Jеssica N. WOZNICKI v. GEICO GENERAL INSURANCE COMPANY. Jeannine Morse v. Erie Insurance Exchange.
Nos. 52, 54, Sept. Term, 2014.
Court of Appeals of Maryland.
May 27, 2015.
115 A.3d 152
Frank F. Daily (Sean P. Edwards, The Law Offices of Frank F. Daily, P.A., Hunt Valley, MD), on brief, for Respondent in No. 52, Sept. Term, 2014.
Ryan S. Perlin (Salsbury, Clements, Bekman, Marder & Adkins, LLC, Baltimore, MD), on brief, for Petitioner in No. 54, Sept. Term, 2014.
Jonathan R. Clark (Amy Leete Leone, McCarthy Wilson, LLP, Rockville, MD), on brief, for Respondent in No. 54, Sept. Term, 2014.
Argued before: BARBERA, C.J., HARRELL, BATTAGLIA, GREENE, MCDONALD, WATTS and DALE CATHELL (Retired, Specially Assigned), JJ.
GREENE, J.
We are called upon to resolve an issue of critical importance for those traversing the many roads of Maryland, namely, the circumstances under which an insurer providing uninsured (UM) motorist coverage may disclaim any such liability owed to its insured.1 Because of the common issues of law, we have consolidated two civil cases for the purpose of this opinion. We granted separate petitions for certiorari in Woznicki v. GEICO Gen. Ins., 439 Md. 694, 98 A.3d 233 (2014) and Morse v. Erie Ins. Exch., 439 Md. 694, 98 A.3d 233 (2014), to answer the following questions:
- Did the Court of Special Appeals err when it held that, as a matter of law, the UM carrier did not waive its right to receive written notice of a pending settlement with the tortfeasor‘s insurance carrier where there was unequivocal testimony from Petitioner‘s counsel that he received oral consent to settle from a UM carrier claims representative?
- Did the Court of Special Appeals err when it held that the uninsured motorist (UM) carrier did not bear the burden of proving prejudice arising from Petitioners’ failure to give written notice of the pending settlement with the tortfeasors’ insurance carrier?
As explained in greater detail below we shall answer each of the questions in the negative and affirm the respective judgments of the Court of Special Appeals.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Jessica N. Woznicki
Woznicki‘s dispute with GEICO arises out of injuries sustained in a motor vehicle collision between Woznicki and James Bowman Houston (Houston), which occurred on November 12, 2010. Woznicki was struck, while operating an automobile in Cecil County, after Houston failed to yield the right-of-way while making a turn. It is undisputed that the accident was caused entirely by the negligence of Houston.
At the time of the accident, Houston was insured by Nationwide Insurance Company (Nationwide) under a motor vehicle
As a result of the injuries sustained during the accident, Woznicki asserted a claim against Houston, through her then-counsel, Ben T. Castle (Castle), a Delaware attorney. Nationwide offered to settle all claims for $20,000—Houston‘s liability policy limit—in exchange for a release of all claims against Nationwide and Houston at some time in March, 2011. In a letter dated March 29, 2011, Nationwide wrote to Castle stating [t]he enclosed Release of All Claims document confirms our settlement with you/your client. On the same day, Castle sent a letter to the GEICO claims adjuster handling the matter, Ms. Rebecca Davis, stating, in part:
At this time it appears that the driver of the car that caused the accident injuring Ms. Woznicki, James Houston, has only limited liability coverage through Nationwide Insurance Company. We will provide more information as it becomes available.
The letter does not mention the Nationwide settlement offer letter received by Castle on the same day.
Central to the dispute between Woznicki and GEICO before this Court, Castle contacted GEICO by phone at some point on or about July 7, 2011,3 and obtained, what Castle and Woznicki characterize as GEICO‘s oral consent to settle without prejudice to any potential UM claim against GEICO. Castle, who was unable to reach Ms. Davis, the claims adjuster assigned to Woznicki‘s case, could not recall who he spoke with about the matter. Castle only remembered that the person was a woman.
By letter dated July 7, 2011, Woznicki executed a Release of all claims against Houston. The same day, Castle wrote to GEICO, stating:
The tortfeasor‘s insurance carrier, Nationwide, has a limited bodily injury liability policy of $20,000 and has tendered those limits to the injured driver, Jessica Woznicki. We are writing to request GEICO‘s consent to acceptance of the settlement.
Enclosed for your file is a copy of the Nationwide Policy insuring tortfeasor, James B. Houston, and the Release in exchange for the $20,000.
GEICO responded on August 15, 2011, denying any and all Underinsured Motorist (UIM) coverage to [Woznicki] ... because [Woznicki] failed to obtain our consent to settle, which is required by both [
Woznicki, represented by new counsel, filed a Complaint and Demand for Jury Trial against GEICO on April 3, 2012, for breach of the insurance policy. Woznicki sought to hold GEICO liable for damages in excess of the $20,000 she received from Nationwide. After filing its answer, GEICO
It‘s clear and undisputed that Section 19-511 was not complied with. In other words, there is—the plaintiff‘s attorney did not comply with that section. And that‘s also refer-enced—incorporated into the policy; therefore, the terms of the policy were not complied with. That‘s undisputed, I believe. But the court finds that there could be a question of waiver. And I believe that these matters could be waived.
The question then arises is does the vague reference to a telephone conversation constitute—or viewed in a light most favorable to the plaintiff, does that constitute sufficient evidence to be material in a decision.
And quite simply, the court finds that under the facts of this case that that reference to a telephone call, with nothing more than has been put forth today, does not constitute sufficient evidence to be material, to affect the decision.
