*1 328 the missing witness instruction should not been have
given Robinson’s case. Moreover, I believe the error be reversible. During trial, the course of the the jury sent in notes evincing considerable interest in Alvin Johnson and his absence from proceedings.. As the State trial, conceded at the only real issue was Robinson’s credibility. situation, In this State’s reliance on the adverse inference authorized missing witness instruction cannot be said to have been harmless State, beyond reasonable doubt. Dorsey v. 276 638, 659, 665, Md. 350 (1976). A.2d 678 Simpson, See 383, Md.App. 69; at 367 A.2d at Lawson, see also 514 A.2d 793; States, Thomas v. United 52, (D.C. 447 A.2d Francis, 1982); State v. (Tenn.1984). S.W.2d I would reverse.
Judges ELDRIDGE and COLE have authorized me to say they join opinion. dissenting
Y v.
Homer C. HOUSE et al. Term, Sept.
No. 1987. Appeals Maryland. Court of March *2 Jr., B. (Frederick Green, Donald P. J. Schlenger Robert brief), Baltimore, P.A., all Davis, Jr., on Whip, Lord & Pittsburgh, Fire Ins. Co. of amicus for Nat. Union curiae Pa. Krause, L. Jayson Spie- E. Myckowiak,
Paul D. Michael brief, Rockville, Jordan, on Lopata, & all gel, Coyne, Savits Liability Society Ins. for Medical Mut. amicus curiae Maryland. Tankard, Funk, Olan- Shapiro W. M. Terrance
David all on Hunt der, Baltimore, Carney, Valley, P. Stephen brief, petitioner. Semmes, Gamse, Miller, Bowen & E. N. Suzan
Alan for American Baltimore, brief, on amicus curiae Semmes, all Ins. Assn. Curran, Joseph Jr.,
J. Atty. Gen. and Meg Rosthal, L. Gen., Atty. Baltimore, Asst. brief, both on amicus curiae for Ins. Com’r of the State Md.
Argued MURPHY, C.J., before ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS and BLACKWELL, JJ.
RODOWSKY, Judge. (1957, Maryland Vol.), Code 1986 Repl. 48A, Art. provides pertinent part: any
“Where insurer seeks to disclaim it, liability insurance by issued on the ground that the insured ... has breached the policy failing by cooperate giving requisite insurer, such disclaimer shall be effective *3 if only establishes, the insurer aby preponderance of affirmative evidence that such lack of cooperation or notice has resulted in actual prejudice to the insurer.” granted We certiorari in this case to determine whether when an applies insurer asserts that there is no § coverage under a “claims made” liability policy because claim was not made while the was in effect. That issue not presented on the case, however, facts of this because issue arises if only here involved is below, construed the insurer contends. As explained we do not accept construction on which the insurer’s argument is premised. House,
Respondents, Homer C. M.D. and his professional corporation (Dr. House), (the had a series annual policies policy) Petitioner, Paul St. Fire and Marine Insurance (St. Paul) 1, Company beginning January 1983, the last 1, which ended on January 1986. The policy had a retroac- 1, of January tive date 1977. It а physicians and surgeons professional liability policy and was written a “claims made” form. part: It provided
“When a claim made? report first an incident you “A is made on date claim agent.” to us or our or injury 1984, surgery Dr. House 29, performed On October (Platzer) left of a allegedly part and Shirley J. Platzer was removed on object in her knee. November needle 27, Dr. House received two letters Subsequently, 1984. Platzer, 21, 1985, Septem- and from for dated June counsel against a Dr. House 16, The letters stated ber turn to his damages and him to the matter over advised insurance carrier. 15, 1985, Platzer initiated proceedings
On November Dr. before the Health Claims Arbitration House on Dr. House on A statement of claim was served Office. 6,1986, him letter dated was forwarded January 12, 1986, his That broker insurance broker. February Paul. agent was an for St. House, asserting Dr. that it declined to defend
St. Paul receive notice of the claim at time before did not 1986, Dr. agent received House’s when February maintained, notice, was not received letter. That St. Paul therefore, was, not a and the claim the policy within risk.1 covered filed declaratory judgment Dr. House July
On claiming City, Baltimore action in the Circuit Court for 48A, prove preju- Art. that St. Paul actual required § coverage for lack notice. Both deny dice before it could The court concluded judgment. moved for parties summary law, granted that, applicable 482 was as a matter of *4 House. Dr. summary judgment Special Appeals, argu- to the of appealed St. Paul Court inapplicable to of claims made ing that 482 was denials § recognized court “the appellate The intermediate coverage. argument contrary to the of persuasiveness Paul’s] [St. position in its brief that "[f]or 1. For reason St. Paul takes purpose appeal, it not material whether St. Paul received of 12, 1986, February a or on later notice the Platzer of date....” 332
the cases in support thereof,” but finding the unqualified of 482 to language “dispositive,” it affirmed the judg- § ment. St. Paul Fire & House, Marine Ins. Co. v. 73 118, 132, 301, 533 Md.App. (1987). A.2d 308 granted We certiorari.2
Section was originally enacted Ch. 185 of the Acts by 1964, in apparent response to our decision in v. Watson Co., United States & Fidelity Guar. 266, 231 Md. 189 A.2d (1963).3 Watson was an action insurer’s insured seeking declaratory judgment that an occurrence coverage, automobile liability policy did not apply to claims arising particular out of a accident. Reporting the accident insurer, to the practicable, soon as express was an precedent condition any action on the policy. Watson held that the condition was not satisfied in- because the sured, present 5, 1961, who the accident of March did not report 10, the insurer until April 1961. The 482, substance, response provisions makes policy § to, requiring with, cooperation the insurer cove- nants and not conditions. The statute measures by the standard actual prejudice materiality breach by those covenants the insured for purpose of deter- if the mining breach excuses performance the insurer. argument St. Paul’s rests on the difference between claims policies and occurrence policies. In Mutual Fire, Vollmer, Marine Ins. v. & Inland Co. 243, 306 Md. (1986), 508 A.2d we contrasted the types two of policies. “ ‘Generally speaking, “occurrence” policies liability cover
