Lead Opinion
This case arises from a dispute as to whether Montgomery County, Maryland (“the County”), Petitioner, a self-insured entity, may recover damages from Montgomery County Police Officer John Distel, (“Respondent”), for the costs of repairing a County-owned police patrol vehicle, which was damaged in a single-car collision while Respondent operated the vehicle under the influence of alcohol. Specifically, we must determine whether Maryland’s compulsory motor vehicle insurance scheme permits a self-insurer, such as the County, to disclaim or exclude insurance coverage, in a self-insurance guarantee, where an individual causes a collision while driving under the influence of alcohol. For the below reasons, we answer the
BACKGROUND
The County’s Self-Insurance Policy and Guarantee
The County is a self-insured entity approved by the Motor Vehicle Administration (“the MVA”). For the period from February 1, 2008, to February 1, 2009, the County agreed to provide motor vehicle liability insurance for County-owned vehicles “commensurate with the provisions as set forth in Section 17-103, Transportation Article, Annotated Code of Maryland and COMAR 11.18.02.” In an application for self-insurance, dated January 8, 2008, the County stated that it would provide coverage for the minimum mandatory limits for: (1) bodily injury liability; (2) uninsured motorist claims; and (3) property damage liability. The County submitted to the MVA a signed Guarantee (“the Guarantee”), which provided, in relevant part:
This guarantee is limited to payment of valid claims arising from motor vehicle accidents resulting from use or operation of covered vehicles by persons authorized to use such vehicles and occurring within the scope of such authorization. Where the use of a County vehicle is prohibited by any applicable vehicle-use policy, coverage is excluded under this Guarantee for damage of any kind.
The County’s self-insurance policy and Guarantee were approved by the MVA and were in effect at the time of the collision at issue.
The Collective Bargaining Agreement
In 2008, at the time of the collision at issue, there was a Collective Bargaining Agreement (“the CBA”) in effect between the County and the Fraternal Order of Police, Mont
Section D. General. Eligible officers participating in the program will be issued a police vehicle for on-duty and off-duty use subject to the regulations in this Article. All take home vehicles assigned to officers will be defined as personal patrol vehicles (PPVs). This policy pertains to all officers assigned PPVs[.]
Section G. Program Regulations. The following regulations apply to all participating officers as well as those officers using PPVs on a temporary basis:
2. PPVs will not be operated within four (4) hours after the officer has ingested any amount of alcohol. PPVs will not be operated after the officer has ingested any drug that impairs his ability to operate the vehicle. No alcoholic beverages will be carried in the PPV except when they are seized as evidence or contraband.
7. The PPV will not be used to carry excessively large or heavy loads or objects which protrude from the trunk or windows, except when required in the performance of official duties.
Section H. PPV Operating Procedures
5. All officers will use seat belts when operating or riding in County motor vehicles, except when an officer’s duties necessitate frequent exiting from the vehicle (i.e., checking stores within the same shopping complex)....
On May 9, 2008, at approximately 1:25 a.m., Respondent was operating a PPV, while off-dnty, and was involved in a single-vehicle collision, which damaged the PPV and resulted in financial loss to the County. At the time of the collision, Respondent was under the influence of alcohol.
Shortly after the collision, through his union representative, Respondent filed a grievance against the County, seeking a determination that the CBA precluded the County from obtaining damages against him for the cost of repairs to the PPV. The grievance went to arbitration. The arbitrator decided that he could not determine whether the County was entitled to recover damages against Respondent, as the matter needed to be resolved through a civil action rather than an administrative action. The parties agreed that the arbitrator would retain jurisdiction, but that the County could seek a civil judgment against Respondent, and if the County succeeded, the FOP could seek to reopen arbitration to determine whether the CBA permitted the civil judgment.
On August 3, 2010, in the District Court of Maryland sitting in Montgomery County (“the district court”), the County filed a complaint against Respondent seeking to recover, the cost of
On October 19, 2011, the district court conducted a one-day trial.