The Court of Special Appeals upheld the decision of the trial court. Woznicki v. GEICO Gen. Ins. Co., 216 Md.App. 712, 90 A.3d 498 (2014). Specifically, the intermediate appellate court concluded that (1) an insurer could waive the requirements of
B. Jeannine Morse
Petitioner, Jeannine Morse (Morse), was injured in a motor vehicle collision on April 28, 2007 in New Castle, Delaware, when her vehicle was struck by a vehicle driven by Paula Smallwood (Smallwood). As a result of her injuries, Morse incurred medical expenses in excess of $22,500. At the time of the collision, Smallwood, the at-fault driver, carried automobile liability insurance with Nationwide Insurance Company (Nationwide). Smallwood‘s policy with Nationwide included a single incident liability limit of $15,000. Also at the time of the collision, Morse maintained UM/UIM coverage through her motor vehicle insurance policy with Respondent, Eriе Insurance Exchange (Erie), with bodily injury limits of $250,000. Morse‘s Uninsured/Underinsured Motor-ists Coverage Endorsement in her policy with Erie contained a condition that required Morse to notify Erie of any settlement offer which would exhaust the tortfeasor‘s liability insurance policy limits and to obtain Erie‘s consent to settle prior to accepting any such settlement with the tortfeasor. For a discussion of the policy language see infra.
After the accident, Morse retained a Delaware attorney, Beverly A. Bove, Esq. (Bove), to represent her. Upon demand from Bove, on October 13, 2008, Nationwide offered Morse its entire $15,000 policy limit in settlement of Morse‘s claims against Smallwood. Nationwide also sent Bove a notarized letter confirming that Smallwood had no other insurance polices applicable to Morse‘s claims. On October 14 or 15, 2008, Bove contacted by telephone a claims adjuster at Erie to report Morse‘s UM claim and the settlement offer from Nationwide. In a letter dated October 27, 2008, Bove sent Erie a copy of the Nationwide settlement offer letter. The letter to Erie was not sent by certified
On February 4, 2009, after accepting Nationwide‘s settlement offer, Bove first informed Erie by telephone that she had accepted Nationwide‘s settlement offer and signed a release.4
Following the February 4th telephone conversation, Erie requested by phone and by mail a copy of the release on March 19 and 27, 2009, respectively. Erie did not receive a copy of the signed release until July 8, 2009, over seven months after it was executed, and nearly four months after Erie requested a copy of the release by letter.
On November 5, 2009, Rucker wrote Bove to advise her that Erie had denied Morse‘s UM claim, because she failed to send written notice of the Nationwide offer and accepted the offer without Erie‘s written consent. On June 17, 2011, Morse sued Erie in the Circuit Court for Cecil County for breach of contract. A jury trial was held on April 22-23, 2013, following which the jury returned a verdict in favor of Erie, finding that Erie did not breach its contract with Morse. Morse appealed.
In a reported opinion, a majority of the Court of Special Appeals affirmed, concluding that the failure to comply with the consent to settle procedure contained in the insurance policy and
Ultimately at issue in this case is the extent to which an individual‘s failure to comply with the settlement procedures outlined in
(a) If an injured person receives a written offer from a motor vehicle insurance liability insurer or that insurer‘s authorized agent to settle a claim for bodily injury or death, and the amount of the settlement offer, in combination with any other settlements arising out of the same occurrence, would exhaust the bodily injury or death limits of the applicable liability insurance policies, bonds, and securities, the injured person shall send by certified mail, to any insurer that provides uninsured motorist coverage for the bodily injury or death, a copy of the liability insurer‘s written settlement offer.
(b) Within 60 days after receipt of the notice required under subsection (a) of this section, the uninsured motorist insurer shall send to the injured person:
- written consent to acceptance of the settlement offer and to the execution of releases; or
- written refusal to consent to acceptance of the settlement offer.
(c) Within 30 days after a refusal to consent to acceptance of a settlement offer under subsection (b)(2) of this section, the uninsured motorist insurer shall pay to the injured person the amount of the settlement offer.
(d)(1) Payment as described in subsection (c) of this section shall preserve the uninsured motorist insurer‘s subrogation rights against the liability insurer and its insured.
(2) Receipt by the injured person of the payment described in subsection (c) of this section shall constitute the assignment, up to the amount of the payment, of any recovery on behalf of the injured person that is subsequently paid from the applicable liability insurance policies, bonds, and securities.
(e) The injured person may accept the liability insurer‘s settlement offer and execute releases in favor of the liability insurer and its insured without prejudice to any claim the injured person may have against the uninsured motorist insurer:
- on receipt of written consent to acceptance of the settlement offer and to the execution of releases; or
- if the uninsured motorist insurer has not met the requirements of subsection (b) or subsection (c) of this section.
(f) Written consent by an uninsured motorist insurer to acceptance of a settlement offer under subsection (b)(1) of this section:
- may not be construed to limit the right of the uninsured motorist insurer to raise any issue relating to liability or damages in an action against the uninsured motorist insurer; and
- does not constitute an admission by the uninsured motorist insurer as to any issue raised in an action against the uninsured motorist insurer.
An insurer may disclaim coverage on a liability insurance policy on the ground that the insured or a person claiming the benefits of the policy through the insured has breached the policy by failing to cooperate with the insurer or by not giving the insurer required notice only if the insurer establishes by a preponderance of the evidence that the lack of cooperation or notice has resulted in actual prejudice to the insurer.
We review issues of statutory construction de novo. See Nesbit v. Gov‘t Emps. Ins. Co., 382 Md. 65, 72, 854 A.2d 879, 883 (2004) (quoting Walter v. Gunter, 367 Md. 386, 392, 788 A.2d 609, 612 (2002)) (When the trial court‘s order ‘involves an interpretation and application of Maryland statutory and case law, our Court must determine whether the lower court‘s conclusions are legally correct under a de novo standard of review. ‘). It is well established that:
The cardinal rule of statutory interpretation is to ascertain and effectuate the intent of the Legislature. Statutory construction begins with the plain language of the statute, and ordinary, рopular understanding of the English language dictates interpretation of its terminology. In construing the plain language, a court may neither add nor delete language so as to reflect an intent not evidenced in the plain and unambiguous language of the statute; nor may it construe the statute with forced or subtle interpretations that limit or extend its application. Statutory text should be read so that no word, clause, sentence or phrase is rendered superfluous or nugatory.... It is also clear that we avoid a construction of the statute that is unreasonable, illogical, or inconsistent with common sense.