inducing occurring during term, events irre- spective of is presented. when actual claim Converse- that, 2. applies, St. Paul does not contend before us if there § genuine actually issue of material fact whether the insurer has been prejudiced. form, original applied only liability In its to mоtor vehicle policies. By Assembly Ch. 205 of the Acts of the General repealed present and reenacted the statute in its form. *5 (or policies liability “claims made” cover ly, “discovery”) during if and when is made the inducing events a claim term, of the events occurred. irrespective when policy are, course, hybrids of the two varieties. There of [Par ker, The Demise the “Claims Made” Insur Untimely of Critique A Stine v. Continental Casu ance Form? alty Company, (footnotes 27-28 Det.C.L.Rev. ” omitted).]’ is, the position quite subject policy Paul’s that simply, St. a that it when claim is made policy, a claims made defines or or report injury “the date first an incident us you made, that here claim was not agent,” our the definition, the was policy accordance that while has reading policy, there never effect. Under claim, Paul coverage claims made for Platzer’s St. been basing the disclaimer on the by has not disclaimed under give required policy, the insured’s failure and, apply. 482 does not consequently, argument the
The St. Paul’s premise controls exclusively clause —“When is a Claim Made?” — under St. Paul treats that how a claim is made changes ordinary the special clause as a definition which “claim meaning ordinary meaning of “claim made.” The or by the assertion of a claim on behalf made” refers to against insured. this case Plat injured the the person made, meaning, during ordinary claim zer’s reads to define period. policy specially St. Paul policy reporting potential “claim made” as the of a claim claim the insurer. that basis the claim was insured to On expired. made had until after interpreta- a St. Paul’s Reading as whole leaves is, minimum, ambigu- a far from clear. tion claim is the insured’s only by ous on whether made carrier, and ambiguous to the whether a reporting solely by person’s assertion injured can ever made can the insured. The be read fairly a claim (in (1) claims made mean- unreported ordinary to cover (2) power during give to the ing) insured to effect the policy period for a yet (in claim which has not been ordinary mean- *6 ing) but which the insured anticipates (in will be made the ordinary meaning). The insured effect the latter ex- may pansion by reporting basic an anticipated claim the (in insurer before claim is made ordinary the meaning). words, In other the can policy be read to abe hybrid claims made and reporting.
Demonstrating the ambiguity requires immersion in thе The a whole. page introduction and two other are pages headed and “Physicians Surgeons Professional Policy Made.” The policy advises —Claims [i.e., St. have written this plain “[w]e Paul] clear, English” “in straightforward English.”4 The page containing insuring agreement is introduced following:
“Important This is Note: a claims made coverage. Please it carefully, read A especially When Claim Is Made and Optional Reporting Endorsement sections.” agreement insuring provides “protection basic against claims professional liability might brought be you your practice as a physician surgeon.” or The page containing agreement, the insuring after ex- plaining monetary limits of coverage, presents two call, clauses which respectively, we shall the “Basic Cover- age Clause” and Coverage the “Accelerated Clause.” They read full: you’re Coverage
“When covered [Basic Clause] professional “To be covered the service must have been (or performed should have performed) been after your * applies. retroactive date that The claim must also first agreement be made is in effect. while representation It “plain" seems inсonsistent with somewhat contain, English urges, that the would as the insurer an exclu- ordinary sive definition of "claim made” which differs from the meaning Seemingly “straightfor- of those words. it would more Surgeons “Physicians Policy ward" to label the Professional —Reporting.” Coverage made? is a claim Clause] “When [Accelerated incident report an on the date you “A is made claim first must include agent. our You to us or injury information: following
(cid:127) Date, of the incident. place time and (cid:127) per- you service professional and what happened What formed.
(cid:127) anticipate. you Type of (cid:127) of injured party. address Name and (cid:127) witness.” address Name and added). (Emphasis in their entire- together are read clauses two
When made,” using “claims seems to cover ties, first clause deal second clause seems to meaning, while the ordinary *7 made, using ordinary the not have been claims which and must so made anticipated are to be but which meaning, in covered in order to become the insured reported by be reads the “Accelerated St. Paul anticipatory state. their But, because the definition. policy as Coverage Clause” claim antic- you of “[t]ype “must” contain every rеport of the claims part only seems to address the clause ipate,” see, that St. Paul's infra, Further, shall we spectrum. policy. in parts not fit other definition does involving claims on three decisions heavily St. Paul relies no held there was cover- in the courts policies made policy until after the reported the claim was age where language those Contrasting expired. had here is policy presented the St. Paul with that of cases instructive. Co., 100 N.J. Fire Ins. v. National Union Zuckerman
In
insuring
(1985),
clause of the
“To behalf obligated pay money legally insured shall become made or claims first any claim damages because during company to the reported insured and against or omission of the arising out of an act period, insured rendering or failing professional to render others____” for services
Id. at
“The Company pay will on behalf of the Insureds all Loss the Insureds shall be legally obligated to pay any civil claim or claims first made them because of a Act, Wrongful provided that claim is first made during the policy period and written notice of said claim is received the Company during the policy period.” Id. upon, the third case relied the insurer was obligated “to indemnify the insured on account damages paid ‘because claim or any claims ... first made against the insured and reported during the Company ” period.’ New v. England Reinsurance National Union Co., Fire Ins. (C.D.Cal.1986), 654 F.Supp. rev’d 887, vacated, withdrawn, F.2d reh’g granted F.2d 840 (9th Cir.1987).
