Costello v. Nationwide Mutual Insurance

ADKINS, J. In this case, we decide that a household exclusion clause in an automobile liability insurance policy limits coverage for a wrongful death claim brought by adult children against their father for negligently causing the death of their mother. On the afternoon of January 31, 1999, Gail Hill was driving his car in Carroll County when he fell asleep at the wheel, causing the car to veer off the side of the road and strike a telephone pole. At the time of the accident, Hill was accompanied by five ⁴⁰⁶ passengers-Anita Hill, his wife, in the front seat, and the couple’s daughter, Gail Ann Costello, and her two children, along with Anita’s sister in the back seat. Mrs. Hill died as a result of the accident.

The Hills had two insurance policies, a $300,000 per person/$300,000 per occurrence automobile liability policy (“the auto policy”) and a $1,000,000 per occurrence personal umbrella policy covering Gail Hill (“the umbrella policy”), both issued by Nationwide. After the accident, Gail Costello and her sister, Janice Hill, appellants, notified Nationwide that they were making a claim against their father under the two insurance policies, alleging that his negligent operation of the insured vehicle was the proximate cause of their mother’s death. These claims were made by appellants both on behalf of their deceased mother’s estate (“survival claim”) and as individual wrongful death beneficiaries of them mother (“wrongful death claim”). A dispute arose between Nationwide and appellants over the extent to which the auto and umbrella policies covered their claims.

The parties apparently agreed that appellants’ survival claim was limited by the household exclusion in the policies. They disagreed, however, about whether their wrongful death claim was similarly limited by the household exclusion in the policies. To resolve this dispute, appellants filed a complaint in the Circuit Court for Baltimore County, seeking a declaratory judgment. Appellants filed a motion for summary judgment concurrent with their complaint.

In response, Nationwide filed a motion to dismiss or, in the alternative, for summary judgment. Appellants challenge the circuit court’s grant of summary judgment in Nationwide’s favor, and present the following question for our review. Did the trial court err as a matter of law in finding that appellants’ potential collective recovery as wrongful death beneficiaries was limited to $20,000 by virtue of the household exclusion in the auto and umbrella policies? ⁴⁰⁷ Because we agree with the trial court that both policies, by their plain language, limit appellants’ recovery based on the wrongful death of their mother to the $20,000 statutory minimum coverage prescribed in Maryland Code (1977, 1999 Repl. Vol., 2001 Cum.Supp.), section 17-103(b)(l) of the Transportation Article (“Trans.”), we affirm the judgment.

DISCUSSION Appellants argue that the $300,000 upper limit of the auto policy applies, and above that, the umbrella policy kicks in, providing an additional $1,000,000 of coverage. Asserting that it is an issue of first impression in Maryland, appellants frame the controversy as “whether wrongful death beneficiaries ... who are not members of a household may nevertheless be limited by a household exclusion because of their relationship with an insured who was expressly covered by such exclusion!.]” Nationwide dismisses this characterization, asserting that this is a simple case of contract interpretation and that the policies are clear and unambiguous in limiting appellants’ recovery to the statutory minimum coverage of $20,000. It argues that appellants have failed to recognize “the distinction between what claims [they] are legally entitled to bring against their father” and what claims Nationwide is liable for. A. Standard Of Review We are asked to review the trial court’s grant of summary judgment to Nationwide. “It is essential to entry of a summary judgment ... that there be no genuine dispute as to any material fact and that the moving party be entitled to judgment as a matter of law.” White v. Fried, 210 Md. 274, 285 , 123 A.2d 303 (1956).

Accordingly, the standard for appellate review is essentially whether the trial court was legally correct in granting summary judgment. See Goodwich v. Sinai Hosp. of Baltimore, Inc., 343 Md. 185, 204 , 680 A.2d 1067 (1996). Thus, we “review[] the same material from the record and decide[] the same legal issues as the [trial] court[.]” Lopata v. Miller, 122 Md.App. 76, 83 , 712 A.2d 24 , cert. denied, 351 Md. 286 , 718 A.2d 234 (1998). ⁴⁰⁸ In granting Nationwide’s motion for summary judgment, the trial court declared that “(1) [t]he coverage provided to Gail Hill for all claims asserted by Plaintiffs is limited to $20,000.00 under [the auto policy], and (2) [the umbrella policy] provides no coverage for Plaintiffs claims.” We review the legal soundness of these conclusions. B. Standards Governing Interpretation Of Insurance Policies Insurance policies are contracts between the insured and the insurer, and are interpreted as such by the courts.

