*1
Court 31, 2000. March *2 (Laura Jacobs, E. Richard Schi Basem J. Budow Michael brief), Bethesda, Noble, P.C., on the and Budow mel appellant. Bucher, (Sasscer, on the Clagett & Zifchak N.
William Marlboro, brief), for appellees. Upper ADKINS, WENNER, JJ. BYRNES and before Argued ADKINS, Judge. the nature and extent appeal in this
We examine liabili- that a cooperate, insured’s refusal from an (1995, Repl. show, to Md.Code pursuant ty insurer must (“IA”) in for the Article order Vol.), § 19-110 of the Insurance insurance obligation provide from its insurer to be relieved Compa- Insurance Farm Mutual Automobile State coverage. *3 Circuit Court for Prince contends that ny, appellant, existed, but finding George’s County erred Allstate Insurance liability coverage. for imposed nonetheless (“Allstate”), of the defends the decision appellee, Company court, a factual find- properly that it made contending circuit actually to which was ing regarding the extent to that extent. coverage only and prejudiced required AND PROCEEDINGS FACTS LEGAL out of an automobile accident occurred This case arises 10, 1994. (“Beltway”) February on Capital Beltway on the a a car she Gregorie passenger Corazón A. was Appellee At time by Mark Winston. some operated owned that was was (“Kirby”) midnight, Kirby Agbemashion1 Latricia S. after traveling in front of Beltway on the and was driving also a car At point, and direction. some car in the same lane Gregorie’s vehicle. car struck the rear end Gregorie’s litigation, married and took the name During the 1. course throughout proceed Kirby-Agbemashion. been referred to She has consistency, do “Kirby.” we shall the same. ings as For Significant disputes concerning arose the circumstances sur- the accident. it rounding According Gregorie, had snowed heavily day earlier and at that time the roads were wet testified, however, She that when damp. Winston and she" driving Beltway midnight, were on the around the snow had stopped plowed dry. and the roads had been and were She further testified that when Winston and she their approached exit on Kenilworth Avenue:
I dark car that very moving lights noticed slow had no it, no no taillights, lights. license say anything, I didn’t because I waiting was to exit—I waiting either to exit or brake. He was [Winston] seconds, doing anything couple after and at that out, I point apparently said look because he didn’t see the car.
[*] [*] [*] said look because I [I out] would have reacted at that I point. would have either been —I would applied my have brakes.
* * * apply Winston did the brakes at that point, very us, shortly after we crashed into the car in front of [Kirby’s] car.
Winston corroborated Gregorie’s version of the incident. He testified that at the time of the temperature accident the freezing was a slight dampness pavement, was to the “[t]here that, slight than pavement discoloration. Other on the Winston, Beltway According was clear.” Beltway That section of the was dark. It was about yards ramp hundred before the started off to the right, lights there were on the But ramp. portion on a roadway pavement and the was dark Beltway was dark also.
* * * from looked, right to the I clutched and looked As double I said look out.... [Gregorie] mirror ... my rearview me a I ahead of on the brakes when saw immediately went that car was that it initial reaction to lights. My car with no Beltway. in the stopped was I going But even as was
I went full on the brakes. that brakes, avoiding it not a of question on the was through late, of much question it how just it was too was person, I that I off before went into speed going was to scrub [sic] car ahead of me. once I degrees right five to the
My car swerved about in that that I went position brakes. And it was applied the of car ahead of directly into the rear me. there, I my
—while I in the skid saw what was middle flicker, I slight signal light believed to be a flicker red rear. accident, Kirby. Kirby interviewed After driving that she was “about 55” and that she was claimed about ice on the She also stated that she worried road. “going that the other car involved the accident was believed quickly.” too driving Weiner behind Winston the same lane
Linda appel- In a made to at the time the accident. statement car was representative, “going lant’s she stated that slow, or and that she saw very, very just stopped completely” that Kirby’s car “had on its hazards.” She further stated any not see ice on the the weather was clear and she did and the other cars on roadway. Finally, she stated she *5 Beltway traveling approximately were at the same rate speed as Winston. accident, Kirby
At time of insured under an was After policy (“policy”) appellant. automobile insurance with accident, the claim. In learning appellant investigated (1) so, a statement from doing appellant: obtained recorded (2) a of the Kirby; acquired copy police report Weiner and (3) accident; report day and a weather for the and took pictures Kirby’s vehicle. a to complaint against filed Winston recover
Gregorie injuries allegedly she sustained the accident. Winston then Kirby Third-Party Complaint against seeking filed a contribu- indemnification, tion Gregorie complaint and and amended her Kirby Kirby brought to name “as a co-defendant. also a Winston, separate action which was consolidated with Gregorie’s tort action. Winston then filed a counter-claim against Kirby that action.