The policy Zuckerman also contained a provision which might analogized the Accelerated Clause in Coverage the St. Paul clause in Zuckerman read:
“A is first period or extended if: reporting period (a) during the or extended reporting period insured shall have knowl- edge act become aware or omission which could reasonably give be expected to *8 rise to a claim under this policy during and shall period the policy or extended reporting give written notice thereof to the Compa- ny in accordance with Condition VII.” 100 N.J. at A.2d at 397. It is not altogether clear above-quoted whether the clause was to expand intended (in the from clause claims ordinary made the meaning) permit including, by reporting, anticipated well, claims as or whether the above-quoted clause is a policy definition. however, That lack clarity, does not in result the material ambiguity presеnted here. is That (as in Zuckerman in well as the clause because Reinsurance) England New and in City Harrisburg during policy period, required reporting specifically meaning) (using ordinary if even the claim were The St. Paul does policy period. policy do that. clearly us, contention, if a under St. Paul’s policy before is in the definition of “claim made” inserted
“reporting” Clause, of “first” create a Coverage Basic the two uses Coverage need to in the Basic redundancy. say There is no is policy that a claim must “first made” while the Clause be if if in a claim can made is only way in effect be the claim report[s]” the insured “first while effect.
If “claim first
made” is read in the
sense
ordinary
...
...
Clause,
Basic
the double use of “first” can
Coverage
what Zuckerman
calls the “moral hazard.”
explained by
be
excluding
prior
“The reasonableness of
claims based
conduct that the insured could
have foreseen
reasonably
as the
for a future claim is
might
apparent.
serve
basis
protect
against
The insurance
is entitled to
itself
company
who, recognizing
past
his
error or omis-
professional
sion, rushes
‘claims made’
purchase
before
a claim
[by
injured person]
error
discovered
professional].
asserted
... This insurance
[the
”
concern has been termed the ‘moral hazard.’
company
(citation
at 320 n.
specific *9 reported the insured the claim to St. during Paul the policy period, the insured bring could about under the subject policy simply by delaying any to the insurer report anof antecedent claim made in the ordinary During sense. to prior date effective the insured either might all, have had no might or have exhausted limits of a monetary prior policy. St. The Paul does state that it “will void if you any be ... hide important us, from us, information mislead or to or attempt defraud to us lie about matter concerning this insurance —either or If before after a loss.” the exclusive manner of effect- ing coverage under the St. Paul is it is by reporting, the fact debаtable whether that a claim is anticipated or has made been before the effective “impor- date tant information” and the efficacy provision the fraud as to protection St. Paul questionable. becomes no Given specific more clause than the fraud provision, it seems to logical have attach under the Paul policy St. a claim made before the policy period reported during but if, policy period, contends, St. Paul a claim made policy period but after reported the policy period hand, is not covered. On the other if in Coverage the Basic Clause the ordinary meaning given to the read- sentence ing: “The claim must also first made agree- while this effect,” ment is in St. then Paul is at least partially protect- hazard, ed from the moral to the extent of claims first made prior period. the policy approach
St. Paul’s definitional is also inconsistent with dealing provisions coverage. termination of option, Dr. House policy gave which he did exercise, endorsement, purchasing reporting described as follows:
“This reporting endorsement cover: will (cid:127) Injuries or deaths that occur after date retroactive that date this agreements before ends. And (cid:127) Claims that are reported us after the first ending agreement date the reporting before endorsement ends.” *10 added). purposes reporting For of the endorse-
(Emphasis “reported” expressly claims “made” and claims are ment causing coverage to attach. treated as alternative events Thus, meaning of “claim reporting cannot be the exclusive throughout made” as the result of a definition applicable Further, any one is hard to conceive of pressed why reason the actual assertion a claim is alternative having during attach reporting coverage as a means of endorsement, extension under the reporting but actual assertion of a claim is not an alternative means of having coverage policy period. attach Be- basic policy contemplates reporting cause the that the endorse- date, ment a definite still will have termination St. Paul will made, the “tail” of a in the problem have covered meaning, has not ordinary reported during been Yet, extension Paul reason period. argues why St. that the coverage arises only reporting during on the basic period is to avoid that of covered claims very problem unknown the insurer. plain English provisions version of traditional
found is also at odds with St. subject policy seemingly interpretation. provisions part: Paul’s Those read Injured Something Happens “Someone Is Or Which Liability In A Can Result Claim “If there’s an accident or incident under this covered policy you protected person other involved must: “1. agent happened Tell us or our as soon as what possible. though Do this even no claim has been made or another you protected person having but is aware done in a something may later result claim. This notice should include:
“(cid:127) The nature of the incident specific including type of claim that may result[.] legal
“3. Send us of all demands or documents if copies someone makes a claim or starts a lawsuit.” Manifestly ordinary meaning of “claim made” is used in the first and third above-quoted paragraphs provi- Indeed, sions. paragraph encourages the insured to ef- fect coverage by using Coverage the Accelerated Clause even if has not effected been under Basic Coverage Clause the actual assertion of claim by injured person.
