of that case,” there was a genuine dispute of material fact as to the issue of actual

prejudice. National Union’s motion for reconsideration was also denied.

                                              11
       A four-day jury trial took place beginning on January 12, 2015. FFA presented four

witnesses: Michael Markarian, the president of FFA; George Wade, the CFO of HSUS;

Roger Kindler, general counsel for HSUS; Roger Zuckerman, a partner at Zuckerman

Spaeder, the law firm that represented FFA in the RICO Case. Mr. Markarian testified that

FFA did not notify National Union of the RICO Case when it was filed in 2007 because

they viewed the suit as an “intimidation tactic.” They “did not view it as a serious threat”

because the RICO Case was stayed almost immediately after the filing. Mr. Kindler

testified as to discussions with Mr. Markarian and MGC, the law firm representing the

plaintiffs in the ESA case, in 2007. He indicated that when the RICO Case was filed, there

was a belief that it was filed as a “litigation tactic” in Feld’s defense of the ESA Case, not

as a “substantive suit.” Moreover, he believed, “you save your insurance until you need

it” and FFA did not need the insurance in 2007. Mr. Zuckerman testified as to the decisions

made by the firm in defending and settling the RICO Case. The lawyers believed FFA had

a reasonable chance of prevailing, but the potential damages were too great to justify

risking trial, and “the ESA [C]ase . . . had virtually no impact on the settlement decision

[in the RICO case].” He and others at his firm dedicated a large amount of time to

researching collateral estoppel and concluded it would not preclude FFA from litigating

facts decided against it in the ESA Case.

       At the close of FFA’s coverage case, National Union moved for judgment on the

grounds that the evidence presented by FFA proved National Union suffered actual

prejudice as a matter of law and FFA had failed to prove its damages with reasonable

certainty. The court reserved its ruling on the motion until the close of all the evidence.

                                             12
       Next, National Union called its sole witness, Maureen Conboy, the assistant vice-

president for AIG Claims, Inc. (formerly Chartis), and the individual who supervised

litigation. Ms. Conboy testified that National Union “lost the opportunity to participate in

the decision to stay the [RICO Case,] . . . to monitor the ESA [Case,] and to try to settle

the stayed [RICO Case] before Judge Sullivan made his findings in December of 2009 and

before Feld incurred another 11 million or so dollars in fees in the ESA [Case] during that

period when [National Union] d[id not] know anything about this.” She mentioned that if

the notice was timely, National Union could have assigned an attorney to represent FFA in

the RICO Case and could have collaborated with FFA lawyers representing FFA in the

ESA Case. On cross-examination, Conboy conceded that National Union could not have

appointed counsel to represent FFA in the ESA Case. Rather, they could have had panel

counsel, a firm chosen by the insurer, enter an appearance in the RICO Case and “monitor”

the ESA Case.

       At the close of evidence, National Union renewed its motion for judgment and

argued it suffered actual prejudice as a matter of law, referencing cases under Maryland

law holding that actual prejudice exists as a matter of law when there was no timely notice

of the claim until after a verdict or judgment had been entered. National Union argued that

here, there was no notice of the RICO Case until after judgment was entered in the ESA

Case. Further, National Union contended that it did not matter that the judgment in

question was entered in the ESA Case, and not in the RICO Case, because the damages

Feld sought in the RICO Case were fees incurred in defending the ESA Case and, under

collateral estoppel, Judge Sullivan’s factual findings in the ESA Case were preclusive of

                                            13
relitigation of certain issues. Thus, National Union posited, FFA’s defense in the RICO

Case was substantially impacted by the adverse factual findings made in the ESA Case.

FFA responded that National Union waived the collateral estoppel argument by not raising

it in its answer and, regardless, the doctrine would not apply to Judge Sullivan’s factual

findings in the ESA Case because they were not necessary to the judgment in that case.

FFA also noted that because Mr. Zuckerman testified that the firm’s decision to settle the

RICO Case was not predicated on a concern about the preclusive effect of findings in the

ESA Case, it was a jury question whether the defense of the RICO Case was impaired by

the judgment in the ESA Case. Thus, FFA argued that prejudice as a matter of law did not

exist and under Maryland law the issue had to be submitted to a jury.

      In granting National Union’s motion, the Circuit Court for Montgomery County

ruled that the factual findings from the ESA Case—(1) that “Rider's testimony was

purchased by [the ESA plaintiffs, including FFA]”; (2) that FFA “had lied in discovery,

and/or at the very least concealed evidence of those payments”; and (3) that FFA tried to

“disguise the payments [to Rider] . . . as payments for media services”—were “material

and relevant to the [standing] issue before [Judge Sullivan in the ESA Case]” and were the

basis for the judgment entered in that case. Therefore, the Circuit Court concluded that

these facts were “finally determined” in the ESA Case. FFA had the opportunity to “fully

litigate those issues” and thus, collateral estoppel in a trial in the RICO Case would

preclude FFA from contesting those same facts and FFA would be bound by them. Those

facts would be significantly detrimental to FFA’s defense in the RICO Case. The Circuit

Court further rejected FFA’s argument that collateral estoppel was waived and concluded,

                                           14
in the alternative, that even if collateral estoppel did not apply in the RICO Case and factual

findings in the ESA Case would not be binding on FFA, the findings necessarily would

create “a substantial problem in [the RICO Case] for [National Union] . . . in terms of

evaluating the settlement of [the RICO Case].” The court finally concluded that Judge

Sullivan’s findings in the ESA Case would drive up the settlement value of the RICO Case,

thereby prejudicing National Union, as a matter of law.