Appellant counsel to defend Kirby against Grego- retained claims, Kirby rie’s and coun- separate Winston’s and retained Nevertheless, sel to her claims. prosecute Kirby own refused to cooperate any attorneys. Apparently, Kirby with of her to Georgia respond appellant’s relocated and did not to re- peated to contact her. claims attempts Specifically, appellant (1) Kirby by it: forwarded letters to certified mail and (2) counsel; requesting first class mail she contact or appellant residence; (3) messages by telephone left least ten at her contacted their local office in Georgia representative and had (4) go Kirby’s to residence to obtain her retained cooperation; private investigator Kirby’s to confirm whereabouts (5) her; to contact attempt pay expenses offered to all total, by Kirby incurred to in her participate defense. it appellant attempts claims that “undertook at least 84 contact [Kirby] cooperation.” and obtain her 10,1996,
Kirby’s was noted for deposition June and October 3, 1996, to appear but she failed on both occasions. Addition- ally, claims that it was respond unable written discovery interrogatories and answer due to refusal Gregorie communicate with counsel. and Winston subse- motions for quently By May filed sanctions. order dated “precluded the circuit court ordered that from of or introducing any concerning the circumstances *6 ... surrounding the accident.”
A liability trial was held on issues only. Again, Kirby failed order, to appear, pursuant and to the court was appellant any forbidden introduce her defense. The jury returned a verdict Kirby only Gregorie. favor Appellant judgment filed a motion for notwithstanding the verdict, which was denied. a trial on jury damages, appellant brought
Before a declara- judgment action a tory seeking declaration that it was not obligated to and for indemnify Kirby any defend claim or judgment cooperate. due to simul- Gregorie taneously brought declaratory judgment against ap- action vehicle, Allstate, and pellant the insurer of her seeking declaration whether or appellant Allstate would be liable to Gregorie. 5, 1999,
On March the trial court that Kirby found had cooperate failed to with that appellant appellant was actually prejudiced by her failure. The court entered an holding appellant order that was not obligated to defend or indemnify for Kirby claims that arose out of the accident. On reconsideration, however, Allstate’s motion for the trial court held in a opinion written that appellant obligated was defend or indemnify Kirby to the extent it was actually prejudiced. The trial court then examined the evi- trial, presented dence and evidence that appellant proffered presented it would have Kirby cooperated. had Based evidence, this the trial court Kirby found that and Winston negligent, were both and that “responsible] (50%) fifty percent Gregorie’s damages up the limits of [appellant’s] liability coverage on the vehicle.” This appeal followed.
324
DISCUSSION
a.
action,
trial court
declaratory judgment
In a
fact,
as to the
its conclusions
of law and
issues
determines
clearly erroneous. See
unless
will not be disturbed
facts
Ins., Md.App.
Mut.
38
v. Brethren
Cas. and Sur. Co.
Aetna
denied,
(1977),
b. her to Kirby required appellant and policy between (1) settlements, making in and assist appellant, with cooperate (3) (2) evidence, hearings attending and giving securing recognized courts have Maryland Although and trials. more clauses, required prove insurer is of such an validity coverage. in order to disclaim cooperate failure to than a mere statute, law By Maryland provides: liability insurance may disclaim on An insurer claiming or a person that the insured ground on the policy insured has breached through policy the benefits if insurer ... cooperate with the by failing the policy of the evidence preponderance the insurer establishes in actual or notice has resulted lack of cooperation that the to the insurer. § IA 19-110. in insurance contract re clause cooperation
A making good ... assist in faith insured quires “[t]he damages.” Indemnity to a suit defense every legitimate
325
Smith,
(1951).
160, 164,
Ins. Co.
197 Md.
461
A.2d
of N.A.
clause,
such a
Under
the insured must make full and frank
insurer,
disclosures to the
see Travelers Insur.
v. Godsey,
Co.
