Bishop v. State Farm Mutual Auto Insurance

²²⁷ ELDRIDGE, Judge. This State’s Insurance Code, Maryland Code (1957, 1991 Repl.Vol., 1992 Cum.Supp.), Article 48 A, § 539, and its motor vehicle law, Code (1977, 1987 Repl.Vol.), §§ 17-103 and 17-104(b) of the Transportation Article, generally require that motor vehicle insurance policies on vehicles required to be registered in Maryland provide coverage for “medical, hospital, and disability benefits” in a minimum amount of $2500. 1 These benefits are known as “Personal Injury Protection” or “PIP” benefits, and they are payable without regard to fault. The issue in this case is whether the petitioner, who was injured in an accident occurring while he was a passenger in a motor vehicle insured by the respondent State Farm Mutual Automobile Insurance Company, is entitled to collect PIP benefits under the State Farm insurance policy despite his previous receipt of PIP benefits from his own insurer. I. The petitioner, Michael Bishop, was a passenger in an automobile owned and driven by Karen Fleagle Scott and insured by the respondent, State Farm.

While driving the automobile in Queen Anne’s County, Maryland, Scott allegedly lost control of the vehicle on a curve, with the vehicle “striking a ditch, and thereby causing the vehicle to overturn, spin in the air, and, come to rest on its roof in a wooded area....” Bishop was ejected from the vehicle and sustained serious injuries. Scott, a former Pennsylvania resident, had insured the car in Pennsylvania. Prior to the accident, however, Scott had become a Maryland resident and had registered her vehicle in Maryland. ²²⁸ As a result of the accident, Bishop suffered damages allegedly in excess of $30,000 in medical bills and lost wages. The State Farm policy covering Scott’s vehicle provides, inter alia, up to $100,000 per person for medical expenses, and $15,000 per person for loss of wages, available to an “insured,” defined as including any person occupying the policyholder’s vehicle.

Shortly after the accident, State Farm sent to Bishop the necessary forms to file a PIP claim under the State Farm policy, and Bishop completed and returned the forms. He also underwent a medical examination at State Farm’s request. Three months after Bishop filed the PIP claim with State Farm, that insurer denied the claim. While the State Farm PIP claim was pending, Bishop also filed a claim with his own insurer, the Maryland Automobile Insurance Fund (MAIF), for PIP benefits.

MAIF paid Bishop $2,500, the full amount of PIP coverage under his policy. State Farm’s denial of PIP coverage under Scott’s policy occurred after MAIF had paid Bishop’s claim. Bishop filed a complaint in the Circuit Court for Queen Anne’s County against Scott and State Farm. Count I of the complaint sought damages from Scott as a result of the alleged negligent operation of her motor vehicle.

In count II, Bishop alleged that State Farm wrongfully denied PIP benefits to him, and he sought damages under a breach of contract theory. Prior to trial, Bishop settled his claim against Scott. Thereafter, the Circuit Court granted State Farm’s motion for summary judgment on count II of the complaint. The Circuit Court based its decision entirely on the Maryland statutory provisions providing for and regulating PIP benefits, namely Art. 48A, §§ 539 and 543.

Subsection (a) of § 543 states as follows: (a) “Recovery where more than one policy. — Notwithstanding any other provision of this subtitle, no person shall recover benefits under the coverages described under §§ 539 and 541 of this subtitle from more than one motor vehicle liability policy or insurer on either a duplicative or supplemental basis.” ²²⁹ The Circuit Court held that because Bishop did, in fact, receive PIP benefits from MAIF, any further recovery was barred as “duplicative or supplemental” under § 543(a). The court noted that if Bishop had not accepted the $2,500 from MAIF, “[w]e might then have had an extremely interesting exercise which would have taken us much longer, perhaps, of deciding what the pecking order was.” According to the trial court, it was the receipt of the minimum PIP benefits that triggered the application of § 543(a). On appeal, the Court of Special Appeals affirmed the judgment of the Circuit Court, but based its decision on its interpretation of the terms of the State Farm policy and not on the statutory provisions regulating PIP benefits. In fact, the intermediate appellate court, in an unreported opinion, seemed to disagree with the trial court’s holding.