We analyze the contested provisions of Maryland‘s Insurance Article in the context of the statutory scheme and construe the plain language so that the various sections of the article do not conflict with one another.... In addition, the meaning of the plainest language is controlled by the context in which it appears. As this Court has stated, because it is part of the context, related statutes or a statutory scheme that fairly bears on the fundamental issue of legislative purpose or goal must also be considered. Thus, not only are we required to interpret the statute as a whole, but, if appropriate, in the context of the entire statutory scheme of which it is a part.
Stickley v. State Farm Fire & Cas. Co., 431 Md. 347, 358-59, 65 A.3d 141, 148 (2013) (citations and quotations omitted).
A. Maryland‘s Uninsured Motorist Statute
Prior to addressing the questions raised before this Court, some background is appropriate. The settlement procedures of
[E]very policy of motor vehicle liability insurance issued, sold, or delivered in
this State ... MAY contain coverage, in at least the amounts required under Section 7-101 of Article 66% of the Annotated Code of Maryland (1970 Replacement Volume and 1972 Supplement), for damages which the insured is entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injuries sustained in an accident arising out of the ownership, maintenance, or use of such uninsured motor vehicle.
State Farm Mut. Auto. Ins. Co. v. DeHaan, 393 Md. 163, 171-72, 900 A.2d 208, 213 (2006) (emphasis in original).
Since its enactment, the UM statute has undergone several changes, the most salient of which was the decision of the Legislature, in 1975, to make UM coverage mandatory for all motor vehicle liability insurers issuing, selling, or delivering such policies in the State by replacing the term may with shall. 1975 Laws of Maryland 562. UM coverage has steadily expanded in scope over the past several decades. Importantly, the General Assembly recognized uninsured motor vehicles as including underinsured motor vehicles. 1981 Laws of Maryland 510 (emphasis added). See also 1983 Laws of Maryland 656 (permitting excess coverage insurers to offer UM coverage); 1989 Laws of Maryland 542 (requiring motor vehicle liability insurers to offer insureds, in writing, the option to purchase higher UM limits); 1992 Laws of Maryland 641 (requiring insurers to provide UM coverage equal to the amount of motor vehicle liability coverage); 1995 Laws of Maryland 515 (expanding the definition of uninsured motor vehicles).
As this Court explained in Erie Ins. Exch. v. Heffernan, 399 Md. 598, 925 A.2d 636 (2007):
The purpose of the uninsured motorist statute is to provide minimum protection for individuals injured by uninsured motorists ... [the] statute creates a floor to liability not a ceiling. Consistent with the public policy of affording minimal protection for innocent victims, an insured can purchase a higher amount of uninsured motorist insurance which will become available when the insured‘s uninsured motorist coverage, as well his damages, exceed the liability coverage of the tortfeasor.
399 Md. at 612, 925 A.2d at 644 (citations omitted). See also Nationwide Mut. Ins. Co. v. Webb, 291 Md. 721, 737, 436 A.2d 465, 474 (1981) (citation omitted) (The courts have repeatedly stated that the purpose of uninsured motorist statutes is ‘that each insured under such coverage have available the full statutory minimum to exactly the same extent as would have been available had the tortfeasor complied with the minimum requirements of the financial responsibility Law.’ ); Kritsings v. State Farm Mut. Auto. Ins. Co., 189 Md.App. 367, 375, 984 A.2d 395, 399 (2009) (The effect [of the UM statute] [i]s to provide an injured insured with compensation equal to that which would have been available had the tortfeasor carried liability insurance in an amount equal to the amount of the injured insured‘s UM coverage. ).
Given the remedial nature of UM coverage, the statute is to be liberally construed to ensure that innocent victims of motor vehicle accidents can be compensated for the injuries they suffer as a result of such accidents. State FarmMut. Auto. Ins. Co. v. DeHaan, 393 Md. 163, 194, 900 A.2d 208, 226 (2006); Johnson v. Nationwide Mut. Ins. Co., 388 Md. 82, 91-92, 878 A.2d 615, 620 (2005); Dwayne Clay, M.D., P.C. v. Gov‘t Emps. Ins. Co., 356 Md. 257, 265, 739 A.2d 5, 9 (1999). Liberally construing the statute, however, does not permit a departure from the legislature‘s intended application[.] Matta v. Gov‘t Emps. Ins. Co., 119 Md.App. 334, 344, 705 A.2d 29, 34 (1998). See also Webb, 291 Md. at 730, 436 A.2d at 471 (This Court has consistently rejected attempts by insurers, as well as insureds and the insurance commissioner, to circumvent the plain language of the required coverage provisions of the statutes dealing with automobile insurance. ).
[Previously,] an injured person who ma[de] a claim against a liability carrier for limits available under the liability policy [wa]s frequently not allowed by their uninsured/underinsured motorist carrier to give the liability carrier a full release of their claim. Therefore, if the injured person wishe[d] to make an additional claim for their injuries against their underinsured motorist coverage, they g[o]t caught in a situation where the liability carrier w[ould] not give them the limits of the at-fault party‘s policy without a release and the uninsured/underinsured motorist carrier w[ould] not allow them to give a release to the liability carrier. As a result, they [we]re unable to recover funds from either carrier. This dilemma c[ould] cause a lengthy delay in settlement.
437 Md. at 347, 86 A.3d at 673-74 (quoting Keeney v. Allstate Ins. Co., 130 Md.App. 396, 401, 746 A.2d 947, 950 (2000)). Under
B. Waiver
With respect to Petitioner Woznicki, we must first determine whether the Court of Special Appeals erred in concluding that GEICO, as a matter of law, did not waive its right to receive written notice of Woznicki‘s settlement offer from Nationwide under
Does § 19-511 Permit Waiver?