669, 673,
(1971),
260 Md.
There is no
dispute
Kirby failed to cooperate.
Further,
the trial court
found that
was actually
prejudiced by Kirby’s
cooperate.
IA
Under
section
19-110, a finding of actual prejudice permits an insurer to
Nevertheless,
disclaim coverage.
court,
the trial
relying
Appeals’s
Court of
decision
Fid. & Cas.
v.Co. McCon
naughy,
(1962),
228 Md.
What
actual prejudice
constitutes
has not
fully
been
developed in Maryland cases. See
*8
Janquitto,
Andrew
Mary
(2d ed.1999)
Insurance,
7.13(A)
land Motor
§
Vehicle
at 262.
Whether
prejudice
actual
exists must be
determined
case-by-case basis. See id. at 263. It is clear that “an insurer
may not disclaim coverage on the
prejudice]
basis
the
is
[that
only
theoretical,
possible,
conjectural, or hypothetical.” Gen
Scott,
603, 615,
eral Acc. Ins. Co. v.
773,
107 Md.App.
669 A.2d
denied,
115,
(1996).
cert.
342 Md.
326 Rosenbaum, 74, 80 351 A.2d Harleysville Md.App.
In Ins. v. (1976), that an the 197 an insurer claimed insured breached an provisions of cooperation” “notice” and “assistance and it actual because prejudice insurance and that suffered policy, trial, having given [the “the before without insured died 83, 197. any of the Id. at 351 A.2d account accident.” insurer] trial court’s was actual We held that the conclusion there finding the was made before prejudice premature because 86, id. at A.2d 197. underlying the trial the action. See 351 Nevertheless, that, in actu whether suggested determining we exists, prejudice al to an insured part
it is
show
act on
necessary
upon
any
jury
‘which
could have had
effect
which
had or
any
them
way
induced them or
caused
to" render
verdict
himself.’
another
the insurer
against
way,
Stated
that if
coopera-
must establish a substantial likelihood
breached,
tion or notice clause had not been
the insured
held
It is
to have
necessary
would
have been
liable....
surrounding
available
facts and circumstances
the acci-
insured,
dent which is the basis for the claim
inherently depends
because a
of actual
finding
case.
upon
some extent
the closeness of the
(footnotes omitted).
84,
Id. at
Id.
503.
A.2d
Both Rosenbaum
Washington
preju
dealt with actual
dice as a result of insufficient notice to
In
the insurer.
Co.,
Nationwide Ins. Co. v. United States Fidelity & Guar.
(D.C.1973),
Although ‘(t)he there are some cases which hold that unrea- sonable failure of the insured attend the trial and testify where he is a material witness is a breach of the cooperation clause, and ... prejudicial per se’ longer this no seems to be the rule in Maryland. case, however, the instant where the record affirmatively shows that the attempted insurer good faith to insured], secure the presence ... [the [and] that it was unable to obtain his deposition or attendance trial, and that he was defense, the sole witness for we trial finding
cannot court erred say . prejudiced. insurer had been omitted). (footnotes Id. case, the court found that there was
In the instant trial agree. Kirby’s to the insurer. refusal actual We *10 an order in led trial court enter cooperate discovery the any appellant’s from in forbidding offering appellant result, the only As the heard uncontroverted jury defense. a Kirby driving at testimony of and Winston that was Gregorie Kirby speed. given by slow In a statement unreasonably an accident, driving that the she said she was appellant after road, 50, ice and 55,” that she was worried about on the “about “going involved in accident too that the other car the was offer Kirby’s was neither able to testimo quickly.” Appellant unreasonably provide explanation alleged nor an for her ny about the speed. the insured’s statement made slow When action, the accident indicates defense to the circumstances of trial is for trial and attend the preparation a failure assist ordinarily company. Hynding to the prejudicial insurance See Co., 743, 999, 7 214 Cal. P.2d 1002 v. Home Accident Ins. (1932); Co., App. Am. Indem. 27 Ohio v. Great Mut. Rohlf 229, 208, 161 232, (1927); Berger, v. 336 Pa. N.E. 234 Cameron (trial (1938) 293, court should have verdict 295 directed a matter where the was essential witness as of law insured defense); Mut. and for State Farm only at trial witness the (1983). Davies, 310, 167, 226 Va. 310 S.E.2d 169 Ins. Co. case, however, present despite preju- In the actual finding trial, for or prepare testify from failure dice that, Kirby cooperated, court both she trial concluded had Gregorie’s injuries. be for As Winston would both liable that could finding, result of this court held of Right “to the of its loss coverage disclaim value of Winston, for say that is to responsibility Contribution from (50%) Gregorie’s damages up to the limits fifty percent disagree on the vehicle.” We [appellant’s] ex- application McConnaughy, the trial court’s with plain.