Respondent noted an appeal to the Circuit Court for Montgomery County (“the circuit court”). Following a hearing, the circuit court reversed the judgment of the district court and entered judgment in favor of Respondent, ruling from the bench, in pertinent part, as follows:
[T]he District Court erred in finding that this was a permissive use exclusion that permitted the County to proceed and subrogate its claim against [Respondent]. I do not find that this is a permissive use exclusion which would preclude [Respondent] from being protected against [a] claim by the County. That the extension of this would deny coverage of anyone who was injured by an operator of a County vehicle who’s using and operating that County vehicle happened to be driving drunk at the time would exclude that. And that’s clearly contrary to the applicable law and I do not find that this is a permissive use exclusion that allows the County to proceed or subrogate[e] against [Respondent],
DISCUSSION
The County contends that it may recover damages from an employee where the employee operates a county-owned vehicle contrary to an applicable vehicle use policy. The County argues that the Guarantee: (1) provides coverage for claims arising from motor vehicle collisions resulting from “use or operation of a covered vehicle by a persons authorized to use such vehicle and occurring within the scope of such authorization”; and (2) excludes coverage where the use of the County vehicle is prohibited by any applicable vehicle use policy. The County asserts that the CBA contains the applicable vehicle use policy that excludes coverage where an officer operates a PPV after consuming alcohol. The County maintains that, because the MVA approved and accepted the Guarantee, with the restriction, coverage is excluded, and it is entitled to seek damages from Respondent, regardless of whether the restriction is authorized by the General Assembly or reduces insurance coverage below that required under Maryland’s compulsory insurance statute.
Respondent replies that contractual restrictions or exclusions in automobile insurance policies that reduce insurance coverage below that required by Maryland’s compulsory automobile insurance laws, and that are not expressly authorized as exceptions by the General Assembly, are invalid and unenforceable. Respondent contends that “Maryland law does not allow an insurer to exclude insurance coverage because the insured was driving under the influence”; i.e., the General Assembly has not promulgated an exception to insurance coverage to exclude coverage for those driving under the influence of alcohol.
In a reply brief, the County responds that the applicable vehicle use policy is contained at Section G of Article 35 of the CBA, which sets forth “the scope of the permitted use of a police vehicle!,]” and that the vehicle use policy does not include other sections such as Section H, “which designates certain procedures that the officer is to follow when he or she is operating a police vehicle within the scope of permission.” (Footnote omitted).
In Marwani v. Catering by Uptown,
[We] will set aside the judgment of a court based on the factual finding of that court only when those findings are clearly erroneous. Maryland Rule 8-131(c)____ The legal analysis of the District Court and of the Circuit Court, however, enjoy no deferential standard of appellate review. Helinski v. Harford Memorial Hosp., Inc.,376 Md. 606 , 614-15,831 A.2d 40 , 45 (2003). We review [without deference] their interpretations of the relevant statutes.
(Omission in original) (quoting Friendly Fin. Corp. v. Orbit Chrysler Plymouth Dodge Truck, Inc.,
As to the motor vehicle insurance scheme within the State of Maryland, we, in no uncertain terms, have stated:
*236 Maryland is a compulsory motor vehicle insurance state. Since the enactment of Ch. 78 of the Acts of 1972, effective January 1,1973, “the owner of a motor vehicle registered or required to be registered in Maryland must maintain a motor vehicle insurance policy on the vehicle, or self-insurance approved by the M.V.A. [Motor Vehicle Administration].”
BGE Home Prods. & Servs., Inc. v. Owens,
Under the compulsory motor vehicle insurance scheme, the General Assembly treats “approved self-insurance as the equivalent of an insurance policy[.]” BGE Home,
“[W]e see no reason to distinguish a certificate of self-insurance from a motor vehicle liability insurance policy. Indeed, by making the minimum amounts of required coverage applicable to motor vehicle liability policies as well as to*237 all other forms of security, we think the legislature demonstrated a clear intent to treat all forms of insurance equally.”
