Dann v. State Farm Mutual Automobile Insurance

ALPERT, Judge. Appellants (plaintiffs below) contend that both their automobile insurance company and its agent breached a duty by failing to advise them that they could have obtained higher uninsured/underinsured coverage. The Circuit Court for Baltimore City (Thomas Ward, J.) disagreed, and, apparently finding as a matter of law that no such breach occurred, granted summary judgment in favor of the defendants. Appellants ask us to address a single question: ⁴⁴ Whether the trial court erred in granting summary judgment to defendants[,] holding that the defendants had provided plaintiffs with notice of their rights when the undisputed facts showed that plaintiffs had not been provided with notice.

We answer in the affirmative and, therefore, reverse. I. On April 7, 1988, Dennis C. Clark drove the wrong way down an Anne Arundel County exit ramp. As a result, he crashed head-on into a vehicle being driven by Karen A. Dann, appellant, apparently causing her to suffer numerous damages including medical bills, loss of work, pain and suffering, and (with respect .to the marital relationship with her then husband, appellant Cecil Adams) loss of consortium. (Karen and Cecil, collectively, will be alternatively referred to herein as either “appellants” or as the “insureds.”) At the time of the accident, Karen was insured through the State Farm Mutual Automobile Insurance Company (hereinafter, “State Farm”) with policy limits in the following amounts: Liability: $100,000 per person $300,000 per accident $ 50,000 property damage Uninsured/ Underinsured: $ 20,000 per person $ 40,000 per accident $ 10,000 property damage Karen had obtained that insurance policy from the late John L. Russell, a State Farm agent and/or broker, from whom Karen had also obtained a number of other insurance policies not now relevant 1 .

Karen’s liability limits under the policy far exceeded the minimum coverage required under Maryland ⁴⁵ law; her uninsured/underinsured (hereinafter, “U/U”) limits, however, merely equated to the lowest level of legal coverage. Md.Ann.Code. art. 48A, § 541(a), (c) (Supp.1992). Tortfeasor Dennis Clark, on the other hand, was insured by the Maryland Automobile Insurance Fund (“MAIF”). His policy liability limits were considerably lower than Karen’s: $20,000 per person, and $40,000 per accident (hereinafter referred to as “20/40” coverage).

In fact, Dennis’s liability coverage was the lowest allowable under Maryland law. See Md.Ann.Code art. 48A, § 541(a) (1991 & Supp.1993). Nevertheless, Dennis’s policy liability limits were equal to Karen’s U/U limits — and there, as far as the present litigation is concerned, was the rub. Under Maryland law, an “uninsured motor vehicle” is defined, in relevant part, as “a motor vehicle whose ... use ... has resulted in the bodily injury ... of an insured, and for which the sum of ... all ... insurance ... is less than the amount of [the other party’s U/U] coverage[.]” Md.Ann.Code art. 48A, § 541(c) (1991 & Supp.1993).

In other words, if, in the present case, Dennis Clark’s 20/40 liability coverage had been less than Karen’s U/U coverage, then, to the extent of the difference, Dennis would have been considered as if he were driving an “uninsured motor vehicle” for the purpose of determining the extent of Karen’s coverage. In this hypothetical situation, Karen could have availed herself of her own (comparably higher) U/U limits to recover damages in excess of Dennis’s insurance coverage. As things turned out, however, Dennis Clark’s 20/40 coverage equaled Karen’s 20/40 U/U coverage; therefore, Karen was precluded from availing herself of anything other than the 20/40 limits provided for in Dennis’s liability policy. Karen eventually ended up settling the accident claim with MAIF for $20,000, i.e., the fullest extent of Dennis’s liability coverage 2 .

It is significant to note, however, that, had Kar ⁴⁶ en’s own U/U coverage been higher than the statutory minimum, she could have claimed under that coverage, and therefore potentially recovered more than just $20,000. Indeed, it is this simple fact that came to form the basis of her claim sub judice. The insureds eventually filed in the Circuit Court for Baltimore City a six-count Complaint against both State Farm and Russell’s estate. The Complaint alleged, as its sole factual ground for recovery, that “at no time were [the insureds] advised by [either State Farm or Russell] that umnsured/underinsured motorist coverage of One Hundred Thousand ($100,000) Dollars, or greater amounts, for each accident was available to them.” Based on this ground, and arising largely out of Md.Ann. Code art. 48A, § 541(c)(2) (as then written), the Complaint set forth three independent theories of recovery 3 : (1) breach of statutory duty to inform the insureds of the opportunity to obtain greater coverage, (2) breach of fiduciary duty in the same regard, and (3) reformation of the insurance contract based on appellees’ exercise of undue influence.

As correctly stated by the insureds, and as implicitly acknowledged by appellees, none of these counts in any fashion alleged that State Farm had breached its insurance contract between the parties. On or about September 25, 1992, appellees filed their Motion for Summary Judgment, in which several defenses were presented to the insureds’ Complaint: (1) in releasing Clark from all claims, the insureds breached their insurance con ⁴⁷ tract, and thus the insureds were precluded from recovering any monies related to that contract; (2) an action for breach of fiduciary duty is not viable in a first-party contract claim; and (3) proper notice of the availability of higher coverage had been provided. In their Memorandum in support of this Motion, however, appellees implicitly acknowledged that a genuine dispute as to material facts might in fact exist; the existence of such a dispute, of course, would defeat appellees’ Motion for Summary Judgment. Md.Rule 2-501.