In McConnaughy,
two witnesses to Butler’s automobile
accident told Butler’s
insurer
Butler’s car had
on
been
correct side of the road and the
on
wrong
other car
side.
5,
See
McConnaughy,
Md. at
In an action brought by the plaintiff the underlying action insurer, to recover from the insurer stated an affidavit $3,500 it would have accepted the had it not been false statements by the insured’s witnesses. See id. Based affidavit, on this the Court of Appeals insurer, held that the actually while prejudiced, was responsible for payment of $3,500. See id. at Court, A.2d 117. Writing for the *11 Judge Hammond explained: think
[W]e the insurer itself has established that it was prejudiced only as to the excess of policy the limit over $3,500. In effect, substance and the company insurance has urged us, upon as the affidavit in filed support of its motion to deny summary judgment stated, below that it would have $3,500 settled the case for if Butler had not produced testimony], [fraudulent and we think that it should be liable for the amount it would paid have if Butler had been frank and fair. It itself $3,500 showed a lack of prejudice as to of the liability. 14-15, 179
Id. at A.2d 117. The trial court in erred its application of McConnaughy to present the circumstances.' Unlike McConnaughy, appellant never attempted to settle the case for a specific amount, dollar and thus made no admission about the limits of its prejudice. Indeed, appellant was in position a that it could not evaluate the merits of the claims against the insured due to Kirby’s complete lack of cooperation. our ignore court’s would deci- adopt approach
To
the trial
that
expressly
in
in which we
stated
the
Washington,
sion
Washington, 60
“prove negative.”
is not
to
a
required
insurer
295,
Kirby’s
of
at
The Court reversed deny complete- coverage and that the insurer could ruling held so, In doing appellate id. court found that the ly. See fact into whether Turner was finding negligent trial court’s “contains a built-in rule of law imposing upon [the insurer] the proving appearance testimony burden of that Turner’s and trial have a Id. produced would different result.”
The court then addressed what an insurer must show coverage. reject- order to disclaim See id. at 169. The court “a an per permit merely ed se rule that would insurer to show that its at trial appear insured failed rule that would [and] that, an show its require appeared, insurer to had insured result would have favor.” Id. at been 170. [the insured’s] Rather, the court whereby favored test insurer could disclaim where a trier of fact could have found in the favor cooperated. insured’s had the insured id. See The explained: court an action on policy,
[I]n when the insurer shows that the willful insured’s at the trial appear original de- prived the insurer of evidence which would have made a jury issue of the liability supported insured’s a verdict favor, in his or her the insurer has established a reasonable likelihood the result would have been favorable to the insured and has carried its of proving prejudice.... burden Id. court subsequently found that Turner’s failure to appear deprived the insurer “of the very necessary make a jury issue of her liability” and relieved the insurer of (For liability. standards, Id. at 172. applying cases similar (“so 131, 134 Haggard, see Brooks v. (Colo.App.1970) P.2d potentially materially valuable as have affected outcome trial”); Hutt v. Travelers’ Ins. Co. 110 N.J.L. (1933)). 12, 14 164 A.
Although we shall not rely exclusively adopt or upon standard, Davies we consider it a approach balanced to the prove prejudice issue how to to an company. insurance It is consistent with McConnaughy, and would hold the insur- minimal, ance company liable when the is either or Moreover, can be in specific measured dollars. it does not require undesirable court in speculation declaratory
332 believed, had would have jury to what the action as judgment Thus, consis- it is also of the insured. it considered which rejection of a standard and its Washington, with tent negative. prove the insurer require would to. standards, often adopted have different jurisdictions
Other
In Boone v.