Id. at 247,
The compulsory motor vehicle insurance scheme in Maryland is designed to provide coverage, or payment, for liability claims.
In accordance with the compulsory motor vehicle insurance scheme, the Montgomery County Code enables the County to obtain “comprehensive auto liability” insurance either from an insurance company authorized to do business within the State or through a self-insurance program. Montgomery County Code, Chapter 20, Article VII, Insurance § 20-37(c). The purpose of such a policy is “to provide an adequate comprehensive insurance program to compensate for injury to persons or damage to property resulting from negligence or other wrongful acts of the county’s public officials, employees and agents and to provide protection for property of the county and for officials, employees, and agents acting within the scope of their duties.” Id. § 20-37(a). Concerning self-insurance, the Montgomery County Code provides: “Insurance protection furnished to the participating agencies by the Montgomery County self-insurance program will not be less than the coverage provided under the independent insurance programs of the participating agencies when they begin to receive coverage from the fund.” Id. § 20-37(e)(3).
As a result of Maryland’s compulsory motor vehicle insurance scheme, we have held, on numerous occasions, that “contractual exclusions in automobile insurance policies that excuse or reduce benefits below the minimum statutorily
In Salamon,
In reviewing the validity of the “pizza exclusion” clause, we stated that we “consistently ha[ve] declared invalid insurance policy exclusions that excuse or reduce the insured parties’
[The insurer] argues that it is entitled to deny [the insured driver] coverage because, at the time of his accident, he was delivering food for compensation in violation of the terms of the insurance contract. Because [the insurer] seeks to deny all coverage to [the insured driver], rendering him uninsured for the accident, the exclusion reduces coverage below the statutory minimum levels.
The “pizza exclusion” has not been authorized by the General Assembly. [The insurer] has not pointed to any Maryland statute that either expressly or impliedly gives insurers the authority to add such an exclusion to their insurance contracts, and thereby to reduce or eliminate benefits below the statutory minimum levels. Upon review of title 17 of the Transportation Article and title 19 of the Insurance Article of the Maryland Code, we too are unable to find any such provision. Accordingly, [the insurer’s commercial use exclusion in [the insured driver]’s policy is invalid.
Id. at 316-17,
In BGE Home,
We held that BGE Home, as a self-insurer, had a duty to defend because “[a]n insurer’s duty to defend, while contractual, is nevertheless a fundamental feature of a basic liability insurance policy.” Id. at 245-46,
*242 It would be an extreme anomaly to hold that express exclusions in a motor vehicle insurance policy, not specifically authorized by the Legislature, are generally invalid, but that a purported exclusion from self-insurance coverage, neither set forth in the self-insurance documents nor specifically authorized by the Legislature, is nevertheless recognized and valid.
Id. at 249,
Here, to begin, we state in no uncertain terms that we neither approve of nor condone Respondent driving under the influence of alcohol. Nonetheless, we agree that the County may not recover the cost of repairs from Respondent; stated otherwise, we are satisfied that the Guarantee purporting to exclude coverage is unenforceable.
The County effectively failed to include the alcohol exclusion in the Guarantee. On their face and by their plain language, the County’s self-insurance application and Guarantee contain nothing that purports to exclude coverage of an authorized individual who operates an insured vehicle after consuming alcohol or while under the influence of alcohol. Neither the self-insurance application nor the Guarantee mentions the word “alcohol” or contains an express provision disclaiming all insurance coverage in the event that an authorized individual operates the vehicle while under the influence of alcohol. Moreover, the language “any applicable vehicle-use policy” is overly broad, and fails to identify with any specificity which vehicle use policies apply or where the applicable vehicle use polices being referenced may be located. The County’s self-insurance policy and Guarantee cover all County vehicles, not just PPVs used by police officers. As such, the “applicable
In particular, neither the Guarantee nor the self-insurance application specifically references or identifies the CBA, Article 35 of the CBA, or the regulation in Section G of Article 35 prohibiting driving within four hours of consuming alcohol as the vehicle use policy pertaining to police officers. And, equally troubling, nothing in the CBA or Article 35 of the CBA is explicitly termed a “vehicle-use policy.” As such, a review of the Guarantee would not result in notice that it refers to the CBA, and a review of the CBA would not result in notice that Article 35, and specifically Section G, constitutes a “vehicle-use policy” to which the County refers in the Guarantee.
