Colonial Insurance Co. of California v. Batson

BLOOM, Judge. Following a hearing on motions for summary judgment filed by both parties, the Circuit Court for Dorchester County determined that appellee, Troy Edward Batson, was entitled to recover underinsured motorist benefits under a policy of insurance issued to his father by appellant, Colonial Insurance Company of California. The court entered summary judgment in favor of appellee against appellant for the sum of $20,000. This appeal is from that judgment.

Based on our reading of the policy and the undisputed facts, we reach a different conclusion from that reached by the circuit court. Accordingly, we shall reverse the judgment and remand with instructions to enter summary judgment for appellant. Facts While driving his father’s car on 19 July 1986, appellee was involved in a head-on collision, in which he sustained serious injuries. The driver of the other vehicle was later convicted of failure to yield the right-of-way and failure to keep to the right of center.

The vehicle with which appellee’s car collided was insured by State Farm Automobile Insurance Company. The driver of that car was insured by Globe American Casualty Company. Although both of those carriers initially denied coverage for reasons not relevant to this case, they each reversed that position and settled with appellee by paying its policy limits to him. Appellee received a total of $70,000; ⁴⁶⁹ $50,000 from State Farm and $20,000 from Globe American.

It is undisputed that appellee’s damages were in excess of $90,000. Appellee’s father had an insurance policy with appellant which provided uninsured/underinsured motorist (“UM/UIM”) benefits in the amount of $20,000 for personal injury to a single individual. Appellee claimed that because his actual damages exceeded the benefits available under the tortfeasors’ policies and the Colonial policy combined, he was entitled to the full amount of the Colonial UIM coverage. Colonial denied the claim, asserting that it was relieved of any obligation to pay UIM benefits because the other available coverage exceeded the insured’s limits of his own policy.

Appellee filed suit against Colonial and the driver and owner of the other vehicle. His complaint originally contained four counts: Count I alleged negligence by Charles E. Hubbard and vicarious liability therfor by Bonnie Sue Harrison, the driver and owner, respectively, of the other vehicle. Count II alleged negligent entrustment of her car to Hubbard by Harrison. Count III sought recovery of uninsured motorist benefits from Colonial.

Count IV sought recovery of underinsured motorist benefits from Colonial. Appellee dismissed his claim against Hubbard and Harrison with prejudice after receiving payments from State Farm and Globe American. In appellee’s motion for summary judgment, he conceded that, since the driver and owner of the other car were insured, he no longer had a claim for uninsured motorist benefits and therefore was not seeking summary judgment as to Count III. With respect to Count IV, both sides moved for summary judgment.

The trial court concluded that the underinsured ⁴⁷⁰ motorist provision of appellee’s father’s insurance policy was applicable to the case sub judice, and, there being no dispute as to any material fact, granted summary judgment in favor of appellee in the amount of $20,000. Asserting error in that ruling, appellant contends: 1. An injured party who has been compensated by the responsible parties’ insurers, in an amount greater than the limits of his own underinsured motorist coverage, has no claim under the UIM provision of his own policy; 2. The coverage provided by the Colonial policy is, in form and substance, perfectly in accord with the public policy of Maryland.

We begin our analysis by noting that insurers have a right to limit their liability and to impose whatever condition they please in a policy so long as neither the limitation on liability nor the condition contravenes a statutory inhibition or the state’s public policy. Walther v. Allstate Insurance Co., 83 Md.App. 405 , 575 A.2d 339 (1990). Md.Ann.Code art. 48A, § 541(c)(1) (1986 Repl.Vol.) provides that an “uninsured motor vehicle” is one for which the sum of the limits of liability under all valid and collectible liability insurance policies ... applicable to the bodily injury or death is less than the amount of coverage provided to the insured under this subsection. Subsection (c)(2) provides that every motor vehicle liabili- ty insurance policy issued in Maryland must contain uninsured motorist coverage in an amount at least equal to the $20,000 minimum liability coverage requirements of § 17-103(b) of the Transportation Article.

Hoffman v. United Services Auto. Ass’n, 309 Md. 167, 171 , 522 A.2d 1320 (1987); Aetna Cas. & Sur. Co. v. Souras, 78 Md.App. 71, 75 , 552 A.2d 908 (1989). According to the Court of Appeals, “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 tort-feasor complied with the minimum requirements of ⁴⁷¹ the financial responsibility law.’ ” Hoffman v. United Services Auto.

Ass’n, supra, [309 Md.] at 172, 522 A.2d 1320 [citing Nationwide Mutual Ins. v. Webb, 291 Md. 721, 737 , 436 A.2d 465 (1981)]. “This mandatory coverage has the ‘purpose of providing minimum protection to individuals injured by uninsured motorists.’ ” Id., [citing Yarmuth v. Gov’t Employees Ins. Co., 286 Md. 256, 264 , 407 A.2d 315 (1979)]. Appellant contends that the Batsons had the statutorily required minimum UM/UIM coverage of $20,000 for personal injuries to an individual. And, because the injured party received exactly that much from one insurance carrier and two and one-half times that much from the other carrier, he is not entitled to compensation under his father’s UIM coverage with Colonial.

Appellee, on the other hand, asserts that appellant’s interpretation of its policy should be rejected because it attempts to restrict the Batsons’ UIM coverage to “the insured’s own uninsured motorist limits” and violates several standard rules of contract construction, including that Colonial’s policy makes underinsured motorist coverage “for which an additional premium was paid” illusory, and fails to make its intention to limit the coverage clear. We disagree with each of appellee’s contentions and will deal with them below. I. Appellee cites Hoffman v. United Services Auto. Ass’n, supra, for the general proposition that “UIM is a supplemental endorsement extending coverage beyond the traditional uninsured situation.” While this statement of the case is correct, the facts of Hoffman are such that reliance on this language to bolster appellee’s argument that his underinsured motorist coverage should not be subjected to the limits of his uninsured motorist coverage is a misapplication of that case.

We shall briefly outline Hoffman in order to dispel any further reliance in this vein. ⁴⁷² The Hoffmans were passengers in a car that collided with another vehicle, killing Mrs. Hoffman and seriously injuring Mr. Hoffman. The car in which they were riding was insured by Hanover Insurance Company and had underinsured motorists coverage in the amount of $50,000/$100,-000. The other car was insured by Travelers Insurance Company and had the minimum required liability coverage of $20,000/$40,000. The driver of the other car, therefore, was not an uninsured motorist, but in terms of the Hanover Insurance Company policy he was an underinsured motorist.

The Hoffmans’ own automobiles were insured by United Services Automobile Association (USAA). The estate of Mrs. Hoffman received $20,000 from Travelers and $30,000 from Hanover’s underinsured motorist coverage. Mr. Hoffman also received a sum in settlement. Mr. Hoffman then individually and as personal representative of his wife’s estate sued USAA to obtain benefits under the supplementary endorsement relating to underinsured motorists for both his cars.

According to the declarations page the Hoffmans had purchased uninsured motorist coverage in the amount of $300,000/$500,000 per car. The issue in Hoffman was whether USAA had expressly extended coverage from the traditional uninsured motorist situation to the underinsured motorist situation. The Court of Appeals held that by virtue of a second endorsement entitled “Supplementary Uninsured Motorists Insurance (Bodily Injury-Property Damage-Limits-Underinsured Motorists)”, they had. The fact that Hoffman had already recovered the amount of the statutory minimum policy from another insurer was irrelevant because, according to the Court, the USAA policy did not purport to provide the same coverage as was dealt with in prior decisions where each policy provided only the minimum statutorily required coverage. 309 Md. at 176 , 522 A.2d 1320 .

USAA provided insurance