St. interpretation Paul’s also means reporting be- increasingly comes more difficult closer a claim is made (in ordinary here, meaning) policy’s expiration, “at time,” 1,1986. 12:01 standard January If a.m., can only by reporting, be obtained reporting ultimately becomes practically impossible within the policy period, e.g., *11 person when the injured asserts an claim unanticipated late on the of day policy period. last the difficulty This Coverage avoided if Basic triggered the Clause is by a made,” “claim in the meaning. Paul’s ordinary St. answer is that insured should the purchase optional reporting that, otherwise, endorsement the insured will be obtain- ing for coverage a for premium time which no has paid. been That analysis carry would more force if this optional reporting endorsement were designed only allow reporting after the for policy period claims within the Here, period. “reported” claims and claims “first made” policy expiration after are each by covered endorsement, optional if reporting purchased. sug- This gests purposes optional that the of the reporting endorse- providing coverage ment include under the St. Paul policy practice who retirеs from physician changes or who coverage to an occurrence
Here the
can
read as St.
Paul contends.
It can
just
easily
be read to have afforded
when a
made,
using
ordinary meaning.
ambiguity
results
what might
from
have been an intentional trade off
on
part
drafting
St. Paul in
policy,
whereby
precision
language
finer points
words,
sacrificed in order to use fewer
so as to
justify
“simple English” labeling
event,
any
contract.
construction,
ordinary
genuine
under
rules of contract
ambiguity
against
party
pre-
should be
who
resolved
Vollmer,
See
the contract.
306 Md.
508 A.2d
pared
Co.,
Indent.
Fire & Cas.
130;
Co. v. Interstate
Pacific
and Truck Ins. Exch. v.
(1985);
488 A.2d
Md.
Rentals,
(1980).5
Marks
288 Md.
Under the alternative the Platzer interpretation claim was covered when it was made this to the period. interpretation, protection Under the insured after the delay reporting by claim is made rests on the “If there’s an accident provision: or incident covered under other policy you agent involved must us or our protected person ... [t]ell A defense happened possible.” what as soon as within resting give foursquare on that covenant to notice is 48A, Art. Appeals these reasons the reached Special
For Court conclusion. the correct THE APPEALS
JUDGMENT OF COURT OF SPECIAL BY AFFIRMED. TO BE PAID PETITIONER. COSTS MURPHY, C.J., Dissenting Opinion BLACKWELL, JJ., join. McAULIFFE and MURPHY, Judge, dissenting: Chief *12 at issue agree I cannot with the that the majority I, therefore, I ambiguous. respectfully dissent. further (1957, 48A, Repl.Vol.) conclude that Md.Code Art. requires prove that an insurer “actual preju 482—which § disclaiming coverage dice” due to the insured’s failure when insurer of a provide requisite claim—-is to the insurance involved this case. inapplicable opinion applica- 5. We intimate no on the construction of 482 if its us, sought, under to those before to a tion is circumstances similar unambiguously claims made defines "claim made” to only reported." mean "claim
I. By attaching its own self-created labels to selected provisions, the majority clouds the interpretation and mean- ing of an essentially straightforward First, liability policy. the policy provision containing the insuring agreement clearly indicates that it is of the “claims made” it type; directs special attention to the provisions entitled “When is a claim made” and “Optional reporting endorsement.” describing the scope of coverage, the policy specifically states that claim must ... first be made while this “[t]he agreement inis effect.” The next clause defines “When a clаim is made” as “the you date first report an incident or injury to us or agent, our (emphasis supplied).” The report to the insurer must contain the following informa- tion:
—Date, time place and of the incident. happened —What professional what service you per- formed.
—Type of claim you anticipate.
—Name and address of injured party.
—Name and address of any witness. It is therefore clear that reporting is a prerequisite to coverage, whether the insured reports a demand made against him by an injured person, or whether the insured reports an incident which lead may to this kind of a demand.
The other provisions do not weaken the clarity the reporting requirement. The clause describing the cov- erage of the optional reporting endorsement, example, states that it “[cjlaims will cover that are made or first reported after ending to us date of agreement before the reporting endorsement (emphasis ends.” sup- plied). phrase reported “made or to us” does not offer alternative; it simply refers back to the definition of “claims made” under the policy. language This reminds the claim, “made,” insured that a to be reported must be to the insurer. The majority creating ambiguity none where exists.
g4g of the majority’s intеrpretation true The same is To concerning under the section “What Do If provisions Something Loss”—“Someone Is Injured Or A You Have In A It Liability Which Can Result Claim.” Happens that the “claims” referred to therein are “liability obvious person against the insured. This injured claims” does not create an not ambiguity and does cast language policy’s requirement reporting before doubt coverage can exist. requirement reporting find I
Therefore unambiguous, attaches to before issue on address the which certiorari proceed now proper application report- of 482 to this granted was § —the liability policy. claims made ing-type
II.
Co.,
out,
Watson v. U.S.F. & G.
points
As the majority
266,
(1963)
231 Md.
The majority of jurisdictions which consider prejudice to
the insurer have
a
applied
two-step test, requiring that the
or delay
omission
of notice
or
be unreasonable
unexcused
before prejudice
to the insurer is considered. See
Annot.,
156,
141,
32
(1984).1
A.L.R.4th
n. 9
Cooper v. Government
Co.,
Ins.
Employees
86,
51
237
(1968),
N.J.
A.2d 870
for
example,
insurer,
held that
in order to disclaim cover-
age, must show
a
“both
breach of the notice provision and a
likelihood
Id. 237
appreciable prejudice.”
A.2d
at 874.
Co.,
v.
In
Brakeman
Potomac Ins.
472
66,
Pa.