The Court of Special Appeals stated that it was “not persuaded that [Bishop] is prohibited by Maryland law from asserting a medical benefits claim against [State Farm].” The appellate court went on to note that “[t]here may be a case in which an injured person will be entitled to recover PIP benefits from two or more insurance policies.” Nevertheless, the Court of Special Appeals held that the priority provision of the State Farm policy prohibited Bishop from recovering under that policy. Bishop timely filed a petition for a writ of certiorari which this Court granted. Bishop v. State Farm, 352 Md. 309 , 721 A.2d 988 (1998). State Farm did not file a cross-petition for a writ of certiorari.

II

As previously mentioned, the Maryland statutory provisions regulating motor vehicles and motor vehicle insurance require, as “basic required primary coverage,” so-called PIP benefits. Unless “the first named insured ... make[s] an affirmative written waiver of those benefits,” Maryland law requires coverage providing benefits for medical expenses and loss of wages up to a minimum of $2500. See Art. 48A, § 539; ²³⁰ §§ 17-103 and 17-104 of the Transportation Article. While the minimum required PIP coverage under the Maryland statutory scheme is $2500, the language of Art. 48A, §§ 539 and 541 (relating to uninsured motorist coverage) clearly “contemplate[s] insurers offering higher coverage.” Hoffman v. United Services Auto.

Ass’n, 309 Md. 167, 177 , 522 A.2d 1320, 1325 (1987). See Hines v. Potomac Elec. Power Co., 305 Md. 369, 373 , 504 A.2d 632, 634 (1986). The “main purpose” of the legislation requiring PIP coverage was “ ‘to assure financial compensation to victims of motor vehicle accidents without regard to the fault of a named insured or other persons entitled to PIP benefits.’ ” Clay v. GEICO, 356 Md. 257, 265-266 , 739 A.2d 5, 10 (1999), quoting Pennsylvania Nat’l Mut.

Cas. Ins. Co. v. Gartelman, 288 Md. 151, 154 , 416 A.2d 734, 736 (1980). For a recent discussion of the history and purpose of the statutory provisions relating to PIP coverage, see MAIF v. Perry, 356 Md. 668 , 741 A.2d 1114 (1999).

Although Scott’s State Farm policy was issued in Pennsylvania, “the Maryland statutory provisions regulating PIP coverage and benefits” apply not only to “insurance policies issued, sold, or delivered in Maryland,” but also “to motor vehicles required to be registered in Maryland.... ” Ward v. Nationwide, 328 Md. 240, 247 , 614 A.2d 85, 88 (1992). See Allstate Ins. Co. v. Hart, 327 Md. 526, 533 , 611 A.2d 100, 103 (1992) (“The General Assembly in the Vehicle Law and the Insurance Code precisely delineated, in terms of vehicles and insurance policies, the scope of the statutorily required motor vehicle insurance coverages. Under Code (1977, 1987 Repl.

Vol.), § 17-104(b) of the Transportation Article, the required insurance coverages must be maintained on ‘a motor vehicle that is required to be registered in this State’ ”); Larimore v. American Ins. Co., 314 Md. 617, 618-619 , 552 A.2d 889, 889 (1989) (Maryland statutory provisions regulating automobile insurance are applicable to “every motor vehicle required to be registered in Maryland”). When Scott became a Maryland resident, she was subject to the motor vehicle registration requirements set forth in Code ²³¹ (1977, 1999 Repl.Vol., 1999 Supp.) § 13-402 of the Transportation Article, and she did in fact register her automobile in Maryland. Consequently, the Maryland statutory provisions regulating motor vehicle insurance, including the provisions regulating PIP, were applicable to Scott’s vehicle.

While Scott, upon becoming a resident of Maryland, could have reduced her PIP coverage to the $2500 minimum under Maryland law, she chose to maintain, and presumably continued to pay a greater premium for the higher coverage which she had in Pennsylvania. Whenever there is PIP or uninsured motorist coverage under more than one insurance policy, the coordination or prioritization of coverage is regulated by Art. 48A, § 543. Circumstances like those in the present case typically involve coverage under two policies. See Travelers Ins.

Co. v. Benton, 278 Md. 542, 545 , 365 A.2d 1000, 1003 (1976) (“whenever a person qualifying as an insured under his own motor vehicle liability policy is riding as a passenger in another vehicle registered in Maryland, PIP coverage potentially exists under both policies”). See also MAIF v. Perry, supra, 356 Md. at 676, 741 A.2d at 1118 . Consequently, the coordination of benefits under Scott’s State Farm policy and Bishop’s MAIF policy, and the question of which insurer is primarily liable, are governed by Art. 48A, § 543. That section provides, in relevant part, as follows: “ § 543.