Specifically, appellees conceded that the insureds’ Complaint was grounded in their assertion “that they were never advised or informed of the availability of increased coverage.” To contest this point, appellees offered that “in a recorded statement made by State Farm agent Russell, he stated that such information would have assuredly been provided to the plaintiffs.” By so stating, appellees have suggested that a material fact (ie., whether or not the insureds were advised of coverage) may be in dispute. On November 6, 1992, a hearing on the Motion was held before Judge Ward. At the hearing, appellees simply reiterated the various arguments that appeared in the Memorandum filed in support of their Motion. At the close of the hearing, the Court concluded, without the benefit of additional analysis, as follows: I am going to grant the motion for summary judgment.

I don’t agree with [counsel for the insureds]. Based on the arguments in the file, arguments made here today and the evidence in the file. * * * * Motion granted. That’s all. The written Order on the Motion also contained no analysis, but instead simply stated that appellees’ Motion for Summary Judgment was granted.

From that Order, the insureds filed their timely appeal.

II

As discussed above, the trial court disposed of this case by way of summary judgment. Maryland Rule 2-501(a) requires ⁴⁸ that summary judgment be granted where “there is no genuine dispute as to any material fact and ... the party is entitled to judgment as a matter of law.” At its heart, therefore, this case presents a single, and rather simple issue: does the record below properly indicate both that there was no genuine dispute as to any material fact and that appellees were entitled to judgment as a matter of law? See, e.g., King v. Bankerd, 303 Md. 98, 111 , 492 A.2d 608 (1985). In resolving this issue, we note that “even where the underlying facts are undisputed, if those facts are susceptible of more than one permissible inference, the choice between those inferences should not be made as a matter of law.” Porter v. General Boiler Casing Co., 284 Md. 402, 413 , 396 A.2d 1090 (1979) (quoting Fenwick Motor Co. v. Fenwick, 258 Md. 134, 138 , 265 A.2d 256 (1970)); see also King, 303 Md. at 111 , 492 A.2d 608 .

Here, as conceded by appellees, the insureds’ entire case centered around one single material fact, that is, whether appellees had provided the insureds with notice of their right to obtain higher U/U coverage. At issue is Md.Ann.Code art. 48A, § 541(c)(2) (1979 & Supp.1985), which in pertinent part provides that: [E]very policy of motor vehicle liability insurance issued, sold, or delivered in this State after July 1, 1975 shall contain coverage, in at least the amounts required under Title 17 of the Transportation Article, for damages which the injured 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. There shall be available to the insured the opportunity to contract for higher amounts than those provided under Title 17 of the Transportation Article if those amounts do not exceed the amounts of the motor vehicle liability coverage provided ⁴⁹ by the policy. 4 (emphasis added). The crux of the insureds argument is the failure of appellees to inform them that greater uninsured/underinsured coverage was available.

The trial court resolved this issue against the insureds and essentially held, as a matter of law, that the appellees had provided the insureds with notice of these rights. The facts, however, showed that this material fact was clearly in dispute; the insureds contend that they never received such notice, and appellees (allegedly bolstered by Russell’s recorded statement) contend that adequate notice was provided. This is a classic example of a dispute as to a material fact that, properly construed, should defeat a motion for summary judgment 5 . The trial court erred by holding otherwise.

Appellees (either collectively, or individually) posit four theories in their attempt to avoid reversal. The essence of each theory is that, irrespective of whether they (either State Farm or Russell) provided the insureds with adequate notice, the insureds would in any event be precluded from any recovery as a matter of law. We discuss, and reject, each theory respectively below. 1. Appellees begin by arguing that, in signing a general release against State Farm’s specific request, the insureds breached the contract of insurance with State Farm, thus ⁵⁰ relieving State Farm of any duty under the insurance policy.

They base this argument on the language contained in the following provision of the insurance contract: “THERE IS NO COVERAGE: FOR ANY INSURED WHO, WITHOUT OUR WRITTEN CONSENT, SETTLES WITH ANY PERSON OR ORGANIZATION WHO MAY BE LIABLE FOR THE BODILY INJURY OR PROPERTY DAMAGE.” (Boldface in original; italics removed.) “As a result of [the insureds’] breach of the insurance agreement,” appellees argue, “[they] are barred from an action under their own policy with State Farm and are not entitled to any coverage under [that] policy.” While appellees’ contention may be a correct statement of the law regarding claims made under the policy, it is inapposite to the case sub judice. The insureds’ claims arise, not out of a claim under their insurance policy, but out of appellees’ alleged breach of a completely separate duty imposed by statute. Counsel for appellants engaged in the following dialogue with the court in explaining why the summary judgment motion should be defeated: Count 1 without question and Count 2 without question, and I would argue Count 3 also is pretty clear, are for negligence of the insurance company. This is not an action on the contract.

This is not an action ex contractu. * * * # Hi * Wdiat we are saying is that State Farm and its agent or through its agent breached their affirmative duty to provide us with the opportunity to obtain higher limits than $20,000 on the uninsured motorist. sf: % # í|í :■« * The only issue, the primary issue and really the only significant issue that has to be tried here that’s going to be before this Court is whether or not under the Libby case State Farm complied with its duty under the statute. The Libby case makes it clear. WTien the statute says they ⁵¹ should make available, that means that they have to take some action, some affirmative action to offer to their insured higher policy limits on the uninsured motorist coverage up to the limits of their liability coverage. 6 In this regard, the insureds’ compliance (or noncompliance) with the terms of them policy is simply not relevant to the facts at bar. Moreover, appellees have failed to provide any reasons why this case otherwise comes within the province of the insureds’ insurance contract. 2.

State Farm next argues that, as a matter of law, the insureds have no viable claim based on an alleged breach by State Farm of either a fiduciary or statutory duty. The essence of its argument in this regard is that, pursuant to