Under
limits of the applicable liability insurance policy ... the injured person shall send by certified mail ... a copy of the liability insurer‘s written settlement offer” to his or her UM carrier. Generally, “[w]hen a legislative body commands that something be done, using words such as ‘shall’ or ‘must,’ rather than ‘may’ or ‘should,’ we must assume, absent some evidence to the contrary, that it was serious and that it meant for the thing to be done in the manner it directed.” Thanos v. State, 332 Md. 511, 522, 632 A.2d 768, 773 (1993) (per curiam) (quoting Tucker v. State, 89 Md.App. 295, 298, 598 A.2d 479, 481 (1991)). Although
In its brief before this Court, GEICO argues that, as a matter of law, neither an insurer nor an insured may waive the procedural requirements of
Although the Legislature elected to use the term “shall,” we decline to hold, as a matter of law, that an insurer may not waive its right to receive written notice under
Our decision does not suggest that an insurer or its insured may waive any provision of an insurance statute in the interest of convenience as GEICO argues. For instance, under our reasoning the parties could not “agree for insurance to be issued at limits less than the statutorily required limits in exchange for lower premiums” as GEICO suggests. Such a waiver would be entirely inconsistent with the purpose of “provid[ing] minimum protection for individuals injured by uninsured motorists[.]” Heffernan, 399 Md. at 612, 925 A.2d at 644.
Apart from GEICO‘s reliance on the language of
Although the State in Gorge failed to demonstrate that it provided written notice to the defendant, it argued that oral notice—which defendant admitted to receiving more than 30 days before trial—was sufficient to meet the requirements of the statute. Gorge, 386 Md. at 611, 873 A.2d at 1177. Alternatively, the State contended that the defendant had waived his right to receive written notice under the statute. Id. We held that the State‘s oral notice to defense counsel was insufficient to satisfy the requirements of
Gorge has little bearing on our decision in the instant case because we declined to address the issue of whether the statute at issue permitted a waiver. Instead, we focused upon whether the conduct of the State complied with the language of the relevant statute. That is not the issue presented in this case. Rather, Woznicki argues that GEICO permittеd her to deviate from the statutory language. We also note that, while not expressly addressed by this Court in Gorge, our opinion at least
GEICO‘s reliance on Motor Vehicle Admin. v. Baptist, 185 Md.App. 56, 968 A.2d 638 (2009), is similarly misplaced. In Baptist, the intermediate appellate court considered, among other things, whether the trial court improperly ordered the Maryland Motor Vehicle Administration (“MVA“) to enroll appellee, Baptist, in the MVA‘s Ignition Interlock Program following Baptist‘s license suspension for driving under the influence. Baptist was advised of his responsibilities for enrollment—which would permit him to drive under an ignition-interlock restricted license in lieu of suspension—but nonetheless failed to complete the requirements within the statutorily proscribed time period of thirty days. 185 Md.App. at 72, 968 A.2d at 648. Indeed, Baptist missed the deadline by nearly one month. Id. Despite this failure, the trial court ordered the MVA to enroll Baptist in the program. 185 Md.App. at 63-64, 968 A.2d at 643. The Court of Special Appeals reversed, concluding that “the court had no authority to excuse Baptist‘s noncompliance [under the statute].” 185 Md.App. at 72, 968 A.2d at 648. Moreover, the intermediate appellate court explained that permitting the trial court to waive Baptist‘s compliance with the statute would be in contravention of the Legislature‘s ” ‘paramount purpose’ ... to ‘craft[] a regulatory scheme of expedient procedures that swiftly would impose penаlties for drunk driving[.]’ ” 185 Md.App. at 73, 968 A.2d at 649 (citations omitted).
We fail to see the similarity between disallowing a trial court to waive an individual‘s failure to comply with a statute, which would contravene the Legislature‘s intent to impose penalties for drunk driving, as in Baptist, and an alleged waiver between an insurer and its insured, where such waiver would be consistent with the Legislative purpose of the statute, as in the present case.
Lastly, GEICO directs us to Kennedy Temps. v. Comptroller of the Treasury, 57 Md.App. 22, 468 A.2d 1026 (1984), in which the Court of Special Appeals addressed, among other things, whether a bid protestor‘s failure to comply with the protest regulations under the
Whatever the procurement officer‘s authority might be to waive a procedural regulation of the Comptroller, we find no authority in the law for him to waive a requirement externally imposed pursuant
to clear statutory authority. Such a power would be inconsistent with the whole thrust and scheme of the law.
Id. Apart from the factual difference between Kennedy Temps. and the instant case, Kennedy Temps., similar to Baptist, was based, in part, on the Court of Special Appeals‘s determination that waiver would be inconsistent with the purpose underlying the law. As outlined above, that is not the case here.
Was Summary Judgment Appropriate?
Having determined that GEICO could have waived compliance with the relevant portions of
The question of whether a trial court‘s grant of summary judgment was proper is a question of law. Pursuant to
Md. Rule 2-501(f) , summary judgment is proper where there is no genuine dispute as to any material fact and the party in whose favor judgment is entered is entitled to judgment as a matter of law. To establish a genuine issue of material fact, a “party opposing summary judgment must do more than simply show there is some metaphysical doubt as to the material facts. In other words, the mere existence of a scintilla of evidence in support of the plaintiff‘s claim is insufficient to preclude the grant of summary judgment; there must be evidence upon which the jury could reasonably find for the plaintiff.”
(citations omitted). Accordingly, we must determine whether Woznicki demonstrated the existence of “a genuine dispute as to a material fact by proffering facts which would be admissible in evidence” concerning the alleged waiver by GEICO to survive summary judgment. Beatty v. Trailmaster Prods., Inc., 330 Md. 726, 737, 625 A.2d 1005, 1011 (1993). We agree with the Court of Special Appeals and conclude that there existed no dispute as to a material fact. Therefore, the Circuit Court‘s grant of summary judgment was proper as a matter of law.