This has as creating only statute been a rebut- presumption prejudice table given when notice is more time. Gerrard Realty year required than one after Requiring This annotation is entitled: “Modern Status of Rules Prejudice Liability Escape Liability Insurer to Show Because of Claim, Delay Giving Failure Insured’s Notice of Accident or or in Forwarding Papers.” Suit Co., Corp. v. States Ins. Wis.2d 277 N.W.2d Am. (1979). statute, Maryland’s requir- created a rule prejudice the insured ing both that have “breached the ... by giving requisite notice to the insurer” establish, “by of affirmative preponderance evi- dence lack of that such ... has resulted actual to the insurer.” prejudice legal One commentator has noted three factors which have may prompted the General change rule: Assembly Watson “First, an aura unfairness emanates from a situation *15 permitted which an insurance to company disclaim it is not liability by when prejudiced insured’s breach of a precedent. situation, condition In such a the insurer unjustifiable Second, receives an windfall. the Watson rule an allows forfeiture by permitting unreasonable insurer’s of assertion a technical to irregularity deny protection for which paid. the insured has Finally, allow- ing an to disclaim has liability the undesirable leaving effect of victims of automobile uncom- accidents pensated paid-for their insurance 38 coverage.” Md.L. (1978). Rev. 309-10
A of other survey jurisdictions which adopted have prejudice rule reveals lines reasoning. First, two basic these courts have found that the strict contractual condition precedent approach creates a forfeiture. The New Jersey Court, Supreme in Cooper, supra, reasoned that “although of the may speak notice provision terms precedent,’ of ‘condition ... what is nonetheless forfeiture, seeks, involved is for the carrier on аccount of a provision, breach that to deny insured the very thing paid for. This is not to belittle the for need notice accident, put of an but rather to the subject perspec- viewed, tive. Thus it becomes unreasonable to read the provision find unrealistically to that the carrier may coverage, forfeit though even there is no likelihood 346 237 A.2d at by the breach.” prejudiced it was
873-74. Brakeman, A.2d at the court stated that supra, In is also here approach inappropriate contractual strict “[a] is a forfeiture. The are concerned with what we because premi- accepted in the instant case company insurance and now insured for insurance by the paid ums notice.” ground on the of late to deny seeks Co., 495 A.2d Bonding v. Maine & Cas. Ouellette See also (forfeiture creates an undeserved windfall (Me.1985) Insur Employers v. American Pickering insurer); R.I. 143, (1971) (“a technical Co., 282 A.2d ance in a should bar provisions the notice breach [not] he has the benefits for recovering from an insured paid”). reasoning upon purpose is based
A second line of Brakeman, supra, provision. notice function of the 197, the court reasoned: A.2d at provision rеquiring of a purpose “The a certain time is to given within accident or loss an through an acquire, opportunity the insurer give the circum- full information about investigation, adequate which, case, proceed it can on the basis stances of the settlement or defense through either disposition, *16 claim____ designed protect clause is
“... reasonable notice [A] in a being placed from substantial- company insurance the in had than it would have been position less favorable ly being pay forced to provided, e.g., notice been timely opportunity not had an it has short, notice In the function of a effectively. defend inter- company’s insurance is to the protect requirement compa- the insurance Where being prejudiced. ests from notice, even harmed a late by have not been interests ny’s circumstances to excuse extenuating of in the absence condition tardiness, the notice the reason behind nor fairness logic neither lacking, is and it follows
347 to relieve the insurance of company obligations its under in such a situation.” Bros., See 123, also Weaver Inc. 684 P.2d Chappel, v. 125 (Alaska 1984)(“In short, requirement the notice is designed to protect the insurer from In prejudice. the absenсe of prejudice, notice, of for regardless delayed the reasons there is no justification excusing from its insurer obligations under policy.”); Great American Ins. Co. v. Const., 387, 769, 771, C.G. Tate 303 N.C. 279 774 S.E.2d (1981) (“[TJhis although provision, by poli- denominated as a cy precedent, condition should be construed accord with its purpose with the reasonable expectations * * * parties. No condition timely given be will greater scope required than to fulfill its purpose.”); Lusch v. 593, Aetna & Or. Casualty Surety Company, 272 538 (1975); Marcantel, 557, P.2d 902 Miller v. 221 559 So.2d (“The (La.App.1969) requirements function the notice simply prevent from being not to prejudiced, provide a technical escape-hatch by deny coverage which to in the of prejudice.”). absence
Although
explicit
there
no
indication of the General
482,
Assembly’s intent
it
most
enacting
appears
likely
that one of
sought
the “evils” which it
to remedy was the
working of an unreasonable forfeiture which created a
windfall for the insurer. See
City
Kaczorowski v.
Balti
more,
505, 513,
309
(1987), noting
Md.
“[pjerhaps legislation
declaring
clauses
in an indemnity policy avoiding
forfeiting
or
the indemni-
ty
comply
provisions
account of failure to
with notice
coupled
unless
with the fact that such failure
preju-
was
dicial to the insurance
and
further
company,
possible
provisions
presumptions,
proof,
burden of
etc. This
as
of course
a matter
good judgment
of the
if
legislature
thought
it is
that adherence to the present
Id.
That 482 allows a notice to fulfill this § is, think, it I going beyond quite without clear.
Ill
argues
St. Paul
inherent nature
“claims made”
inapplicable.
points
renders
It
to the differ-
policies
types
liability policies
ence between these
so-called
*18
Fire,
us Mut.
type policies,
“occurrence”
in
explicated by
Vollmer,
Marine & Inland Ins. v.