       On March 12, 2015, the Circuit Court for Montgomery County entered judgment in

favor of National Union. FFA timely appealed to the Court of Special Appeals. The Court

of Special Appeals reversed the judgment of the Circuit Court and remanded the case to

the Circuit Court. The intermediate appellate court noted that if FFA had moved for

judgment the court would have directed the Circuit Court to enter judgment in favor of

FFA on liability. Further, if FFA did move for judgment on remand the trial court should

enter judgment in FFA’s favor. The Court of Special Appeals held:

       In this case, we hold that when an insured gives late notice and during the
       period of delay in notification the insured’s defense becomes impaired, to the
       actual prejudice of the insurer, the insurer may disclaim coverage only if
       there is a causal link between the late notice and the prejudice.

Fund for Animals, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA., 226 Md. App. 644,

647, 130 A.3d 1155, 1157 (2016).

       National Union filed a petition for writ of certiorari and FFA filed a cross-petition

in this Court. We granted the Petition for Certiorari to answer the following questions:

   1. Did [the Court of Special Appeals] err in holding that the actual prejudice
      standard in Insurance Art. § 19-110 requires an insurer to prove that, had it
      received timely notice, the outcome would have been different?


                                              15
   2. Did [the Court of Special Appeals] exceed its authority by instructing the
      trial court on remand to permit and grant a belated motion for judgment,
      when such a motion was never filed at the time of trial?

We also granted the cross-petition for writ of certiorari to answer the following

questions:

   1. Did Petitioner waive the affirmative defense of collateral estoppel by failing
      to plead that defense in its answer or mention it during discovery?

   2. Does collateral estoppel apply to the findings made in the Endangered
      Species Act case?

Nat’l Union Fire Ins. Co. v. Fund for Animals, 448 Md. 29, 136 A.3d 816 (2016).

        We shall hold that in order to disclaim coverage under § 19-110, an insurer must

show, by a preponderance of the evidence, that the delay in giving notice resulted in actual

prejudice to the insurer. “[T]he statute applies to require [the insurer] to show how it was

prejudiced by [the insured’s] late-delivered notice in investigating, settling, or defending

of the . . . actions.” Sherwood Brands, Inc., 418 Md. at 331, 13 A.3d at 1287. In other

words, the burden is on the insurer to establish that the breach or failure to give timely

notice resulted in actual prejudice to the insurer. In addition, the actual prejudice element

requires that the insurer show that the harm to the insurer from the lack of required notice

is more than theory or conjecture. Here, National Union was not able to produce sufficient

evidence of the impairment of its defense as a result of National Union receiving late notice

of the RICO claim. Although the application of collateral estoppel would prejudice

National Union, it could not show that it was the late notice of the RICO claim that resulted

in actual prejudice because the outcome of the factual findings would not have changed



                                             16
had National Union been notified of the RICO Case earlier. That is so because National

Union had no right to intervene in the ESA Case or affect its outcome.

                               STANDARD OF REVIEW

       National Union’s motion for judgment as a matter of law, on the issue of actual

prejudice, is reviewed under a de novo standard and without deference given to the lower

court. District of Columbia v. Singleton, 425 Md. 398, 406–07, 41 A.3d 717, 721–22

(2012); Thomas v. Panco Mgmt. of Md., LLC, 423 Md. 387, 393–94, 31 A.3d 583, 587

(2011) (“We review the trial court’s grant of defendants’ motion for judgment de novo,

considering the evidence and reasonable inferences drawn from the evidence in the light

most favorable to the non-moving party.”          (citing Md. Rule 2-519)).      Statutory

interpretation of § 19-110 is also reviewed de novo. Allen v. State, 440 Md. 643, 667, 103

A.3d 700, 714 (2014). Furthermore, an application of collateral estoppel “is a legal

conclusion that this Court reviews de novo.” Garrity v. Md. State Bd. of Plumbing, 447

Md. 359, 368, 135 A.3d 452, 458 (2016). See also Elec. Gen. Corp. v. Labonte, 229 Md.

App. 187, 202, 144 A.3d 856, 865 (2016).

       As for the Court of Special Appeals’ decision to consider an alleged “unpreserved

issue,” this Court reviews that judgment under a deferential abuse of discretion standard.

Jones v. State, 379 Md. 704, 715, 843 A.2d 778, 785 (2004). “[W]e respect the judgment

of the Court of Special Appeals in determining whether it needed to consider the issue for

the proper execution of justice and unless upon our review that court abused its discretion

under the Rule, we will not substitute our judgment for theirs.” Id.