“Waiver is the intentional relinquishment of a known right, or such conduct as warrants an inference of the relinquishment of such right, and may result from an express agreement or be inferred from circumstances.” Hovnanian Land Inv. Grp., LLC v. Annapolis Towne Centre at Parole, LLC, 421 Md. 94, 122, 25 A.3d 967, 983 (2011) (citation omitted). “[O]ur case law [] require[s] mutual knowledge and acceptance, whether implicit or explicit, of the non-conforming action.” Hovnanian, 421 Md. at 120, 25 A.3d at 982. “A waiver of a contractual provision must be clearly established and will not be inferred from equivocal acts or language.” Myers v. Kayhoe, 391 Md. 188, 205, 892 A.2d 520, 531 (2006). As a general matter, “[g]iven the highly factual nature of the waiver inquiry, it is an uncоmmon case in which the issue can be resolved by summary judgment.” Hovnanian, 421 Md. at 123, 25 A.3d at 984. In some instances, however, the waiver, or lack thereof, may be so apparent that a court can make a determination as a matter of law. Id. at 124, 25 A.3d at 984. See also Myers, 391 Md. at 207, 892 A.2d at 531 (affirming grant of summary judgment because “[no] rational trier of fact [could] conclude that appellants’ [sole] statement[,] standing alone, constituted an implied waiver“).
Central to the dispute between Woznicki and GEICO is the deposition testimony of Woznicki‘s former attorney, Castle,
Accepting the statements in Castle‘s deposition as true, nothing in the record supports a reasonable inference that GEICO waived compliance with the provisions of
[Counsel for GEICO]: Did, in fact, GEICO ever give you consent to settle [] Woznicki‘s claim against [] Houston who was insured by Nationwide?
[Castle]: It was my understanding that they had, and it was done by telephone. And it was not [ ] Davis. It was somebody taking her place when she was unavailable.
[Counsel for GEICO]: Tell me those details.
[Castle]: My recollection is a telephone call to GEICO asking for [] Davis with whom I‘d been dealing all along.
[Counsel for GEICO]: And when did that happen?
[Castle]: Well, it would have been probably within a week, ten days of July 7th prior to. I can‘t tell you exactly. And [Davis] was unavailable. And I spoke to someone who asked for the file number and policy number and so forth and told—it was a female. I know that. And told her that—what the situation was and asked her what she wanted from me to confirm this. And I was told that she wanted a copy of the Release and a copy of the Declaration Page from the Nationwide Policy. And that would be the extent of it.
* * *
[Counsel for GEICO]: Not knowing [about §] 19-511, why would you have called GEICO even to get their permission then?
[Castle]: Because that‘s our practice in Delaware, and that has always been my customary practice when I‘m dealing with an underinsurance claim, to be very careful to advise the underinsurance carrier as soon as I have a sense that there‘s going to be an underinsured claim, which I think I did with GEICO, and also to find out whether there are any special circumstances or evidence that they want. And I also am very careful to make it clear in the Release that I‘m not releasing the underinsurance claim.
* * *
[Counsel for GEICO]: When you spoke with them, had you already settled with Nationwide? [Counsel for Woznicki]: You mean settled, you mean like accepted the tender?
[Counsel for GEICO]: Accepted the tender from Nationwide.
[Counsel for Wоznicki]: Or gotten a check or—I don‘t know what you mean.
[Counsel for GEICO]: Reached an agreement with Nationwide that the claim of [ ] Woznicki against [ ] Houston was settled.
[Castle]: As a practical matter, I certainly would have told them that we have settled or [are] going to settle or [are] willing to settle, that we‘re going to take it. I certainly would have communicated that that phase of the case is or has been or will be settled, and we‘re going to be asserting a claim against GEICO for the underinsured coverage. What exact words I used, I can‘t tell you.
[Counsel for GEICO]: Okay. So you have given—you had advised Nationwide that for all practical purposes [] Woznicki‘s claim against [] Houston was settled, but you wanted to pursue a UIM claim against GEICO?
[Castle]: That‘s true.
* * *
[Counsel for GEICO]: As I understand, the conversation that you ... claim to have had with GEICO about settlement with Nationwide, you‘re not able to tell precisely whether you said it was your intention to settle or whether the claim had been settled? You just know, you spoke with GEICO about settling the claim?
[Castle]: I know I spoke with GEICO, and I know I would have told them what the realities were and that the case was in the process of being settled. Whether I said has been settled or will be settled or we need your permission to settle—I don‘t think I said that, but I told them what the facts were.
* * *
[Counsel for GEICO]: Did GEICO ever tell you that it did not require written notification?
[Castle]: Only the conversation I referred to in which I asked them what they needed, and I was told the Release and the Declaration Page.
[Counsel for GEICO]: But you would agree you were never told that you do not need to get written consent from GEICO?
[Castle]: I don‘t recall ever being told that in so many words, no.
(Emphasis added).
Absent from Castle‘s testimony is any indication that GEICO informed Castle, or that Castle requested, that GEICO was waiving compliance with the relevant statutory and contractual provisions. That Castle did not request that GEICO waive the procedural requirements of
Woznicki‘s argument rests upon the notion that GEICO, through an unknown claims representative, orally consented to the Nationwide settlement of the underlying bodily injury claim during the telephone conversation with Castle. We disagree with Woznicki that there is “no question” that Castle requested and received GEICO‘s consent to settle during the alleged phone call. Indeed, during deposition, Castle stated that ”
Although Castle testified that it was his understanding that GEICO had consented to the settlement with Nationwide during the telephone conversation, we are left to speculate as to what was actually said by either individual during this conversation. Importantly, Castle admittedly was never told “that [he] d[id] not need to get written consent from GEICO” prior to settling with Nationwide. Castle‘s subjective understanding of what occurred during the conversation lies in contrast to his subsequent correspondence with GEICO by mail. Particularly, on July 7, 2011, the same day Woznicki executed the Release, Castle wrote GEICO stating that ”[w]e are writing to request GEICO‘s consent to acceptance of the settlement.” (Emphasis added). When confronted with this language, Castle testified that “If I read that letter the way I‘m thinking about it, is that I called, asked what information they needed. They told me the Release and the evidence of the coverage and that they would grant their consent.” There is no indication in the record that this letter was simply confirming the conversation Castle had with the unknown GEICO representative. Furthermore, following GEICO‘s denial of UM coverage to Woznicki, Castle wrote:
Your letter of August 15, 2011 disclaiming GEICO‘s underinsured coverage for this loss surprised me. Cognizant of the notice requirement,8 I contacted your office and in-
formed the person who took the call for you that the tortfeasor‘s carrier had tendered its limits of $20,000, and inquired what should be done to obtain GEICO‘s “consent.” I was instructed to forward a copy of the declaration page for the tortfeasor‘s policy and a copy of the release. This was done by letter on July 7, 2011.