Nonetheless, the County contends that the applicable vehicle use policy is contained solely at Section G of Article 35 of the CBA, and does not include Section H. We find this contention to be nonsensical. Section G is entitled “Program Regulations,” whereas Section H is entitled “PPV Operating Procedures.” Both sections contain restrictions on the use and operation of PPVs. For example, item 2 of Section G provides: “PPVs will not be operated within four (4) hours after the officer has ingested any amount of alcohol.” Item 5 of Section H provides: “All officers will use seat belts when operating or riding in County motor vehicles[.]” Both items refer to the operation of PPVs and are contained in Article 35 concerning “Vehicles.” At oral argument, the County attempted to distinguish Section G from Section H, and maintained that not wearing a seat belt would not result in a lack of insurance coverage as would driving within four hours of consuming alcohol. As the Honorable Lynne A. Battaglia so aptly pointed out, however: “How would somebody who is a police officer ... know which one of these things [Section G or Section H] that ... he’s operating under, which one will obviate the County’s responsibility and which won’t?” The simple answer is that a police officer would not know based on the plain language of the self-insurance application, Guaran
Our inquiry does not end there. Given the gravity of the question, we address head-on the issue of whether the County may exclude coverage where an employee causes a collision after consuming alcohol, and conclude that such an exclusion is not valid under Maryland law.
Undeniably, the exclusion in the Guarantee violates Maryland’s compulsory motor vehicle insurance scheme by reducing insurance coverage below the mandatory mínimums (and, in fact, eliminating all coverage) in the absence of express approval by the General Assembly. In other words, because the County, as self-insurer, seeks to deny coverage to Respondent and essentially render him uninsured at the time of the collision, the exclusion reduces coverage below the statutory minimum levels in effect at the time of the collision. See, e.g., Salamon,
Moreover, an exclusion of coverage for driving while under the influence, or driving within four hours of consuming alcohol, has not been expressly authorized by the General Assembly. The County has not identified
any Maryland statute that either expressly or impliedly gives insurers the authority to add such an exclusion to their insurance contracts, and thereby reduce or eliminate benefits below the statutory minimum levels. Upon review of title 17 of the Transportation Article and title 19 of the Insurance Article of the Maryland Code, we ... are unable to find any such provision.
Salamon,
For obvious reasons, the County’s position has troubling consequences. Maryland’s compulsory motor vehicle insurance scheme has many purposes, including “assuring] that victims of automobile accidents have a guaranteed avenue of financial redress[,]” Rentals Unlimited,
We are likewise not persuaded by the County’s reliance on Consumers Life Ins. Co. v. Smith,
*249 We find nothing in the enactments of the General Assembly relative to insurance to indicate that we are expected as a matter of public policy to deny recovery to a beneficiary of an accident insurance policy because the insured drove a vehicle while intoxicated. If insurance companies desire to avoid liability on such ground, they are free to insert a clause in their policies to that effect. Such a clause would be valid and binding.