                                            17
                                     DISCUSSION

                                  Parties’ Contentions

       National Union contends that the judgment of the Court of Special Appeals should

be reversed because the intermediate appellate court imposed an incorrect standard under

§ 19-110 for proving actual prejudice and holding that National Union’s lack of control

over the ESA Case was dispositive of the prejudice issue. In addition, National Union

maintains that FFA’s late notice caused National Union to lose the opportunity to mitigate

its risk prior to entry of the adverse ESA judgment, thus, causing National Union actual

prejudice. Moreover, according to National Union, collateral estoppel would be applied

against FFA in the RICO Case to the detriment of National Union. In addition, National

Union maintains that it was not required to plead collateral estoppel as an affirmative

defense in the Coverage Case because it was only raising actual prejudice from late notice

of the RICO Case as a defense to the breach of the insurance contract. In other words,

National Union contends that the doctrine of collateral estoppel was only being used as an

argument to support the defense of actual prejudice. Further, National Union asserts that

issues of insufficiency of evidence and FFA’s entitlement to judgment as a matter of law

were never presented or decided by the Circuit Court. According to National Union, this

Court should review whether the Court of Special Appeals abused its discretion in

essentially instructing FFA, on remand, to move for judgment on the previous trial record

and directing the Circuit Court to grant it. Finally, National Union urges that the case be

remanded for a new trial to be tried in accordance with any new standard.



                                            18
       FFA, however, contends that the trial court erred as a matter of law in ruling that

the evidence conclusively proved actual prejudice. National Union failed to show that

prejudice resulted from FFA’s untimely notice to National Union of the RICO Case.

According to FFA, the uncontradicted evidence at trial was that judgment in the ESA Case

“had a negligible effect on [FFA’s] decision to settle the RICO Case.” Moreover, FFA

maintains that any prejudice to its defense in the RICO Case based on allegedly binding

adverse findings from the ESA Case was hypothetical. Further, according to FFA, National

Union waived collateral estoppel by not raising it in its answer as required by Md. Rule 2-

323(g)(4).

                                     Actual Prejudice

       According to Maryland law, an insurer providing a liability insurance policy may

disclaim coverage if an insured breached the policy by giving late notice of a claim and

establishes by a preponderance of the evidence that late notice resulted in actual prejudice

to the insurer.

       An insurer may disclaim coverage on a liability insurance policy on the
       ground that the insured or a person claiming the benefits of the policy through
       the insured has breached the policy by failing to cooperate with the insurer
       or by not giving the insurer required notice only if the insurer establishes by
       a preponderance of the evidence that the lack of cooperation or notice has
       resulted in actual prejudice to the insurer.

INS. ART., § 19-110.

       The law “permits an insurer to disclaim coverage on the ground that the insured has

breached the policy by failing to cooperate with the insurer only if the insurer establishes

that the lack of cooperation has resulted in actual prejudice to the insurer.” Allstate Ins.


                                             19
Co. v. State Farm Mut. Auto. Ins. Co., 363 Md. 106, 108, 767 A.2d 831, 832 (2001). In

order for § 19-110 to be in play, the insured must breach the insurance policy “by failing

to cooperate with the insurer or by not giving the insurer requisite notice.” Sherwood

Brands, Inc., 418 Md. at 312, 13 A.3d at 1275.

       This Court has rejected a per se approach, which would allow the finding of actual

prejudice for any breach by the insured—instead, the actual prejudice must be a

consequence of the breach. Allstate Ins. Co., 363 Md. at 124, 767 A.2d at 841. We have

also rejected a but-for approach, which would allow a finding of actual prejudice if but for

the insured’s breach there was a substantial likelihood the results at trial would have been

different. Id. The breach nonetheless must result in actual prejudice. A but-for analysis

would require that no prejudice would result in the absence of a breach; however, the

“results in actual prejudice” element simply means that actual prejudice came about

because of, or as a consequence of, the breach.

       The actual prejudice element requires that the harm be more than possible,

theoretical, hypothetical, speculative, or conjectural. This Court has found actual prejudice

in instances where the insured’s breach has: precluded the insurer from establishing a

legitimate jury issue or presenting potentially outcome-determinative evidence, Allstate

Ins. Co., 363 Md. at 127–30, 767 A.2d at 843–44; hampered the insurer from presenting a

credible defense, Allstate Ins. Co., 363 Md. at 127–28, 767 A.2d at 843; or impeded an

insurer’s right to involvement or participation in the litigation, Prince George’s Cnty. v.

Local Gov’t Ins. Trust, 388 Md. 162, 190, 879 A.2d 81, 98 (2005); Washington v. Federal

Kemper Ins. Co., 60 Md. App. 288, 296, 482 A.2d 503 (1984).

                                             20
       “[W]e believe that the proper focus should be on whether the insured’s willful

conduct has, or may reasonably have, precluded the insurer from establishing a legitimate

jury issue of the insured’s liability, either liability vel non or for the damages awarded.”