(Emphasis added).
No rational trier of fact could conclude that Castle‘s sole statement that it was his understanding that he had obtained GEICO‘s consent, standing alone, constituted a waiver, express or implied, of the statutory or contractual requirements imposed on Woznicki. Myers, 391 Md. at 207, 892 A.2d at 531. Castle, who was admittedly unaware of the requirements of
Woznicki directs us to several out-of-state cases, in support of her argument
[P]lease provide with proper documentation when you settle with Dairyland Ins. Co. so that I can give consideration to the UIM (under-insured motorist coverage) possibility.
Id. (emphasis in original). This evidence, the Court held, “was sufficient to raise a fact issue of the material elements of waiver.” Id. at 270.
Woznicki asserts that “the only material difference between the fact situation in Swiderski and that in the present case is that the claims representative‘s communications in Swiderski w[ere] in writing, while the communication at issue here was oral[.]” We disagree and note that, unlike Swiderski, there is no record of what was actually said during the conversation at issue apart from Castle‘s subjective understanding of what the unknown GEICO representative informed him. Moreover, in the instant case, Castle admittedly never asked GEICO for their consent, or to waive the requirements of the statute or the contract. Furthermore, GEICO never specifically informed Castle that Woznicki did not need written consent to settle. We also note that Castle‘s own letters to GEICO belie his subjective understanding of the conversation. Swiderski does not save Woznicki from summary judgment where the only support for Woznicki‘s position is the equivocal statement of Castle concerning his subjective understanding of an undocumented conversation.
C. Prejudice
GEICO and Erie justify their disclaimer of coverage to Petitioners Woznicki and Morse respectively on the basis that Petitioners failed to obtain the insurers’ consent to settle as required by the insurance policies and
As explained below, the prejudice rules arise from statute, see
Pre-§ 19-110 Common Law
In addition to the duty to pay premiums, automobile insurance policies commonly require insureds, as a condition to the insurance policy, to both (1) promptly notify
There [were] two main lines of authority in the country. One line takes the formalistic, technical view and holds that policy provisions for notice, forwarding of suit papers and cooperation are conditions precedent to liability by the insurer, and that a breach by the insured discharges the
insurer regardless of prejudice. Some courts so holding presume prejudice. The other line holds that the policy provisions are conditions subsequent and prejudice must be shown by the insurer, if it is to be absolved.
228 Md. at 12, 179 A.2d at 122-23. “As a matter of Maryland common law, we did not appear to adopt either view completely.” Allstate Ins. Co., 363 Md. at 119, 767 A.2d at 838. “Rather ... we drew distinctions both between the requirements of notice and cooperation and between non-cooperation based on false statements made by the insured and non-cooperation based on the insured‘s failure to attend depositions, hearings, or trial, or to assist in giving or obtaining evidence regarding the accident or claim.” Id.
On the one hand, where the insured failed to give proper notice of an accident or promptly forward suit papers, we applied the formalistic “no-prejudice” approach. See Watson v. United States Fidelity & Guaranty Co., 231 Md. 266, 189 A.2d 625 (1963). In Watson, the appellee, United States Fidelity & Guaranty Company (“Company“) issued an automobile liability insurance policy to appellant, Watson, requiring Watson to provide the Company written notice of an accident “as soon as practicable” as a condition precedent to coverage under the policy. 231 Md. at 269, 189 A.2d at 626. The Company sought to deny coverage under the policy as a result of Watson‘s failure to provide prompt notice following an automobile accident. 231 Md. at 269-71, 189 A.2d at 626-27. In concluding that the Company could deny coverage as a result of Watson‘s failure to provide notice without a showing of prejudice, this Court began by noting that, under contract principles, the notice requirement at issue was a condition precedent “that must be performed before any obligation on the part of the assurer commences.” 231 Md. at 271, 189 A.2d at 627. We rejected Watson‘s contention that the insurer must demonstrate prejudice prior to a disclaimer of liability, and emphasized that “[t]his contention [was] not in accord with the Maryland decisions, nor with the weight of authority elsewhere in this county.” 231 Md. at 272, 189 A.2d at 627.
On the other hand, where an insured failed to cooperate by providing false statements to the insurer, a showing of prejudice to the insurer was required prior to any disclaimer. See McConnaughy, 228 Md. at 13, 179 A.2d at 123 (“The cooperation clause is included ... so that the insurance company will not be prejudiced in investigation and defense at trial. It should be construed and applied to effectuate
§ 19-110‘s Enactment
Following our decision in Watson, the Legislature enacted
in Watson, which permitted insurers to disclaim liability to an insured where the insured failed to comply with his or her contractual duty to notify, which served as a condition precedent to the insurer‘s liability, irrespective of whether prejudice occurred. Hearn, 242 Md. at 582-83, 219 A.2d at 824. See also Allstate Ins. Co., 363 Md. at 122, 767 A.2d at 840 (noting that the General Assembly may have also been responding to the suggestion in Indemnity Ins. Co., 197 Md. 160, 78 A.2d 461 that prejudice is not required where the insured fails to cooperate by failing to attend hearings, depositions, and other court proceedings, or provide the insurer with evidence).
Since its original enactment, the statute has remained substantively the same. Md. Gen. Assemb., Dep‘t. of Legis. Serv., Fiscal and Policy Note, H.B. 11 (1996) (“The bill [enacting
An insurer may disclaim coverage on a liability insurance policy on the ground that the insured or a person claiming the benefits of the policy through the insured has breached the policy by failing to coоperate with the insurer or by not giving the insurer required notice only if the insurer establishes by a preponderance of the evidence that the lack of cooperation or notice has resulted in actual prejudice to the insurer.
