Mardirossian v. Paul Revere Life Ins ( 2002 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
ARIS MARDIROSSIAN, 
Plaintiff-Appellant,
v.
 No. 01-1922
THE PAUL REVERE LIFE INSURANCE
COMPANY,
Defendant-Appellee.

ARIS MARDIROSSIAN, 
Plaintiff-Appellee,
v.
 No. 01-1923
THE PAUL REVERE LIFE INSURANCE
COMPANY,
Defendant-Appellant.

Appeals from the United States District Court
for the District of Maryland, at Greenbelt.
Alexander Williams, Jr., District Judge.
(CA-99-1192-AW)
Argued: February 25, 2002
Decided: April 17, 2002
Before LUTTIG and GREGORY, Circuit Judges, and
Henry M. HERLONG, Jr., United States District Judge
for the District of South Carolina, sitting by designation.
Vacated and remanded with instructions by published opinion. Judge
Luttig wrote the opinion, in which Judge Gregory and Judge Herlong
joined.
2 MARDIROSSIAN v. PAUL REVERE LIFE INS.
COUNSEL
ARGUED: Albert David Brault, BRAULT, GRAHAM, SCOTT &
BRAULT, L.L.C., Rockville, Maryland, for Appellant. Derek Barnet
Yarmis, FUNK & BOLTON, P.A., Baltimore, Maryland, for Appel-
lee. ON BRIEF: Joan F. Brault, James M. Brault, BRAULT, GRA-
HAM, SCOTT & BRAULT, L.L.C., Rockville, Maryland, for
Appellant. Bryan D. Bolton, FUNK & BOLTON, P.A., Baltimore,
Maryland, for Appellee.
OPINION
LUTTIG, Circuit Judge:
This suit arises out of the Paul Revere Insurance Company’s ("Paul
Revere") refusal to issue an insurance policy to Aris Mardirossian.
The district court granted summary judgment in favor of Paul Revere
and Mardirossian appeals.
I.
Aris Mardirossian sought to purchase disability insurance from
Paul Revere. Prior to submitting his application, Mardirossian told his
insurance agent, licensed by Paul Revere, that he was diagnosed with
and treated for sarcoidosis (a disease involving the formation of
tumor-like nodules). At the time of application for coverage, the dis-
ease had gone into remission. According to Mardirossian, following
several conversations between Mardirossian and his agent, and
between the agent and Paul Revere, the insurance company advised
that the policy would issue despite his medical condition. J.A. 24
(Amended Complaint, ¶ 5). Mardirossian alleged that "[t]here was
nothing remaining to be done but file the application with Paul
Revere and Paul Revere was to send the policy with the terms agreed
upon. Paul Revere’s managing agent promised to do so." J.A. 25
(Amended Complaint, ¶ 6). However, upon requesting and obtaining
an additional blood sample from Mardirossian, Paul Revere declined
to issue the policy and returned his premium deposit.
MARDIROSSIAN v. PAUL REVERE LIFE INS. 3
Mardirossian filed a complaint with the Maryland Department of
Insurance, which has yet to render any determination on the merits.
He then filed a complaint in state court, requesting, inter alia, "that
[the] Court enter a judgment of specific performance ordering Paul
Revere to issue the policy as applied for by Mardirossian," J.A. 27.
Paul Revere removed the suit to federal court. It then moved for sum-
mary judgment, which the district court granted on Mardirossian’s
claim for specific performance. The court denied as moot Paul
Revere’s counterclaim, which alleged that even if Mardirossian were
granted specific performance, Paul Revere was entitled to rescind his
insurance coverage because Mardirossian failed to disclose a material
fact relating to his health, namely, his back condition.
II.
The district court concluded that Mardirossian sought to compel
Paul Revere to issue a disability insurance policy that it allegedly
agreed to provide Mardirossian despite his sarcoidosis. Said the court,
"[i]n order for the Plaintiff to properly receive the remedy that he is
asking for, he must first await the ruling from the Insurance Commis-
sioner. After such time, the decision of the Insurance Commissioner
can be appealed to the proper court." J.A. 183. The court then granted
summary judgment to Paul Revere "because the remedy sought,
enforcement of the alleged oral agreement, is under the exclusive
jurisdiction of the Maryland Insurance Commissioner. The Plaintiff
has failed to exhaust his administrative remedies in seeking specific
performance." Id.
As a threshold matter, in order for the grant of summary judgment
to be a proper disposition here, the court had to reach the merits of
Mardirossian’s claim. That the court did not do. J.A. 182 ("The Court
recognizes that there is a genuine dispute as to whether a valid con-
tract was formed. . . . However, the Court does not need to reach this
issue in order to reach a conclusion."). Instead, it based its ruling on
the exhaustion requirement. Thus, we vacate the grant of summary
judgment.