Allstate Ins. Co., 363 Md. at 127–28, 767 A.2d at 843. This requires “that the insurer show

that the failure of cooperation has, in a significant way, precluded or hampered it from

presenting a credible defense to the claim.” Id. “If the insured violates the notice provision

without harming the interests of the insurer—i.e. without prejudice—then there is no

reason to deny coverage.” Local Gov’t Ins. Trust, 388 Md. at 185, 879 A.2d at 95.

“[P]ossible, theoretical, conjectural, or hypothetical prejudice is not enough to satisfy

section 19–110; prejudice cannot be surmised or presumed from the mere fact of delay.”

Oliff–Michael v. Mut. Benefit Ins. Co., 262 F. Supp. 2d 602, 604 (D.Md.2003); Gen.

Accident Ins. Co. v. Scott, 107 Md. App. 603, 615, 669 A.2d 773, 779 (1996) (“[A]n insurer

may not disclaim coverage on the basis of prejudice that is only possible, theoretical,

conjectural, or hypothetical”).

       The requirement of “actual prejudice” means that an insurer may not disclaim
       coverage on the basis of prejudice that is only possible, theoretical,
       conjectural, or hypothetical . . . (defining “actual” as “existing in fact; real”,
       “existing or acting at the present moment”). Nor is it enough to surmise harm
       that may have occurred by virtue of the passage of time; prejudice cannot be
       presumed from the length of the delay.

Gen. Accident Ins. Co., 107 Md. App. at 615, 669 A.2d at 779 (citation omitted) (holding

that the following statements were conclusory allegations and insufficient, as a matter of

law, to raise a genuine dispute as to whether the insured suffered actual prejudice: “(1)

[insured] ‘could not fully investigate the underlying facts,’ such as by taking ‘timely’


                                              21
statements from witnesses, ‘photographing any property damage,’ or investigating the

scene of the accident; (2) it could not evaluate its potential exposure; (3) it could not

participate in the decision as to whether to submit the case to arbitration; and (4) it could

not decide whether to ‘set high/low parameters.’”).

       In the case at bar, the RICO Case was dormant for over two years, however, the

mere passage of time is not enough to establish actual prejudice. Hartford Accident &

Indem. Co. v. Sherwood Brands, Inc., 111 Md. App. 94, 111, 680 A.2d 554, 562 (1996)

(holding no prejudice occurred with a delay over two years and six months), vacated on

other grounds, 347 Md. 32, 698 A.2d 1078; Woodfin Equities Corp. v. Harford Mut. Ins.

Co., 110 Md. App. 616, 656, 678 A.2d 116, 135 (1996) (holding no prejudice occurred

even when insured gave insurer notice over six years after the date of loss), vacated on

other grounds, 344 Md. 399, 687 A.2d 652 (1997); Gen Accident Inc. Co., 107 Md. App.

at 606, 669 A.2d at 775 (holding no prejudice occurred with a delay over two years and

five months). The Court of Special Appeals has stated “[a]s we recently made clear . . .

actual prejudice may not be presumed from the mere passage of time—even when

notification to the insurer occurred almost two and one-half years after the accident.”

Woodfin Equities Corp., 110 Md. App. at 658, 678 A.2d at 136.

       Although the insured bears the burden to prove it is entitled to coverage under the

policy, the insurer has the burden of proving it is actually prejudiced from the late notice;

“allocating the burden to the insurer encourages the insurer to undertake a timely

preliminary investigation.” Local Gov’t Ins. Trust, 388 Md. at 188, 879 A.2d at 97.

National Union neither met its burden nor showed by “affirmative evidence that the delay

                                             22
in giving notice ha[d] resulted in actual prejudice to the insurer.” See Sherwood Brands,

Inc. v. Hartford Accident & Indem. Co., 347 Md. 32, 42, 698 A.2d 1078, 1083 (1997).

       In the Coverage Case, it was FFA’s burden to prove it was entitled to coverage in

the RICO Case. In defending itself, National Union had the burden to prove that late notice

of the claim resulted in actual prejudice. In order for National Union to obtain a judgment

as a matter of law on the defense of actual prejudice, the evidence, viewed most favorably

to FFA, had to compel the conclusion that actual harm to National Union resulted from the

delay in receiving notice of the RICO claim and that no reasonable jury could find

otherwise. Cf. Willis v. Ford, 211 Md. App. 708, 716, 66 A.3d 112, 116 (2013) (to obtain

judgment as a matter of law on defense of contributory negligence, defendant “was

required to show that there was no evidence from which the jury could find” that the

plaintiffs acted reasonably); Lindenberg v. Needles, 203 Md. 8, 14, 97 A.2d 901, 903

(1953) (“[C]ontributory negligence cannot be found as a matter of law, unless the evidence

permits of but one interpretation which shows some prominent and decisive act in regard

to which there is no room for ordinary minds to differ.”).