That
As originally introduced before the General Assembly,
§ 482 provided that an insurance company was required to prove actual prejudice in an action under a motor vehicle liability insurance policy where it filed a disclaimer of
insurance for “any reason.” The words “any reason” were deleted from the bill prior to final passage. As amended and ultimately enacted,
§ 482 required insurance companies to prove actual prejudice only where the disclaimer was based on the insured‘s failure “to cooperate with the insurer or by not giving requisite notice to the insurer.”
278 Md. at 552, 366 A.2d at 16-17 (emphasis added).
Local Gov‘t Ins. Trust
To clarify any confusion, we also note that our decision in Prince George‘s Cnty. v. Local Gov‘t Ins. Trust, 388 Md. 162, 879 A.2d 81 (2005) makes reference to a “common law” prejudice rule apart from
Although the Trust acted as an “insurer” for the County, it was not expressly covered by the statutory rule.12 Indeed, the Trust, as an insurance pool under
Although our holding implies that a broader class of “insurers” than those defined under
that in Local Gov‘t Ins. Trust “we stated merely that, in requiring an insurer to show prejudice when it denies coverage based on a breach of a notice provision, we were not unlike the overwhelming majority of our sister states“).
Contentions
Petitioners contend that the intermediate appellate court erred in concluding that Maryland‘s prejudice rules are inapplicable to a failure to comply with
Respondents GEICO and Erie begin by noting that
disclaimer based upon the insured‘s failure to give the required notice.
Is A Showing of Actual Prejudice Required Here?
It is undisputed that Petitioners Woznicki and Morse failed to comply with
At the outset, we note that “consent to settle” clauses are generally upheld, at least to the extent that settlements, consent judgments, releases, covenants not to sue, etc. between insureds and the uninsured motorists are not binding upon insurers unless the insurers have given their consent.” Webb, 291 Md. at 740, 436 A.2d at 476; Waters v. United States Fidelity & Guar. Co., 328 Md. 700, 717, 616 A.2d 884, 892 (1992). By including a consent to settle clause in its policy, an insurer can protect itself where its insured and an uninsured tortfeasor settle a tort suit which exhausts the applicable liability insurance policy limits. Waters, 328 Md. at 717, 616 A.2d at 892; Webb, 291 Md. at 739-40, 436 A.2d at 476 (“[T]he insurer can easily protect itself from being bound by [a settlement between the insured and the uninsured motorist]. The standard uninsured motorist endorsement ... requires the insurer‘s consent to any settlement with the uninsured motorist.“).
The consent to settle clauses of both the GEICO and Erie policy are largely the same and track the language of
[UM/UIM] insurance does not apply to:
1. damages sustained by “anyone we protect” if he, she or a legal representative settled with anyone who may be liable for damages, without “our” written consent
*
The following duties are added:
*
3. “Anyone we protect” must notify “us” by certified mail of any offer to settle a claim for bodily injury or death that, in combination with any other settlements for the same loss, would exhaust the applicable bodily injury or death limits of the liability insurance policy. Within 60 days after receipt of such notice, “we” will send “anyone we protect:”
a. written consent to accept the settlement and to the execution of releases; or
b. written refusal not to accept the settlement offer. Within 30 days of such notice of refusal, “we” will pay “anyone we protect” the amount of the settlement offer. Payment of the amount of the settlement offer to “anyone we protect” preserves “our” right of recovery from anyone else held responsible.
Once this payment is made, “anyone we protect” is required to transfer the right of recovery up to the amount of such payment to “us” and to do nothing to harm this right. Anyone receiving payment from “us” and from someone else for the same accident or loss will reimburse “us” up to the amount of “our” payment. If “we” fail to meet all of the requirements imposed on “us” under this section, “anyone we protect” may accept a settlement offer and execute releases from anyone held responsible for the loss without prejudice to any uninsured motorists claim.
(Emphasis in original). Similarly, the GEICO policy, applicable to Woznicki, provides:
Section IV [concerning UM/UIM coverage claims] does not apply:
1. To bodily injury to an insured if the insured or his legal representative has made a settlement of his claim which exhausts the applicable bodily injury or death limits of the liability insurance without our prior written consent unless:
(a) We are notified in writing by Certified Mail that a tentative agreement to settle for the liability limits of the owner or operator of the other vehicle has been reached;
(b) We did not make a payment equal to the tentative settlement amount to our insured within 30 days of our refusal to consent to the settlement offer; and
(c) We responded to the written notice of settlement within 60 days.
(Emphasis in original).
We have characterized
Upon receipt of the required notice, the UM carrier has a period of 60 days in which it must either send “(1) written consent to acceptance of the settlement offer and to the execution of releases; or (2) written refusal to consent to acceptance of the settlement offer.”
The injured person may accept the liability insurer‘s settlement offer and execute releases in favor of the liability insurer and its insured without prejudice to any claim the injured person may
have against the uninsured motorist insurer: (1) on receipt of written consent to acceptance of the settlement offer and to the execution of releases; or
(2) if the uninsured motorist insurer has not met the requirements of subsection (b) or subsection (c) of this section.
Section
Section
As originally introduced before the General Assembly, § 482 [now
§ 19-110 ] provided that an insurance company was required to prove actual prejudice in an action under a motor vehicle liability insurance policy where it filed a disclaimer of insurance for “any reason.” The words “any reason” were deleted from the bill prior to final passage. As amended and ultimately enacted, § 482 [now§ 19-110 ] required insurance companies to prove actual prejudice only where the disclaimer was based on the insured‘s failure “to cooperate with the insurer or by not giving requisite notice to the insurer.”
Harvey, 278 Md. at 552, 366 A.2d at 16-17 (emphasis added).