306 Md.
508 A.2d
(1986). There,
we quoted
Stine v.
from
extensively
Co.,
Casualty
Continental
419 Mich.
“Coverage an "occurrence’ policy is no matter provided made, course, when the claim is subject, of to contractual statutory and notice and рrovisions, limitations of actions providing complained the act during occurred the poli- cy period. Because the insurer’s in such liability policies ordinarily definite, relates to a easily identifiable and notorious event such accident, fire, as an automobile a slip collision, and fall or injury, ship the insurer is ordinarily able conduct a prompt investigation of the incident and make an early assessment of related injuries damages and with the result that actuarial considerations permit relative certainty ratios, estimating loss estab- lishing reserves, fixing premium and rates.” 349 N.W.2d at 131.
As to “claims made” policies written to cover professional Stine noted that liability, they were of relatively recent origin and were developed primarily to deal with situations negligent which the act is difficult to pinpoint and may have occurred over extended of time. As to these policies, court observed: error or omission may be a discrete act or failure
“[T]he act, or it may consist of a lengthy process and remain latent and undiscoverable for a of years. number Exam- ples include a physician’s misdiagnosis, an attorney’s concealment, fraudulent or an аrchitect’s defective de- sign. From an underwriting perspective, poli- occurrence cies are unrealistic for such risks long because of the or open ‘tail’ exposure which results. When the ‘event’ intended to be easily covered cannot fixed be and the liability consequent injury long extends into the future, often expiration well after of the policy, considera- inflation, tions of upward spiraling awards, jury and legislative adoption judicial newly developing eon-
cepts factors, of tort mean that including law actuarial fixing premium reserves, and establishing adequate rates speculative. result, are highly logically, is the estab- premium lishment of a rate sufficiently high schedule accommodate ‘worst scenario’ jury verdicts returned error, omission, after the years negligent act.” Id. policies, said, “Claims made” the court “meet such difficulties by enabling the insurer to under- risk, compute write the premiums, establish re- greater accuracy, serves with safe in the assumption will limited to claims liability actually *19 policy premium term the for which the is computed. expires, When the term exactly insurer knows is, in exposure what its at least terms of the nature and result, number of ‘claims mаde’. As a the insurer is predict exposure better able limits of its and more accurately premium estimate the rate schedule necessary to accommodate the risk undertaken.” Id. in-
Finally, the Stine court addressed the benefits to the
in purchasing
sured
a claims made
It said:
policy.
“Since the insurer can limit the duration of its exposure
force,
to the term of the
the more
currently
precise
charge
actuarial data available enable it to
a
premium than
for an occur-
necessary
lower
would be
policy.
advantage
rence
Another
to the insured is the
desired,
if
ability,
purchase insurance which will cover
during
prior
acts or omissions
a
to the
period
inception
providing
claim is made
policy,
only
any
during
policy period
extensions thereof. Claims
are also useful to the
policies
professional person
provide
coverage
excess
addition to ‘occurrence’
earlier,
much
purchased
maximum limits of
low____” Id.,
unrealistically
which are
349 N.W.2d
now
at 131-32.
253-54,
Vollmer,
See There the claims made types policies are various within “pure” policies claims made category. generally So-called brought agаinst “claims made” as all claims define
ggl insured the policy period. within The claim made against the insured is the event which party coverage. invokes also of a policy may “reporting” defining “claims type, made” as all claims made against the insurer the insured during Thus, the policy period. the claim made invoking is the “reporting” event type of claims made policies
Claims made may also differ in their scope coverage. policies, example, Some are very restrictive and cover those claims only made which are based within the policy period. See actions or omissions fall Co., Stine v. Continental Cas. 419 Mich. 349 N.W.2d (1984). however, More in- commonly, will clude a “retroactive date” for period years, will provide coverage for claims made which are on ac- based tions or omissions retroactive and the period. claims made policies Some even include “occurrence-type” language report which allows insured to to the insurer claims, those occurrences which are likely to lead to future invoking coverage for these if thereby incidents and when a Ins., claim is made. See Zuckerman v. Nat. Union Fire Harris *20 City 304, 395, (1985). 100 N.J. 495 A.2d 397 Cf. Ins., v. burg Surplus Intern Lines 954, 958 F.Supp. (M.D.Pa.1984).
The issued St. Paul to Dr. by House is of the “reporting” type, defining a “claim made” as the report of to the insurer or its or injury accident The agent. 1, January 1, 1986, effect from 1983 to January and 1, Therefore, included a retroactive date of 1977. January any incidents or claims reported St. Paul before January 1, 1986 provision withholding and based on the or of profes- 1, sional medical services from January 1977 to December covered. The also wer,p “occurrence-type” included Dr. language, allowing House to report an incident or Paul if injury specific St. even addition, him had not been In yet made. that the insured its
policy required notify agent St. Paul or injury possible.” of an incident or “as soon as
IV
(A)
noted,
to have been
already
appears
Section
Watson
enacted to
the harsh result of the
case.
remedy
statute,
interpreting
purpose,
we seek to discover the
Kaczorowski,
supra,
aim or
behind it.