Duplication of benefits; coordination of policies. “(a) Recovery where more than one policy. — Notwithstanding any other provision of this subtitle, no person shall recover benefits under the coverages described under §§ 539 [PIP] and 541 [liability and uninsured motorist coverage] of this subtitle from more than one motor vehicle liability policy or insurer on either a duplicative or supplemental basis. “(b) Benefits payable by insurer of vehicle; exception. (1) As to any person injured in an accident while occupying a motor vehicle for which the coverage described under § 539 of this subtitle is in effect, and as to any person ²³² injured by such a motor vehicle as a pedestrian or while in, on, or alighting from any other vehicle powered by animal or muscular power, or on or alighting from an animal, the benefits shall be payable by the insurer of the motor vehicle. * * * “(c) Benefits payable by injured party’s insurer. As to any person insured under a policy providing the coverage described under §§ 539 and 541 of this subtitle who is injured in an accident while occupying a motor vehicle for which the coverage described under §§ 539 and 541 of this subtitle is not in effect, or struck as a pedestrian or injured while in, on, or alighting from any other vehicle powered by animal or muscular power or on or alighting from an animal by a motor vehicle for which the coverage described under §§ 539 and 541 of this subtitle is not in effect, the benefits shall be payable by the injured party’s insurer providing such coverage; provided, however, that such benefits shall be reduced to the extent of any medical or disability benefits coverage applicable to the motor vehicle and collectible from the insurer of such motor vehicle.” State Farm’s principal argument throughout this litigation, with which the Circuit Court agreed, has been that the medical and wage loss benefits under the State Farm policy constitute PIP benefits for purposes of Art. 48A, §§ 539 and 543(a), that § 543(a) prohibits the recovery of PIP benefits under more than one policy, and that, since Bishop received PIP benefits under his MAIF policy, subsection (a) of § 543 precludes the recovery of PIP benefits under the State Farm policy. State Farm chiefly relies upon Travelers Ins.

Co. v. Benton, supra, 278 Md. 542 , 365 A.2d 1000 ; Yarmuth v. Government Employees Ins. Co., 286 Md. 256 , 407 A.2d 315 (1979); and Rafferty v. Allstate Ins. Co., 303 Md. 63 , 492 A.2d 290 (1985), for its contention that the receipt of PIP benefits under one policy absolutely precludes the recovery of such benefits under a second policy. According to State Farm, because subsection (a) of § 543 begins with the phrase “Not ²³³ withstanding any other provision of this subtitle,” the coordination and priority provisions in subsections (b) and (c) of § 543 can have no application to this case.

In State Farm’s view, even if subsections (b) or (c) would dictate that State Farm was primarily liable and that MAIF was only secondarily liable, the fact that MAIF went ahead and paid benefits to Bishop prevents any recovery from State Farm under the language of subsection (a). State Farm asserts that the fact of the MAIF payment and the wording of subsection (a) renders any consideration of the priority provisions in subsections (b) and (c) “meaningless.” (Respondent’s brief at 4). State Farm alternatively argues that the Court of Special Appeals correctly construed the terms of the State Farm policy and that the priority provision in the policy prevented any recovery of PIP benefits from State Farm. The petitioner Bishop initially argues that the Court of Special Appeals erred in affirming the grant of summary judgment on grounds other than those relied on by the Circuit Court.

Alternatively, Bishop contends that the Court of Special Appeals misconstrued the priority provision in the State Farm policy. Bishop also argues that the Circuit Court misconstrued Art. 48A, § 543, and that State Farm is primarily liable under § 543 to the extent of Bishop’s medical expenses and lost wages, up to the limit of State Farm’s coverage. Bishop states that, if he recovers PIP benefits from State Farm, he will reimburse MAIF for the $2500 which it paid. Finally, Bishop argues that, if subsection (a) of § 543 were applicable to this case, it would apply only to the minimum statutorily required PIP coverage of $2500.

Relying on Hoffman v. United Services Auto. Ass’n, 309 Md. 167 , 522 A.2d 1320 (1987), Bishop contends that he can recover under the “optional excess personal injury protection ... coverage ... provided by a second policy.” Hoffman, 309 Md. at 178 , 522 A.2d at 1325 .

III

Preliminarily, we point out that the Court of Special Appeals erred, in two respects, by affirming the summary judg ²³⁴ ment based on the intermediate appellate court’s interpretation of the priority provision in the State Farm policy. First, it is a settled principle of Maryland appellate procedure that