       [W]hen a defendant moves for judgment based on an affirmative defense, or
       upon the legal insufficiency of the plaintiff's evidence, the trial judge must
       determine if there is any evidence, no matter how slight, that is legally
       sufficient to generate a jury question, and if there is, the motion must be
       denied and the case submitted to the jury. It is only when the facts and
       circumstances only permit one inference with regard to the issue presented,
       that the issue is one of law for the court and not one of fact for the jury. An
       appellate court must review the grant or denial of a motion for judgment by
       conducting the same analysis as the trial judge.

Thomas, 423 Md. at 394, 31 A.3d at 588 (citations and internal quotation marks omitted).



                                             23
       Section 19-110 requires the insurer to show how it was prejudiced by the insured’s

late notice in investigating, settling, or defending of the underlying actions. Sherwood

Brands, Inc., 418 Md. at 331, 13 A.3d at 1287 (“Sherwood ‘breached the policy . . . by not

giving the insurer required notice’ as provided in § 19-110, and, thus, the statute applies to

require Great American to show how it was prejudiced by Sherwood’s late-delivered notice

in investigating, settling, or defending of the Massachusetts and Israeli actions.”). Ms.

Conboy, on behalf of National Union, testified regarding what National Union might have

done differently if it had been given earlier notice by FFA. National Union argues that it

would have appointed its own panel attorney to defend FFA in the RICO Case; monitored

the ESA Case; participated in the decision to stay the RICO Case; and tried to settle the

RICO Case before Judge Sullivan made his factual findings in December of 2009.

       We agree with FFA’s response to this possible or hypothetical prejudice. Ms.

Conboy acknowledged that the most counsel could have done in the ESA Case was to

monitor it and keep National Union “apprised of what was happening in the ESA Case so

that [it] would . . . know if anything . . . potentially bad was going to happen that would

affect the [RICO Case].” FFA points out that National Union’s counsel could not have

controlled prosecution of the ESA Case nor could it have intervened. Even if National

Union had received earlier notice, its involvement in the ESA Case would have been

speculative because its involvement would have been dependent upon FFA’s consent.

Because National Union argues it suffered prejudice based on an inability to participate in

litigation in which it had no actual right to participate, any prejudice caused by the late

notice is conjectural. Moreover, prejudice in the form of an inability to participate in

                                             24
litigation is not a result of late notice, it is the result of not having any right to participate

in that litigation at all.

        Furthermore, by August of 2007, the point at which National Union expected to

have received notice of the RICO claim, the direction of the ESA Case was well established

and it was apparent that the organizational plaintiffs had been paying Rider since 2001.

Additionally, the plaintiffs had already provided discovery responses that Judge Sullivan

later found to be incomplete and misleading. Moreover, there is no evidence that by

appointing a panel attorney to monitor the ESA Case, National Union would have in any

way impacted the outcome of that Case. Similarly, there is no evidence that had National

Union appointed counsel for FFA in the RICO Case in 2007, that the case would not have

been stayed and decided before the ESA Case. This is because the allegations in the RICO

Case were premised on the findings entered against FFA in the ESA Case and the damages

were fees incurred and continued to be incurred in the ESA Case. Judge Sullivan, who

presided in both cases, found that the decision in the RICO Case had to await the outcome

of the ESA Case. Lastly, there was no evidence that had National Union been notified in

2007 rather than 2010, the RICO Case would have settled or for a sum less than the actual

settlement in 2014. There is no legitimate reason advanced as to why Feld would have

wanted to settle the RICO Case while the ESA Case was pending.

        National Union analogizes this case to Local Gov’t Ins. Trust and Kemper. See

Local Gov’t Ins. Trust, 388 Md. at 162, 879 A.2d at 98; Washington v. Federal Kemper

Ins. Co., 60 Md. App. at 288, 482 A.2d at 503. However, the insurer’s right to participate

in a claim distinguishes the case sub judice from those cases. In those cases, the insured

                                               25
failed to notify the insurer of a claim until after that claim had gone to trial and a judgment

had been entered against the insured. Local Gov’t Ins. Trust, 388 Md. at 190, 879 A.2d at

81; Fed. Kemper Ins. Co., 60 Md. App. at 290–91, 482 A.2d at 504. Further, in those cases,

if notice had been timely, the insurer could have involved itself in the litigation by

appointing counsel, investigating the claim, directing the defense, and even settling the

claim as the insurance policy allowed.

       In the Kemper case, the insurer was found to be actually prejudiced as a matter of

law when the insured did not give its insurer notice of a contract and tort lawsuit brought

against it. Fed. Kemper Ins. Co., 60 Md. App. at 294, 482 A.2d at 506. Kemper, the

insurer, was not notified until after the case had been tried by a jury, the court had entered

a directed verdict against the insured on one count, and the jury had found against it on two

other counts. Fed. Kemper Ins. Co., 60 Md. App. at 290–91, 482 A.2d at 504. The Court

of Special Appeals in Kemper held that “Kemper’s rights to investigate, evaluate coverage,

choose defense counsel, and attempt to settle were substantial rights which were denied by

the [insured’s] conduct in this case which resulted in substantial actual prejudice to the

[insurer].” Fed. Kemper Ins. Co., 60 Md. App. at 294, 482 A.2d at 506.