Davies standard.
than the
clearly
less
defined
(1983),
293,
the Kansas
ate test to be Dietz v. a meritorious defense.” “presenting insurer from Co., 496, 276 Mut. Fire Ins. 88 Wis.2d Hardware Dealers (1979). 808, announced: 814 The court N.W.2d will not be cooperation of notice and The insured’s duties worthy plaintiff traps denying as technical interpreted However, an granted cannot be when recovery. recovery insured’s reprehensible prejudices conduct insured’s defense.... a meritorious right present contract for fair treatment may ‘If insurers insured, they practically are helpful cooperation by automobile collision.’ of the mercy participants 695, 606, Watkins, 245 v. 210 Wis. N.W. (quoting Id. Watkins (1933)). 698 Kemper
A was articulated Anderson similar standard 249, (1983), Co., which 340 N.W.2d Mich.App. Ins. Michigan measured Appeals the Court of ability in their “materially injured the insurer was whether 90; also Coleman Id. at see [claim].” contest the merits (whether Co., 306, 308 (D.C.App.1973) v. Aetna Ins. defense”); “vital v. Autoist testimony was Schneider (1931) (since Mut. Ins. Co. 346 Ill. 178 N.E. 467-68 who insured driver witness the defense knew accident, about the his refusal to attend trial rendered insurer defense); handicapped incapable conducting its Eakle *14 520, 1072, (1936)(insured v. 185 Wash. 55 Hayes, P.2d was ... “principal negligence actor whom was witness.”). ... charged, necessary he was a [so that] and vital similar, many they While these standards are in the vary proof required strictness of the to show to the prejudice case, however, insured. We conclude that the present pres- ents a that qualifies prejudice justifying circumstance as dis- claimer of any under of these standards.
The is well illustrated when one examines the dilemma by faced the trial court. As the trial explained: court
If Kirby had by way offered admissible evidence of depo- sition or appearance Declaratory Judgment at the proceed- ing, and provided explanation for her slowed to stopped Beltway, condition [appellant] might prov- well have en prejudice as to the Verdict against Kirby. entered does not know why Kirby traveling [c]ourt was at an inordinately slow or stopped speed. Was there a sudden mechanical failure? Kirby experiencing Was some illness that caused her to slow or stop? Kirby Did see some ice or snow that other Kirby witnesses overlooked? Had slowed to avoid a collision with another motor vehicle or animal or object short, on or Beltway? near the [c]ourt does why not know was in Kirby precarious position that she was in.
If there were no might circumstances that explain answers questions, to the court’s Kirby’s may then not absence have prejudiced appellant, and disclaimer of coverage may have See, been inappropriate. e.g., United States Fid. & Guar. Co. Perez, 904, denied, v. 384 So.2d 905 (Fla.App.), rev. 392 So.2d (Fla.1980) (insured’s testimony possibly could not have demon- insurer, clearly “the record since beneficial
been in- have established testimony would that such strated v. Bureau Mut. Ins. Co. Farm negligence”); Western sured’s (factu- Co., (Ky.1971) 128-29 468 S.W.2d Danville Constr. suggest court existence to trial did al material submitted material- why non-appearance evidence to show of substantial Co., 63, 581 Ins. 283 Or. Unigard, Rosalez ly prejudicial); (1978) insured’s by not shown (prejudice 947-48 P.2d admittedly made a the insured had to attend trial when failure car, was from approaching which plaintiffs turn front left direction). the opposite statement, however, it is fair the existence
Given could have cooperated, appellant if had presume or all of the trial that answered some presented 50-55 traveling that she was Kirby stated inquiries. court’s She hour, about ice on the road. and was concerned per miles Winston, testimony from and the hit from behind slow to may have been suggested Winston Gregorie *15 him. car in front of Kirby’s to of presence notice and react the are not so negligence by Kirby suggesting The circumstances in Kirby’s statement disregard that we should compelling This from her absence. appellant to assessing prejudice it, statement, would have created consistent with and evidence conflicting testimony factual with the dispute a material traffic danger to to other slowly pose was so as traveling she Beltway. on the that a different of likelihood
Obviously, degree the is diffi the insured testified would have resulted had verdict the having heard court to determine without cult for the trial the demean the accident and observed description of insured’s in with our decision To be consistent or of the witness. moreover, on the insurance impose we cannot Washington, of strength and establishing weight of the the burden company to establish insured order testimony of its absent and of the accident both the circumstances prejudice, when of a viable defense. the existence Kirby’s suggest statement approach addressing The trial court’s to was a novel one. The court found that appellant appellant step “retrying” but then took the unusual of both prejudiced, Winston, Gregorie’s against Kirby case and her case sought of her car. We believe the trial court to driver reach an result equitable by imposing liability upon shared drivers, both in- thereby affording complete recovery consistent, however, jured party. approach The court’s is not with our decision in or with Washington the standards estab- states, lished other because it adds an layer additional This requirement prejudice. approach re- quires prejudice, the insurer to show actual but it mandates delving into an examination of the or amount of proportion It prejudice. fact-finding does so based on additional made testimony. without the benefit of the insured’s The approach requires speculation missing testimony, about the how a and fact finder would react to same. Kirby’s
The court had insufficient information about poten- tial or testimony conclude whether not she would have been negligent By concluding determined had she testified. testimony her would not have been sufficient to her relieve from liability, imposed the court the burden on the insurance company prove exactly what it could what Kirby not— said, would have how she would have said it. For these reasons, we hold that trial court erred.