Maryland does not follow the rule that insurance policies should, as a matter of course, be construed against the insurer. Instead, ordinary principles of contract interpretation apply. Accordingly, if no ambiguity in the terms of the insurance contract existfs], a court has no alternative but to enforce those terms. Nevertheless, under general principles of contract construction, if an insurance policy is ambiguous, it will be construed liberally in favor of the insured and against the insurer as drafter of the instrument.

Dutta v. State Farm Ins. Co., 363 Md. 540, 556 , 769 A.2d 948 (2001)(quotation marks and citations omitted)(emphasis in original). Policy language is afforded its usual, ordinary, and accepted meaning. See Nationwide Mut.

Ins. Co. v. Scherr, 101 Md.App. 690, 695 , 647 A.2d 1297 (1994), cert. denied, 337 Md. 214 , 652 A.2d 670 (1995). This “is the meaning that a reasonably prudent layperson would give to the term.” Id. “If a reasonable layperson could infer two different meanings from the language used, the language is ambiguous.” Id. C. Interpreting The Policies l.

Automobile Liability Policy The auto policy provides that “[Nationwide] will pay for damages for which [the insured is] legally liable as a result of ⁴⁰⁹ an accident arising out of the . . . use ... of [the insured’s] auto.” The policy covers “damages .. . involving] property damage ... or ... bodily injury.” “Bodily injury” is defined as “bodily injuryt,] .. . sickness[,] ... disease!,] ... or ... death ... of any person.” Under a section entitled “Limits and Conditions of Payment,” the auto policy elaborates on the scope of Nationwide’s liability for “bodily injury” damages. It states: The limit shown . .. for Bodily Injury Liability for any one person is for all legal damages, including all derivative claims, claimed by anyone arising out of and due to bodily injury to one person as a result of one occurrence. The per-person limit is the total amount available when one person sustains bodily injury, including death, as a remit of one occurrence. No separate limits are available to anyone for derivative claims, statutory claims, or any other claims made by anyone arising out of bodily injury, including death, to one person as a result of one occurrence.

(Emphasis added.) The auto policy also includes nine “coverage exclusions,” which limit the initial scope of the policy. Exclusion 9, the so-called “household exclusion,” is at issue here. It excludes from coverage, [b]odily injury to any insured or any member of an insured’s family residing in the insured’s household. However, this exclusion applies only to the extent that the limits of liability for this coverage exceed the limits of liability required by Maryland law.

The latter sentence is meant to reflect the provisions of Trans, section 17 — 103(b)(1), otherwise known as the “Maryland Financial Responsibility Law,” which provides for a statutory minimum coverage of $20,000 per person. 1 The purpose of a ⁴¹⁰ household exclusion such as this is “to protect the insurer against collusive or cozy claims ... [and] to exempt him from liability stemming from one whose natural ties and pulls are likely to favor a claimant who lives in the same household^]” State Farm Mut. Auto. Ins. Co. v. Briscoe, 245 Md. 147, 151 , 225 A.2d 270 (1967).

The parties disagree about whether the household exclusion limits Nationwide’s liability under the policy for appellants’ individual wrongful death claim to the $20,000 statutory minimum prescribed by the Maryland Financial Responsibility Law. Appellants contend that, although the household exclusion applies to their survival claim on behalf of their deceased mother because she “resid[ed] in the insured’s household” at the time of her “bodily injury,” the household exclusion does not apply to their wrongful death claim. They assert that the language of the auto policy is unambiguous in this respect. According to appellants, “[s]ince the literal terms of the household exclusion in [their father’s] policy would not cover [them] they cannot be bound by the terms of the exclusion.” They argue, in other words, that since neither appellant resided in their father’s house at the time of the accident, the exclusion does not apply to claims brought by them in their individual capacities, even if stemming from the bodily injury of a person to whom the exclusion applies.