309 Md. at
initial inquiry
2. House's you "If there’s an accident or incident covered under this or any protected person other involved must: agent happened possible. 1. Tell us or our what as soon as Do this though you protected or even no claim has been but another person having something may is aware of done later result in a should include: claim. This notice event; place The time and The involved; persons protected including specific type nature of the incident of claim that result; may and any injured people witnesses. The name and addresses and Notify police may 2. if a law have been broken. copies legal us of all demands or documents if someone 3. Send makes a claim or starts a 4. ing hearings lawsuit. evidence, Cooperate securing giving and assist us in and attend- trials, obtaining witnesses. attendance of taking obligations paying Refrain from financial out any money Doing may our authorization. without making so result in our not reimbursement of the payment though coverеd But this even the cost is *21 apply money spent emergency rule doesn’t first aid to others at the time of an accident.” We have also noted that the “plain-meaning rule is not rigid,” Kaczorowski, 513, supra, 628, Md. at 525 A.2d that
“where a statute is plainly susceptible of more than one
meaning and thus contains an
courts
ambiguity,
consider
only
words,
literal or usual
meaning
but
their meaning and effect
in light of the setting,
objectives and
purpose
enactment.
such circum-
stances,
court,
in seeking to ascertain legislative
intent, may consider the consequences resulting from one
meaning
another,
rather than
and adopt that construction
which avoids
illogical
result,
or unreasonable
or one
which is
(citations
inconsistent with common sense.” Id.
omitted; quoting Tucker,
75,
supra,
Even where no ambiguity
however, we have held
that even the “plainest
language” is “controlled by the
context in which it appears.”
514,
Id. at
“Sometimes the language question will be so clearly consistent with apparent (and purpose not productive of result) absurd that further research will be unneces- sary. But on other occasions much more extensive in- quiry will be required____
“... Potter v. Bethesda Fire Department, 309 Md. [I]n 347, 524 (1987) ..., A.2d 61 Orth, Judge quoting State v. Fаbritz, 416, 421-422, Md. 348 A.2d 278-279 (1975), denied, cert. 425 U.S. 96 S.Ct.
L.Ed.2d
(1976),
plain (At 351-55,
made it
354 literal mean- the intention indicated the by over
prevailing ’ A.2d at 64.” Id. at 515-16, 525 Id. ing.” omitted). (citation and footnote A.2d 628 to the instant case. principles these apply I shall now (B) of based on the arguments a number Paul advances St. First, a “disclaimer” and it claims that of 482. language § It things. different coverage very of are two a “denial” coverage when applies only the former term asserts that attached, of the failure of but because under the has condition, provide insurer refuses to that a technical in the context of an occurrence example, An coverage. has occurred in the accident a case which would be policy, but, or lack of due to late notice period, within the “Denial,” insurеd, coverage that is lost. cooperation by coverage never however, in those situations which applies occurs attaches, when the accident example, after denial asserting is argues Paul that it St. policy period. disclaimer, not 482 is therefore not a coverage, of § terms, statute, applies its own by because the applicable coverage.” “seeks to disclaim an insurer only when Special Appeals of argues that the Court Paul also St. meaning “any” of word interpreting erred arbitrarily court concluded It claims that 482.3 § “some,” out “one “every,” or instead means “all” “any” in the defini- “either,” are also included or many” (5th ed. Dictionary Black’s Law See “any.” tion of 1979). persuasive. is foregoing arguments
Neither of and a “deni- a “disclaimer” of distinction between distinc- logical a valid although may it coverage, al” of statute, nor has language of tion, not clear from the to regard with made such a distinction case any Maryland that, Special Appeals agree I also Court § “any applicable insurer" made it to § amendment to 3. The 1966 liability.” "any used, in the context the word “any,” applied insurance, or a policy liability mеans “every” or “all.” however, “any,”
The definition of the word disposi- not tive, for there are other terms within the statute which its modify scope. restrict While it is true that potentially applies “any” liability insurer or it is policy, requires also true that the statute the basis for the disclaimer or denial of be that “the insured has breached giving ... requisite notice to the *23 (emphasis supplied). insurer” St. Paul argues therefore that there inwas fact no “breach” of the in this policy case. above, encompasses
As noted a two-part test. the required Without breach of the notice provision, preju- dice to the is immaterial and the statute does not apply. then, The pertinent inquiry, is whether Dr. House breached the St. Paul policy by reporting the claim after the expired. had policy failure,
A excuse, breach of contract is a without legal to perform promise which forms the any part whole or of a See Black’s Law (5th contract. 1979). Dictionary ed. That Dr. perform House did not his promise to St. Paul to inform it of claim as soon as any possible and within the policy period however, is clear. The first question, this failure legal whether was “without It excuse.” seems that Dr. House’s failure to inform St. Paul before the policy was not “without expired legal had excuse.” Dr. House Paul, was to legally report bound claims to St. if he only but If coverage wanted for them. Dr. House chose not coverage, invoke this St. Paul would have no legal right action him him report claim; indeed, to force choosing report not to an accident or claim to one’s insur- ance in these company circumstances is not a breach of contract. arose,
The problem course, when Dr. House finally chose to report claim to St. Paul. The fundamental whether, question now is at the time reported he the Platzer claim, there existed a contract between the for one parties, a contract is not in cannot breach which existence. question, again To I look to the nature of answer policies. made and occurrence Both types policies claims (1) which define provisions include events (2) provided coverage when how can be For an occurrence example, policy initiated. has a fixed defining what events or occurrences period specific time ends, however, period this time will be covered. When end, under the do not for it responsibilities insurer’s events, barring held for the covered statutes may be liable limitations, at time thereafter. image are almost the mirror policies Claims policies they occurrence often cover claims based occurred came many years events which before effect, limit the to claims based scope into but on these events which are made within the limited time policy, Unlike the occurrence potential liability policy expires. insurer’s ends when the Therefore, the claims made issue here when there left. The could not expired nothing was be longer there no breach- breached because *24 is same expiration ed. claim made after its of the Any occurs after the “expi- effect as an accident event which breach; There no policy. ration” of an occurrence was I therefore think simply coverage. there was no that § of claims made inapplicable “reporting” type is to a claim is made after the expiration policy. when the