Id. at 577,
Before concluding, we pause to explain that the clause in the Guarantee is, indeed, an “exclusion” rather than an omnibus clause or a permissive use clause. An omnibus clause is an overarching clause contained in an automobile insurance policy that “extends coverage to a third party who operates the vehicle within the permission of the named insured.” Salamon,
A permissive use clause “limits the coverage under the omnibus clause to claims that arise while the third party is operating the vehicle within the scope of the permission granted by the named insured.” Salamon,
The clause of the Guarantee at issue — “Where the use of a County vehicle is prohibited by any applicable vehicle-use policy, coverage is excluded under this Guarantee for damage of any kind” — is an exclusion. The clause is certainly not an omnibus clause because it does not extend coverage to third parties, or otherwise evince an intent to extend coverage or to provide added protection for third parties. In fact, the clause does exactly the opposite — it limits or eradicates all coverage under certain circumstances. The clause is also not a permis
In summary, we hold that the exclusion in the Guarantee-purportedly excluding or disclaiming all insurance coverage on the basis that Respondent operated his PPV under the influence of alcohol-is invalid because it violates Maryland’s compulsory motor vehicle insurance scheme, is not expressly authorized by the General Assembly, and is against public policy.
HARRELL, J., dissents.
Notes
. In light of our resolution of the question pertaining to the exclusion, we need not address the second issue raised by the County as to whether the collective bargaining agreement permits the County to seek damages against Respondent.
. The CBA was effective from July 1, 2007, through June 30, 2010.
. Respondent's blood-alcohol concentration level was recorded as 0.18.
. In accordance with the CBA, Respondent surrendered eighty hours of annual leave in lieu of the eighty-hour suspension without pay.
. At trial, the County took the position that it would have defended and indemnified Respondent had the collision involved a third party:
As far as the insurance line is concerned there’s no question that if in fact [Respondent] in this particular case had been involved in a two[-]car accident and [Respondent] had been sued. The County would certainly have defended the action of [Respondent] and provided for any liability judgment that would have been received by the third party.
And I believe that, that’s what the cases are that are cited by [Respondent], There’s no dispute about that.
. The caption of this Court’s order granting certiorari misspells Respondent's name as “Distil.”
. "The required insurance attaches to automobiles, not to persons.” Edwards v. Mayor and City Council of Balt.,
. Although the collision at issue here occurred before issuance of the 2012 Replacement Volume, the substance of the above language remains the same.
.
Under Transp. § 17-103(b), a motor vehicle insurance policy or self-insurance policy must satisfy the following minimum levels:
(1) The payment of claims for bodily injury or death arising from an accident of up to $30,000 for any one person and up to $60,000 for any two or more persons, in addition to interest and costs;
(2) The payment of claims for property of others damaged or destroyed in an accident of up to $15,000, in addition to interest and costs;
(3) Unless waived, the benefits described under § 19-505 of the Insurance Article as to basic required primary coverage;
(4) The benefits required under § 19-509 of the Insurance Article as to required additional coverage; and
(5) For vehicles subject to the provisions of § 25-111.1 of this article, the security requirements adopted under 49 C.F.R., Part 387.
. Another troubling matter, indeed, is whether the County would attempt to disclaim all coverage for any violation of any item contained within Section G of Article 35. For example, Item 7 of Section G provides that "[t]he PPV will not be used to carry excessively large or heavy loads or objects which protrude from the trunk or windows, except when required in the performance of official duties.” Nothing within Section G defines what constitutes an "excessively large or heavy Ioad[.j” Thus, a police officer would again be confronted with not knowing whether he or she is in violation of the regulation or under what circumstances the County would disclaim coverage under Item 7 of Section G.
. Such a "drunk driving exclusion" seems to be contrary "to as-surfing] that victims of automobile accidents have a guaranteed avenue of financial redress.” Rentals Unlimited,
. At oral argument, Respondent directed our attention for the first time to Allstate Ins. Co. v. Sullivan,
Although not mandatory authority, Sullivan, id., is instructive. The Missouri Court of Appeals demonstrated a wariness of restrictions or
. This is in contrast to the position the County took before the district court. There, at trial, the County asserted that it would have defended and indemnified Respondent had the collision involved a third party.