Appellants urge, moreover, that even if we find the language ambiguous, they should still prevail because any ambiguity must be construed in favor of the insured. They further assert that the intent behind both the Maryland wrongful death statute and stan ⁴¹¹ dard household exclusions in insurance policies favors their interpretation. Nationwide also argues that the policy is unambiguous. It contends, however, that the policy language is unambiguous in limiting appellants’ recovery to the statutory minimum coverage.

According to Nationwide, because the policy itself only covers “bodily injury,” and the only person suffering “bodily injury” was Anita Hill, an individual to whom Exclusion 9 is applicable, “coverage for all claims, including derivative claims, flowing from Anita Hill’s bodily injury, is limited to $20,000.” We agree with Nationwide’s interpretation because appellants’ claim is not a bodily injury independent of the death of their mother. Our holding is consistent with our own precedent, as well as that of other jurisdictions that have addressed the issue. The Court of Appeals has held that solatium 2 damages claimed in a wrongful death action are not, in and of themselves, “bodily injury” damages. See Daley v. United Svcs.

Auto. Ass'n 312 Md. 550, 553-54 , 541 A.2d 632 (1988). In Daley , the parents of a minor child killed in an automobile accident obtained judgments against the driver totaling $225,000, including both a survival action on behalf of the child, and wrongful death actions by the parents. The driver was insured under a policy with a $100,000 per person limit, and a $200,000 per occurrence limit.

The driver’s insurer tendered payment of only $100,000, asserting that only the decedent had suffered a “bodily injury,” and the wrongful death claims by the parents did not constitute a separate and second “bodily injury” that would trigger an additional $100,000 of coverage. The Court of ⁴¹² Appeals reviewed, with approval, decisions of other jurisdictions which held that the “per person” liability limit applies to all claims of damage flowing from such bodily injury. Therefore, such consequential or derivative damages are computed together with the claim for bodily injury of which they are a consequence. These principles have been applied in wrongful death actions.

For example, where a widow and two children sued over the death of the husband-father, the limit of liability was that for bodily injury to one person. “The limit[ ] as to ‘each person’ relates to a person suffering bodily injury and not to the person or persons who may suffer damages in consequence of such injury.” Where state law creates a right to damages for mental anguish suffered by those in specified relationships to the person who suffers bodily injury or death, it has been held that the damages for mental anguish are, in effect, derivative of the single bodily injury. Id. (citations omitted); see also Scherr, 101 Md.App. at 696-98 , 647 A.2d 1297 (applying Daley to hold $100,000 per person limit applicable to wrongful death claim by husband and sons of woman killed by negligent insured). Maryland courts have not expressly applied these principles to a situation in which the person suffering “bodily injury” or death is covered by a policy exclusion, limiting his or her recovery to the statutory minimum coverage.

Other jurisdictions confronted with this situation, however, have concluded that wrongful death claims are subject to the “per person” liability limit applying to the party who was killed. In Am. Motorists Ins. Co. v. Moore, 970 S.W.2d 876 (Mo.Ct. App.1998), a wrongful death claim was brought by the mother and sons of a woman killed by her husband.

The husband was insured by AMI. The AMI policy contained a standard household exclusion. The court, finding the language of the policy clear and unambiguous, held the wrongful death claims to be derivative of the deceased’s bodily injury, and limited recovery ⁴¹³ to the amount the deceased would have been permitted to recover under the policy. See id. at 878-79 .

Similarly, in St. Paul Fire & Marine Ins. Co. v. Warren, 87 F.Supp.2d 904 (E.D.Mo.1999), the federal district court, interpreting an insurance policy under Missouri law, found a standard household exclusion clause to unambiguously “preclude coverage for wrongful death claims arising out of or derived from the bodily injury to an insured no matter who pursues the claim and regardless of who seeks coverage under a policy Id. at