cooperate any liability relieves on the underlying below, judgment claim. We therefore vacate the entered remand this case to the trial court with to enter directions in favor judgment appellant. REVERSED;
JUDGMENT TO BE PAID BY COSTS APPELLEE. *16 BYRNES,
Dissenting Opinion by J.
BYRNES, Judge, dissenting.
I dissent. respectfully trial court The assessed the evidence was admitted at that underlying the trial of the tort action and the 336 made a factual at that trial and from admission precluded Farm, to State under prejudice” issue of “actual
finding on the that there was the trial court found Specifically, § IA 19-110. not breached the that had a substantial likelihood as to clause, would have been different the verdict cooperation i.e., Kirby would have only, that both Winston and Winston Thus, failure to resulted Kirby’s cooperate been found liable. Farm in that it deprived to State State prejudice in actual of contribution Kirby’s right benefit of Farm of the Farm could disclaim trial court ruled that State The Winston. amount, judgment of one-half of the to the extent coverage it occupied it would have had position it to the restoring thus prejudiced. not been applied legally that the trial court majority suggests Rely I prejudice.” disagree. for “actual
incorrect standard
Rosenbaum, Company
Insurance
v.
Harleysville
ing
upon
(1976),
74,
explained
the trial court
Md.App.
actual prejudice,
Farm had suffered
deciding
whether State
it
cooperate
had made
it considered whether
liability
at the
that the verdict rendered
substantially likely
than it would have been had
trial
have been different
would
Rosenbaum,
the trial court found that
cooperated.
she
in
as a result of the
prejudice
had suffered actual
insurer
This Court
cooperate.
notice and
give
sured’s failure
Md.Code, article
the 1964 enactment of
observed that before
19-110,
48A, 482,
§
to IA
insurance
§
statute
predecessor
lack of
without
coverage for
notice
could
companies
disclaim
for lack
but could disclaim
prejudice,
of actual
proof
30 Md.
proof
prejudice.
of actual
cooperation
upon
looked to the
A.2d 197. The Court then
App. at
n.
addressing
statute and
predecessor
case law
pre-dating
glean
meaning
cooperation
disclaimers for lack
Id.
United States
(citing
in the statute.
prejudice”
“actual
Williams,
289, 307,
337 to meaning a firm basis to the the Court ascribed there was phrase. that Washington disapprove did not opinion
Our later
in Rosenbaum. Rath-
prejudice explained
for actual
standard
er,
factually inappo-
that the cases were
the Court concluded
Rosenbaum,
of
acci-
In
the insurer received notice
the
site.
Even
a third
-withinweeks of its occurrence.
party
dent from
to
about the
respond
inquiries
the insured did not
though
died, the insurer was not foreclosed
eventually
accident and
discovering the facts
conducting
investigation
from
contrast, Washington,
the
surrounding
By
the accident.
day
of the claim the
after the
insurer first received notice
ensuing
In the
verdict
its insured was rendered.
action,
put
the insurer
declaratory judgment coverage
that,
of the insured’s
showing
consequence
as a
notice,
investigating
give
prevented
had
from
it
been
claim,
and therefore was unable
underlying
the facts
or
have discovered but
show what facts it could have would
trial court’s
breach. This Court affirmed the
the insured’s
insurer,
that
finding
prejudice
holding
factual
of actual
of all
deprived
opportunity
when the insurer “has been
defend,”
prejudice,
to show actual
prove
negative
and must
evi-
entry
judgment
of the adverse
is itself “affirmative
60
(1993)(same). in that “materiality” The use of the word preju- for “actual to me that the standard suggests
context
in Rosenbaum remains
viable.