However, we cannot simply remand the case for consideration of
the merits because, as the district court itself seemed to recognize,
there is an antecedent issue of jurisdiction. That is, if the Maryland
4 MARDIROSSIAN v. PAUL REVERE LIFE INS.
Insurance Code provides either the exclusive remedy or the primary
remedy (requiring that a claimant first invoke and exhaust the admin-
istrative remedies), Mardirossian is improperly before the court and
the court should dismiss for lack of subject matter jurisdiction. If,
however, the remedy is concurrent, the court should proceed to rule
on the merits.*
The nature of the administrative remedy depends largely on the
existence of a judicial remedy and its relationship to the underlying
statutory scheme. Zappone v. Liberty Life Ins. Co., 349 Md. 45, 62
(1998) (a remedy is exclusive "only when the Legislature has indi-
cated that the administrative remedy is exclusive or when there exists
no other recognized alternative statutory, common law, or equitable
cause of action") (emphasis added); id. at 65 ("Where [a] judicial
cause of action is wholly or partially dependent upon the statutory
scheme which also contains the administrative remedy, or upon the
expertise of the administrative agency, the Court has usually held that
the administrative remedy was intended to be primary and must first
be invoked and exhausted before resort to the courts.") (emphasis
added); id. at 65-66 ("[W]here the alternative judicial remedy is
entirely independent of the statutory scheme containing the adminis-
trative remedy, and the expertise of the administrative remedy is not
particularly relevant to the judicial cause of action, the Court has held
that the administrative remedy is [concurrent].") (emphasis added).
According to the complaint, Mardirossian sued for specific perfor-
mance, alleging that there was an oral contract between him and Paul
Revere. J.A. 16-17. Mardirossian argues that his claim for specific
performance is a straightforward contract claim, wholly independent
of any administrative remedies available under the Code.
In support, he cites Phoenix Ins. Co. v. Ryland, 16 A. 109 (Md.
1888), and National Fire Ins. Co. v. Tongue, Brooks & Co., 61 Md.
App. 217 (1985). However, Tongue has nothing to do with the avail-
ability of specific performance as a remedy for oral insurance con-
tracts and preemption of causes of action, such as Mardirossian’s, by
*It is unclear whether the court held that the Maryland Insurance Code
provides the exclusive remedy for Mardirossian’s claim or a primary
remedy; for reasons that follow, we need not resolve this ambiguity.
MARDIROSSIAN v. PAUL REVERE LIFE INS. 5
the Insurance Code. See id. at 225 ("We are dealing here with a basic
contract issue of offer and acceptance.").
And while Ryland addresses the question before us, as it affirmed
the grant of specific performance of an oral contract to issue an insur-
ance policy (covering cargo), Ryland predates the enactment of the
Maryland Insurance Code, which may have modified or supplanted
Maryland’s common law of contracts. For instance, certain provisions
of the Maryland Insurance Code that prohibit unfair trade practices
and give the Commissioner authority to enjoin and restrain such prac-
tices, see Md. Code Ann. (Insurance) §§ 27-103, 104, 105, may pre-
empt or render secondary (that is, require exhaustion of administrative
remedies before seeking judicial relief) the traditional equitable rem-
edy of specific performance.
We are not persuaded, however, by Paul Revere’s assertion that
Muhl v. Magan, 313 Md. 462 (1988), conclusively resolves the ques-
tion of the availability of specific performance on an oral contract to
issue a disability policy. In Muhl, the court noted that "[defendant’s]
objective is to have [the insurance company] compelled to enter into
a contract with him, a form of relief generally unknown to the com-
mon law." Id. at 480. We believe, however, that Muhl is simply not
on point. In that case, the defendant filed a complaint with an Insur-
ance Commissioner, challenging the insurer’s refusal to cover his
medical practice (there was no allegation of the existence of a con-
tract). The defendant explicitly based his complaint on section 234A
of Subtitle 15 of the Insurance Code (unfairness or discrimination in
underwriting), id. at 470, which provides that "[n]o insurer . . . shall
. . . refuse to underwrite . . . a particular insurance risk . . . except by
the application of standards which are reasonably related to the insur-
er’s economic and business purposes." And, indeed, there is no com-
mon law cause of action against an insurance company for its failure
to calculate objectively the probability of an adverse effect upon the
insurer, which is precisely what section 234A of the Code requires
and what was at issue in Muhl. Here, by contrast, Mardirossian’s
complaint, at least on its face, is not based on any section of the Insur-
ance Code, but rather appears to allege a wrong (failure to perform
on an oral contract) that has been traditionally vindicated by the com-
mon law.
6 MARDIROSSIAN v. PAUL REVERE LIFE INS.
In the absence of any authority bearing directly on the question
before us, we remain uncertain whether Maryland common law does
in fact provide a cause of action for the wrong Mardirossian alleges.
Accordingly, we vacate the grant of summary judgment and remand
this case to the district court with instructions to certify the following
question to the Maryland Court of Appeals:
Does Maryland law provide a judicial cause of action,
entirely independent of the Maryland Insurance Code, for a
claim to compel specific performance on an oral contract for
disability insurance?
Once the court receives the response, it will be able to ascertain,
by applying the framework of Zappone, whether the Maryland Insur-
ance Code provides an exclusive, primary or concurrent remedy.
Depending on the disposition of this claim, the court should also
reconsider whether Paul Revere’s counterclaim is indeed moot.
CONCLUSION
For the foregoing reasons, we vacate the grant of summary judg-
ment, and remand with instructions for certification.
VACATED AND REMANDED WITH INSTRUCTIONS