       Similarly, in Local Gov’t Ins. Trust, notice of the claim was not given until after

judgment was entered on the claim. That case involved a police brutality claim against

Prince George’s County and three Prince George’s County police officers. Local Gov’t

Ins. Trust, 388 Md. at 167–68, 879 A.2d at 84–85. The Trust, the excess insurer for Prince

George’s County, denied coverage because the County failed to inform it of the incident,

claim, and lawsuit until after the trial. The jury awarded the injured party damages of over

                                              26
$4.1 million. The County paid the judgment. “At no point prior to the jury verdict did the

County notify the Trust of the incident involving the officers and [Mr.] McCollum or of

[Mr.] McCollum’s suit against the County and its officers. On April 13, 2000, ten days

after the jury returned its verdict, the County first wrote to the Trust, [and] informed the

Trust of the judgment[.]” Local Gov’t Ins. Trust, 388 Md. at 167–68, 879 A.2d at 84–85.

This Court held that the untimely notice effectively nullified the insurer’s contractual rights

to “participate[ ] in trial preparation, propose[ ] trial strategies, and encourage[ ]

settlement.” Local Gov’t Ins. Trust, 388 Md. at 193, 879 A.2d at 100. “Indeed, the Trust

had no opportunity to participate in the investigation, settlement, or defense before the

verdict was issued.” Id. (holding that the insurer was prejudiced under the common law,

rather than § 19-110 because the Trust was technically an insurance pool and,

consequently, did not meet the definition of an “insurer” under § 1-101). We said, “[t]he

delay vitiates the purpose of the contractual notice requirement, as the insurer cannot

exercise any of its rights to investigate, defend, control, or settle the suit. Accordingly,

courts have held that the insurer is prejudiced as a matter of law.” Local Gov’t Ins. Trust,

388 Md. at 190, 879 A.2d at 98.

       Unlike the case at bar, in Local Gov’t Ins. Trust and Kemper, the late notice resulted

in actual prejudice because it eliminated the insurer’s right to control or participate in

litigation against its insured and to resolve the claim or employ a more effective strategy.

Thus, the actual prejudice in Local Gov’t Ins. Trust and in Kemper was that the late notice

resulted in the impairment of actual rights held by the insurers with respect to the litigation.

Here, National Union never had a right to participate in any part of the litigation in the ESA

                                              27
Case because that case involved FFA acting as a plaintiff to sue Feld; FFA was not seeking

defense coverage from National Union in the ESA Case. Thus, having no actual right to

involvement in the ESA Case, National Union did not suffer any actual prejudice.

Although National Union contends that in addition to appointing panel counsel, it could

also have advised FFA, the harm resulting from its inability to do so is merely hypothetical.

Nothing bound FFA to abide by or to even entertain National Union’s advice. Moreover,

National Union was aware of the RICO Case less than two months after the stay was lifted

and before the merits of that case had been reached.

       This Court, in Home Indemnity Co. v. Walker, found no actual prejudice existed in

that case. 260 Md. 684, 685, 273 A.2d 429, 429 (1971). The insured notified the insurer

that she was involved in an automobile accident. Walker, 260 Md. at 685, 273 A.2d at 429.

The insurer unsuccessfully attempted to settle the case with the plaintiff’s lawyer which

led to the plaintiff filing suit. Id. During this time, the insured moved to California without

notifying the plaintiff. Walker, 260 Md. at 686, 273 A.2d at 430. The plaintiff was

eventually able to locate the insured, serve her, and obtain a default judgment. Id. When

the plaintiff presented the default judgment to the insurer, the insurer refused to pay the

money judgment and claimed actual prejudice based on “the fact that it received written

notice of the filing of the suit ‘after it was too late to do anything about it.’” Walker, 260

Md. at 687, 273 A.2d at 431. This Court held that the insured’s failure to notify did not

deprive the insurer of all opportunity to settle, even after default judgement. Id. Similarly,

in the instant case, National Union had the opportunity to get involved in mediation and

settlement in the RICO Case but declined. Further, we held in Walker that the insurer was

                                              28
not actually prejudiced despite the plaintiff’s pointing out to the insurer that they could use

the default judgment as leverage in settlement negotiations. Walker, 260 Md. at 687, 273

A.2d at 430 (The comment “I am sure you would like time to re-examine your file, etc. and

possibly to increase your offer for an out-of-court settlement” was stated by the plaintiffs

in a letter to the insurer.). Here, there is an even weaker argument for finding actual

prejudice as Feld never suggested or took the position that the findings from the ESA Case

had increased the settlement value of the RICO Case.

       In Allstate, this Court held that the automobile liability insurer was actually

prejudiced when the insured breached the cooperation clause of the insurance policy by

refusing to attend depositions, respond to interrogatories and demands for documents, and

attend trial. Allstate Ins. Co., 363 Md. at 128, 767 A.2d at 843. The insured’s actions

precluded the insurer from presenting evidence that the insured was driving at a normal

speed, concerned about ice, and had hazard lights on at the time of the accident. Allstate

Ins. Co., 363 Md. at 129, 767 A.2d at 844. If this evidence had been presented a jury could

have reasonably found no negligence by the insured in the operation of the vehicle. Allstate

Ins. Co., 363 Md. at 116, 767 A.2d at 837.