. In addition, at oral argument, the Honorable Sally D. Adkins asked the County whether it had provided any notice to Respondent that he would need to purchase additional private insurance in his own name to provide coverage were he to act outside of the scope of permission granted to him. Judge Adkins identified N. Ind. Pub. Serv. Co. v. Bloom,
.
We have described permissive use clauses in further detail as follows:
A "scope of permission” or "permissive user” clause limits coverage under an omnibus clause to claims that arise while the third party is operating the vehicle within the scope of the permission granted by the named insured. When a vehicle is covered under the typical "scope of permission” clause,
the vehicle must be used for a purpose reasonably within the scope of the permission granted, within the time limits imposed or contemplated by the parties, and operated within geographical limits so contemplated.... Of course, this does not mean that every immaterial deviation would automatically cut off the policy protection. It merely declares that such use must be reasonably within the intention of the parties at the time consent is given, or a use to which the insured would have consented had he known of it.
Omnibus clauses and "scope of permission” restrictions do not always contain the same language and should not all be interpreted in the same way.
Salamon,
. In other words, although an omnibus clause "extends coverage to a third party who operates the vehicle with the permission of the named
. In Salamon,
An omnibus clause in an automobile insurance policy extends coverage to a third party who operates the vehicle with the permission of the named insured. This Court has treated omnibus clauses differently with regard to the requirements of the compulsory insurance law, such as personal injury protection and uninsured motorist coverage, because the dominant purpose of an omnibus clause is “an intent to extend coverage.” ... [W]e declined to follow the “liberal rule” of omnibus clause interpretation, which would have invalidated all "scope of permission” clauses. Instead, we held that that such clauses could be valid and, when they are, they should be interpreted in the same manner as any other term in an insurance contract.
(Citations and footnotes omitted). The “liberal rule” of omnibus clause interpretation, referenced above, “require[d] that, if the vehicle was originally entrusted by the named insured ... to the person operating it at the time of the accident, then despite hell or high water, such operation is considered to be within the scope of the permission granted, regardless of how grossly the terms of the original bailment may have been violated.” Id. at 315 n. 9,
. In his brief, Respondent contended that the circuit court properly determined that the County, as a self-insurer, may not subrogate against him because he was insured under the self-insurance policy and Guarantee even while operating the PPV after consuming alcohol. The County responded that subrogation is not at issue in the case because Respondent was not insured under the self-insurance policy; i.e., because Respondent was not insured due to his violation of the vehicle use policy, the County is not suing itself to recover damages.
We agree with Respondent that it is well-settled that an insurer may not recover from its insured as subrogee. See Rausch v. Allstate Ins. Co.,
Dissenting Opinion
dissenting.
I dissent. At the expense of legal scholarship,
I agree with the Majority opinion that the County’s permissive use exclusion in its approved self-insurance guarantee should not be enforceable as a defense available to the County to an innocent third party’s, i.e., a victim’s, claims (whether impersonal injury or property damage), up to the mandatory minimum statutory coverage.
Through the combination of the permissive use exclusion
Like the Majority, but for different reasons, I would not reach the question of interpreting the collective bargaining agreement and, instead, leave it to the resumption of the arbitration of Officer Distel’s grievance.
. Had I thought there to be a prayer that a more conventionally-expressed and erudite dissent (replete with citation of "legal” authorities and the deployment of reasoning based on those authorities) might draw enough of my colleagues to my view, I would have invested the time in that pursuit. With the benefit of knowing that such a prayer would not be answered, however, I default to a more economical, plainspoken invocation of common sense merely to record my idiosyncratic views.
. That, of course, is not the question or circumstance presented by this case.
. I agree with the Majority opinion that this is an "exclusion” and is not part of an omnibus clause or a permissive use clause. Maj. op. at 249-52,
. I disagree with the Majority opinion that the details of the use policy needed to be included in the self-insurance guarantee (Maj. op. at 242-43,