Maryland Courts have rejected attempts to apply
We think it clear from the history and language of § 482 that its provisions do not apply to insurance disclaimers
grounded on the insured‘s failure to submit proof of loss within the time specified in the policy. That a proof of loss or claim is separate and distinct from a notice of accident is well recognized. A proof of loss enables the insurer to ascertain the nature, extent and character of the loss and to set reserves accordingly. Empire State Ins. Co. v. Guerriero, 193 Md. 506, 69 A.2d 259 (1949). The chief purpose of a proof of loss “is to acquaint the insurance company with certain facts and circumstances relative to the loss, forming a basis for further steps to be taken by the company, ranging from full settlement to absolute repudiation of liability.” United States Fire Ins. Co. v. Merrick, 171 Md. 476, 489, 190 A. 335, 341 (1937). The insurer‘s right to a proof of loss, where required by the policy, has been characterized as “an important one to the insurer, and one in which it is to be protected.” Automobile Ins. Co. v. Thomas, 153 Md. 253, 261, 138 A. 33, 37 (1927). See also Appleman, Insurance Law and Practice s.3481, et seq. (1970); 8 Blashfield, Automobile Law and Practice s.331.5 (1966). GEICO‘s policy issued to the appellee in this case clearly distinguished between the required notice of an accident and the proof of claim; the provisions with respect to each were contained in separate paragraphs in the policy under the heading ‘Conditions.’
278 Md. at 553, 366 A.2d at 17. The basis for the insurer‘s disclaimer of PIP coverage was the insured‘s failure to submit a timely “proof of loss” claim. Accordingly, the statutory requirement that the insured show actual prejudice to deny the claim was inapplicable because a “proof of loss” is not equivalent to a failure to notify.16
More recently, the Court of Special Appeals considered the sсope of
[O]ne of the main purposes of a no-action clause is to protect [the insurer] “from collusive or overly generous or unnecessary settlements by the insured at the expense of the insurer.” That last-mentioned purpose would be difficult to accomplish if an insured could disregard the no-action clause, sue its insurer, and put the nearly impossiblе burden on the latter of showing collusion or demonstrating, after the fact, the true worth of the settled claim.
143 Md. App. at 524, 795 A.2d at 220-21 (citation omitted).
A failure to comply with a consent to settle clause or
When the uninsured motorist carrier fails to include a consent to settle clause in the uninsured motorist provisions of the policy, and when the carrier, with notice of the tort suit, does not attempt to litigate at trial the underlying tort issues of liability and/or damages, the carrier will ordinarily be bound by a settlement of the tort suit entered into between its insured and the uninsured tortfeasor
328 Md. at 719, 616 A.2d at 893. We explained that a consent to settle clause offered an insurer protection against settlements between the insured and an uninsured tortfeasor, and by not including a consent to settle clause in its insurance policy the insurer had “failed to utilize this method of protecting itself.” 328 Md. at 717, 616 A.2d at 892. Or, stated differently, a consent to settle clause acts separate and apart from a duty to notify. See also West American Ins. Co. v. Popa, 352 Md. 455, 468, 723 A.2d 1, 7 (1998) (noting that “when the uninsured/underinsured provisions of the insurance policy do not contain a clause requiring the carrier‘s consent before the insured can settle with the tortfeasor, the insured is entitled to enter a settlement or a consent judgment with the tortfeasor without obtaining the consent of or without further notice to the carrier“).
Apart from providing an insurer greater proteсtion than a notice clause, an insured‘s obligations under
We also note that the unilateral decision of the insured to accept the liability insurer‘s settlement offer and execute a release of claims without his or her UM carrier‘s consent negatively impacts the UM carrier‘s ability to preserve its subrogation rights against the tortfeasor. The insurer‘s right to seek subrogation against the uninsured tortfeasor is expressly provided by
Morse suggests that “the common law prejudice rule should apply even if a case does not fit neatly into the specific language of
Petitioners ultimately rely upon the remedial purposes underlying the enactment of Maryland‘s UM scheme, arguing that it would be inconsistent with the purpose of
That
Petitioners cite to numerous out-of-state cases which require prejudice in the context of an insured‘s noncompliance with a consent to settle clause.20 Our emphasis in
“To the extent the parties attempt to squeeze a square peg—that is, Maryland‘s notice-prejudice statute, as embodied in
§ 19-110 , and our jurisprudence—into a round hole—that is, the notice-prejudice jurisprudence of other states and jurisdictions—they are unpersuasive. See Bozman v. Bozman, 376 Md. 461, 490, 830 A.2d 450, 467 (2003) (“[D]ecisions of our sister jurisdictions are not binding on this Court and ought not dictate the course of jurisprudence in the State of Maryland.“). Of the more than three-dozen states adopting a notice-prejudice rule, see Local Gov‘t Ins. Trust, 388 Md. at 183-84 n. 9, 879 A.2d at 94-95 n. 9, it appears that only two did so legislatively, as Maryland has.”
418 Md. at 327-28, 13 A.3d at 1285 (emphasis added).
Although Petitioners have provided us with numerous out-of-state jurisdictions which have required prejudice where an insurer seeks to disclaim coverage to its insured for the insured‘s failure to obtain consent to settle, few courts have done so in the context of a statutory prejudice rule. Moreover, of the states that, similar to Maryland, have legislatively addressed this issue, they expressly include a prejudice requirement in the context of a failure to obtain an insurer‘s consent to settle unlike
The out-of-state opinions Petitioners cite to do not bear heavily on our decision interpreting the reach of
McDONALD, J., concurs and dissents.
McDONALD, J., concurring and dissenting.
The Majority Opinion provides a thorough and scholarly discussion of Maryland Code, Insurance Article (“IN“),
As the Majority Opinion explains, although an insurer may waive compliance with
As the Majority Opinion recounts, UM coverage is designed to compensate a victim of an automobile accident when the at-fault driver lacks sufficient insurance to make the victim whole. Majority op. at 109-11, 115 A.3d at 161-63. To facilitate the payment of that compensation to the injured person, the Legislature enacted
The General Assembly, in enacting
Under the Majority Opinion, the UM insurer escapes its obligation to pay UM benefits entirely without any need to show that it suffered any disadvantage from the failure of its insured to obtain a timely consent to the settlement with the liability insurer. This is a windfall to the insurer and a trap for the insured. I would hold, consistent with
Notes
Harvey, 278 Md. at 550, 366 A.2d at 15.As soon as practicable, within a period not to exceed 6 months after the date of the accident, the injured person ... shall submit to the Company written proof of claim including full particulars of the nature and extent of the injuries and treatment received and contemplated.