       The prejudice was not in terms of how the jury would actually have viewed
       this evidence, whether the jury would have found it believable or not
       believable, for that is purely a matter of speculation. The prejudice lies in
       the fact that there was a credible defense to be presented and that Kirby's
       non-cooperation precluded State Farm from even presenting that defense.

Allstate Ins. Co., 363 Md. at 129–30, 767 A.2d at 844. Though there was also a breach of

the insurance contract when FFA did not provide timely notice, unlike in Allstate, there

was no lost opportunity to present evidence resulting in actual prejudice to National Union.

                                              29
Although the findings in the ESA Case would naturally affect the outcome in the RICO

Case because they would establish a violation of the RICO Act and constitute mail and

wire fraud, National Union was not affected in its right to investigate, settle, or defend the

RICO claim. This is so because National Union could not have intervened in, impacted,

or influenced the outcome of the ESA Case. The ESA Case was a completely separate

action, which did not involve National Union. National Union had no duty to defend where

its insured was suing another party. National Union only had the right to be involved in

the RICO Case, as that case involved its insured, FFA, defending claims brought against

it. Moreover, National Union was notified shortly after the stay was lifted in the RICO

Case, before mediation, settlement or a trial in the RICO Case had taken place.

       Maryland law requires proof of actual prejudice to avoid policy holder forfeiture

and insurance company windfall. Local Gov’t Ins. Trust, 388 Md. at 185–86, 879 A.2d at

95. The lack of a connection or link between the alleged actual prejudice and delayed

notice, and the notion that an insurer can hang its disclaimer on any developments that

occurred before notice was given, regardless of whether the earlier notice would have made

a difference in the outcome of the case, is inconsistent with § 19-110.

       We hold that an insurer must show, by a preponderance of the evidence, that the

insured’s delay in giving notice resulted in actual prejudice to the insurer in order to

disclaim coverage under § 19-110. National Union could not show, by a preponderance of

the evidence, that the late notice resulted in actual prejudice in order to disclaim coverage.

National Union argued it was actually prejudiced because it believed FFA was precluded

in the RICO Case from contesting many of the facts found by the court in the ESA Case,

                                             30
as those facts undermined any defense FFA might have raised. Although FFA’s defense

in the RICO Case may have been hindered by the adverse findings from the ESA Case, this

alleged prejudice was not attributable to the late notice FFA gave to National Union

concerning the RICO Case. The ESA case did not involve National Union and it could not

have intervened in, impacted, or affected the ESA findings. Prejudice in the form of

National Union’s inability to do anything it might have done had it received earlier notice

is entirely speculative. Moreover, National Union’s inability to participate in the ESA Case

was not the result of late notice, but rather, was the result of lacking any right to participate

in the case. Further, National Union was informed by FFA of the RICO Case almost

immediately after the stay in the RICO Case was lifted and before mediation, settlement,

or the merits of the case had been reached. Therefore, National Union was not prejudiced

in investigating, settling, or defending the RICO Case as a result of it receiving late notice.

                                     Collateral Estoppel

       “The doctrine of collateral estoppel precludes a party from re-litigating a factual

issue that was essential to a valid and final judgment against the same party in a prior

action.” Shader v. Hampton Improvement Ass’n, Inc., 217 Md. App. 581, 605, 94 A.3d

224, 238 (citing Welsh v. Gerber Prods., Inc., 315 Md. 510, 516, 555 A.2d 486 (1989)),

cert. granted, 440 Md. 225, 101 A.3d 1063 (2014), aff’d, 443 Md. 148, 115 A.3d 185

(2015). There is a four-part test under Maryland law which must be satisfied for collateral

estoppel to apply.

       1. Was the issue decided in the prior adjudication identical with the one
          presented in the action in question?
       2. Was there a final judgment on the merits?

                                               31
       3. Was the party against whom the plea is asserted a party or in privity with
          a party to the prior adjudication?
       4. Was the party against whom the plea is asserted given a fair opportunity
          to be heard on the issue?

Wash. Suburban Sanitary Comm’n v. TKU Assocs., 281 Md. 1, 18–19, 376 A.2d 505, 514

(1977) (citing Pat Perusse Realty Co. v. Lingo, 249 Md. 33, 39, 238 A.2d 100, 104 (1968)).