Y plain language is hot mandated the only This result in accord its intent and with the but is also with § jurisdictions in the other which have weight authority dealt this issue. noted, adopting prejudice
As the main reasons for already concern rules like 482 have been a with unreasonable forfeitures and the need to restrict the effect of the notice In context of a claims purpose. the to its intended condition Allowing import. are of less concerns these policy, made in does not work this case liability to deny Paul St. coverage the received all of forfeiture, insured has for the claims covered policy clearly The paid. he has for which and policy period, insurer within to the reported therefore, case, This is not a coverage provided. covered, only he believed was reasonably the insured notice of a technical due to breach coverage to lose that no expired, there was Here, when condition. taken ad- Having to attach. chance further made policy, of a claims cost benefits vantage of the lower scope.4 its limited rightfully complain Dr. House cannot the notice re function of Moreover, purposes dif fundamentally are made in a claims quirements of a purpose policy. than in an occurrence ferent is It serves two-fold. provision policy’s claims made but also prejudice, insurer from protect only not City Harris In coverage. extent of scope define (M.D. Lines, Inc., F.Supp. Surplus v. Intern. burg type “reporting” made Pa.1984), under a claims the insured approximately claim to the policy reported discussing expired. had after the months rule, announced prejudice Pennsylvania’s applicability Brakeman, the court stated: supra, claims-made of a provision the notice conclude that
“[W]e from one purpose different materially policy serves of a claims- provision The notice an occurrence as the important just the in- [against claim be asserted that the requirement insured does If the policy period. sured] period, time required contractually give notice within there ‘during policy period,’ case in the instant given opportunity to Dr. House was also note that I would have cover- which would optional reporting endorsement purchase an *25 option policy period. This expiration of the claims made after the ed 8, 1986, January by a letter dated to Dr. House offered St. Paul was coverage. reporting purchase extended the Dr. House did not but 358 no under policy.” Id. 371 A.2d at coverage the
simply 961. to the under
Notice insurer the St. Paul not policy serves allow the insurer time only investigate the and settle claim, also to if but determine the claim itself is within the the There scope policy. can be no claims coverage for after reported policy the has expired because notice the event which invokes and all possibility the ends. policy ends when jurisdictions
Other
which have dealt with this issue are in
Zuckerman v. Nat.
Fire
For example,
Union
accord.5
Ins.,
304,
(1985),
100 N.J.
3g§
expired.
policy
His
policy
after the
had
ten months
period,
occurring
at
him
for acts
omissions
“afforded
reported
and
time,
that the claim be asserted
provided
Id.,
A.2d at
period.”
the
policy
the carrier
rule
prejudice
the
of
apply
declined to
897. The court
in the claims
supra, because
provision
the notice
Cooper,
coverage,
policy
the
at
defined its
and because
policy
made
expectations of the insured
fulfilled
“reasonable
issue
the
Id., 495 A.2d at
scope
coverage.”
of
respect
to the
“an extension of the notice
The Court also noted that
406.
unbargained-
an
policy
in a
made’
constitutes
period
'claims
resulting
insurance
gratis,
coverage,
the
for
of
expansion
than
substantially
to a risk
broader
company’s exposure
Id.
policy.”
the
insured
expressly
Harrisburg, supra,
determined that
court in City
of
of
after
which was notified
a claim
company
an insurance
discussing
the
was not liable.6
expiration
policy
the
not
the court
prejudice
apply,
rule did
why the Brakeman
at issue in the claims
concerns were not
noted that
same
First,
bargaining
the lower
there involved.
made
plaintiff could have
because the
power
pertinent
was not
reporting
for
occurrence
or an extended
bargained
did not
Second,
court stated that
situation
period.
a lower
paid
“the insured ...
work a forfeiture because
for
find
the defendant
for
...
premium
to]
[and
exactly
they had
give
plaintiffs
here
what
would
Id. not
A.2d
962. The
less.”
bargained
and
notice
In a
purposes
provision
said
court also
than
an occurrence
were different
claims
in that
an insurer knows
certain date after which
provides a
“[i]t
according-
policy,
under the
longer
that it no
liable
accurately fix its reserves
insurer to more
ly, allows the
mayor-elect
plaintiff,
at the time
who was a
The court held that
claim,
an "insured” under the
to leading
the event
prejudice
and the
rule is
The discussion
terms
therefore dicta.
for future liabilities and compute premiums with greater
Id.
certainty.”
Co. Dolan,
Ins.
v.
Fertig
Curtis,
Gulf (Fla.1983) was based on a insured that should, court as a public matter of policy, “engraft upon an unambiguous claims-made insurance reasonable additional time after policy period expires for reporting claims that arise in the late contract term.” Id. at 513. In declining so, to do the court reasoned:
“Notice within an occurrence pоlicy is not the critical distinguishing feature that policy type____ Cover- age on depends negligent when the act or omission oc- curred and not when claim was asserted. ... The giving of a condition of only policy, and in no manner is it an extension of It itself. does not matter the insurer when is notified of the claim by the insured, long so as the notification is within reasonable time so long negligent act or omission oc- curred within the policy period itself.
“With claims-made policies, the act of very giving an of reporting extension time after expiration policy period negates ... the inherent difference between Coverage the two contract types. depends the claim being reported made and to the insurer during the policy period. discovery policies Claims-made or are essentially policies. If the claim is reporting reported to policy period, then the carrier legally obli- gated pay; if the is not reported during no policy period, attaches.” liability (emphasis Id. at 515 in original). 482,1
Consistent with conclude that Dr. House’s claims not, St. Paul did circumstances of case, this provide requisite coverage he has claimed.
Judge Judge. McAULIFFE and BLACKWELL have au- join thorized me to state that they expressed the views dissenting opinion.