dice” described
the trial
the standard that
majority
specify
does
The
prejudice,
actual
determining
applied
court should have
standard,
in finding
the court erred
any
that under
reasoning
against Kirby.
to the verdict
respect
no
with
*18
case, the
circumstances in this
majority holds that under the
that was admitted
considering
in
the evidence
trial court erred
tort
underlying
at the trial of the
that was precluded
its
of that evidence
determining
in
from evaluation
action and
Kirby/State
done had
jury
a reasonable
would have
what
majority
put
to
on á defense. The
permitted
Farm been
Washington,
that,
not have
in
the insurer should
concludes
as
trial court should have
negative,
to
a
and the
prove
been made
Kirby that
entry
judgment against
mere
of
found from the
disagree.
I
prejudice.
suffered actual
State Farm
IA
disclaimers of
under
addressing
The cases
breach of the
§ 19-110 make
that whether the insured’s
plain
resulted
give
cooperate
notice or the covenant
covenant
is a
of fact to be
question
in actual
to the insurer
prejudice
in
action
declaratory judgment
the trial court
the
by
decided
erroneous standard. See
clearly
and to be reviewed under
(“We
do not find
Washington,
Md.App.
Finally, majority to coverage Kirby partially, to to allowing Farm disclaim State prejudiced. it was by of the dollar value which the extent in the trial court erred majority reasons that Specifically, 1, 228 Md. 179 A.2d McConnaughy, Fid. Co. v. reading & Cas. (1962), authority ruling. disagree I as such with this conclusion also.
In McConnaughy, prior which was decided the enactment 48A, 482, declaratory § of the trial court in a judgment article coverage summary judgment, explana- action ruled on without tion, prejudiced by that the insurer had not been the insured’s cooperate, procuring which had taken the form of favor. testify falsely underlying witnesses to his tort $10,000 judgment against action had resulted the insured. of Appeals doing, The Court reversed. so it observed that though even it the insurer’s in- accepted position sured’s actions had caused it prejudice, preju- the insurer was $6,500 judgment diced the extent because its coopera- own evidence showed that but for its insured’s lack of tion, $3,500 paid it would have settle the case.
I agree with the trial court the instant case that McCon- stands for the that in a naughy proposition declaratory judg- action in coverage ment which the insurer seeks to disclaim the basis the insured’s breach of the covenant to cooperate, may partial the court allow a disclaimer commen- insurer, surate with the prejudice actually by suffered «assuming that that is I quantifiable.1 do not read the lan- 32, Hartford, supra, 1. In a footnote in Sherwood 347 Md. 698 A.2d Appeals approval the Court of indicated of the allowance of a partial coverage. disclaimer of Sherwood concerned an insurer’s obli- gation pay pre-notice by costs of defense incurred the insured. After context, observing that in that the issue of actual includes an pre-notice expenses assessment of whether the insured’s were reason- able, they "materially and whether exceed[ed] that which the insurer event,” 48-49, likely any would have incurred in id. the Court commented: was, itself, expense The fact that an incurred the insured reason- *20 necessarily question prejudice. able in amount does not resolve the of may, example, arrangement competent The insurer have an with competent investigator support person defense counsel or a or other insured, provide negotiated derogation service at a rate. If the so, duty employs of its not contractual to do counsel or other that, litigation support persons though facially at rates unreason- able, substantially are nonetheless in excess of those that would have paid by otherwise been the insurer had it been notified and undertak- (article 48A, § 482 and subsequent enactments guage 19-110) finding partial from trial courts precluding § as IA factual I distinc- nor do consider coverage, of disclaimers to be judice the case sub McConnaughy and tions between trial no clear error there was meaningful. Because suffered only prejudice finding factual court’s Kirby’s right its loss of the benefit Farm was State Winston, the trial should not disturb we contribution coverage to Farm to disclaim to allow State court’s decision one- prejudice: commensurate with an amount judgment. half of the earlier, claiming may basis for insurer have some en the defense prejudice at to the extent least difference. 1078(emphasis supplied).
347 Md. at n.