       In addition, collateral estoppel as a defense to a claim is an affirmative defense and

must be raised in a party’s answer. Md. Rule 2-323(g)(4). The defense is waived if it is

not raised properly. Md. Rule 2-323(a). The Court of Special Appeals agreed with

National Union that FFA’s waiver argument, that National Union did not specifically raise

collateral estoppel as a defense in the Coverage Case, was meritless. National Union’s

defense to the breach of the insurance contract claim was that it could disclaim coverage

due to actual prejudice resulting from FFA’s breach of the 2007 Policy by providing late

notice of the RICO Case. National Union claimed that by the time it had notice of the

RICO Case, in 2010, Judge Sullivan had already made findings of fact detrimental to FFA

in the ESA Case. And, moreover, National Union contends, in the RICO Case, Feld could

have raised collateral estoppel offensively to preclude FFA from contesting the court’s

factual findings. Therefore, according to National Union, it was not defending the breach

of the insurance contract claim against it on the ground of collateral estoppel, rather it was

asserting actual prejudice. National Union pointed out that Feld could have asserted the

doctrine of collateral estoppel in the RICO Case and that would have prejudiced FFA’s

defense and therefore ultimately prejudiced National Union. National Union contends it

was not required to plead collateral estoppel as an affirmative defense in its answer in the


                                             32
Coverage Case because it was not raising the doctrine as a defense, rather it was asserting

the doctrine to demonstrate actual prejudice.

       The Circuit Court found that Judge Sullivan, in the RICO Case, would have likely

precluded FFA from re-litigating factual findings made in the ESA Case. The findings in

the ESA Case were that “Rider [was] essentially a paid plaintiff[,]” the organizational

plaintiffs used the United States mail system to make payments, and the payments “were

not disclosed initially in discovery, by both omissions and affirmatively false statements.”

Feld Entm’t, Inc., 677 F. Supp. 2d at 67, 77, 83. Further, the Circuit Court reasoned that

findings in the ESA Case were related to the same issues that formed the basis for Feld’s

RICO, conspiracy, abuse of process, and malicious prosecution claims; hence, the issues

were fully litigated. The court noted that Judge Sullivan made findings regarding those

issues (which he knew overlapped issues pending in the RICO Case). In addition, the

Circuit Court noted that FFA had the opportunity and did contest those issues, thus, it

would conserve judicial resources to preclude relitigation of identical factual issues.

       In our view, under the collateral estoppel doctrine, in the RICO Case, FFA could

have been precluded from contesting those same prejudicial facts and would have been

bound by them. Moreover, those facts could have been significantly detrimental to FFA’s

defense in the RICO Case. Alternatively, even if collateral estoppel did not apply and the

factual findings in the ESA Case were not binding on FFA in the RICO Case, as the Circuit

Court pointed out, the findings had the potential to create prejudice in terms of evaluating

the settlement of the RICO Case and could drive up the settlement value.



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       Assuming arguendo that collateral estoppel would have prejudiced the RICO Case

due to the adverse factual findings made in the ESA Case—that FFA paid Mr. Rider for

testimony, concealed those payments, and used the United States mail system—it could

certainly have hindered FFA’s defense in the RICO Case or driven up the amount of the

settlement demand. However, as we discussed, National Union could not establish in the

Coverage Case that late notice of the claims resulted in actual prejudice because National

Union had no right to involvement in the ESA Case. At best, National Union could have

“monitored” that case.

                                  Instruction on Remand

       The Court of Special Appeals noted that if FFA had moved for judgment in the

Coverage Case, the court would have directed the Circuit Court to enter judgment in favor

of FFA on liability. Further, if FFA did move for judgment on remand the trial court should

enter judgment in FFA’s favor; however, the determination of damages was not before the

intermediate appellate court and that issue would have to be decided on remand. We hold

that the Court of Special Appeals did not exceed its authority and abuse its discretion, by

instructing the trial court on remand to permit the filing and granting of a belated motion

for judgment, even though such a motion was never filed at the time of trial. Ray v. State,

206 Md. App. 309, 337 n.13, 47 A.3d 1113, 1128 n.13 (2012), aff’d, 435 Md. 1, 76 A.3d

1143 (2013) (to be preserved, “an issue simply needs to be ‘raised in or decided by the trial

court,’ regardless of which party raises the issue”); Md. Rule 2-501(f) (noting that the court

“shall enter judgment in favor of or against the moving party”). National Union could not



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have satisfied its burden under § 19-110 and therefore judgment should not have been

granted in its favor.

       In addition, Md. Rule 8-131(a) grants the appellate courts of this State discretion to

review any unpreserved issue. Jones, 379 Md. at 715, 843 A.2d at 784–85. The Court of

Special Appeal’s decision to consider an “unpreserved issue” is reviewed under a

deferential abuse of discretion standard. Jones, 379 Md. 704, 715, 713, 843 A.2d 778, 785,

783 (2004) (“[A]n appellate court has discretion to excuse a waiver or procedural default

and to consider an issue even though it was not properly raised or preserved by a party”).

We hold that it was proper for the Court of Special Appeals to direct the Circuit Court to

enter judgment in favor of FFA.

                                     CONCLUSION

       For the reasons stated above, we affirm the judgment of the Court of Special

Appeals.

                                             JUDGMENT OF THE COURT OF
                                             SPECIAL APPEALS IS AFFIRMED.
                                             COSTS TO BE PAID BY PETITIONER.




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