Erie Insurance Exchange v. Reliance Insurance

WILNER, Judge. On the evening of March 14, 1982, Robert Aiello, without permission or authority, borrowed a Jeep that belonged to his friend, Charles Muhly. The actual, registered owner of the Jeep was Charles’s mother, Thelma Muhly. At some point in the evening, Aiello picked up another friend, Gregory Orsini.

While crossing the Severn River bridge in Annapolis, Aiello lost control of the vehicle, causing it to overturn. Orsini was thrown from the vehicle and injured. The Jeep was insured under a policy issued by Reliance Insurance Company (Reliance) to Thelma Muhly; Aiello had a policy issued by Arnica Insurance Company; and Orsini was covered under a policy issued by Erie Insurance Exchange (Erie) to his father, Fred Orsini. Desirous of recompense for his injuries, Orsini filed suit in the Circuit Court for Anne Arundel County against the Muhlys, Aiello, and all three insurance companies.

He ultimately pled six counts: Count I was against Aiello for negligence; Count II was against the Muhlys for negligently entrusting the Jeep to Aiello, Orsini averring that Aiello had used the Jeep with their permission; Counts III, IV, and V were against the three insurance companies, respec ⁶¹⁵ tively, Orsini claiming as a third party beneficiary of the insurance contracts between them and their respective insureds; Count VI was against all three insurance companies. Alleging that the companies had taken inconsistent positions on whether Aiello had permission to use the Jeep and thus as to coverage under the policies, Orsini sought a declaratory judgment determining “which insurance company is the proper insurance carrier, and whether said insurance coverage is provided to the Defendants pursuant to liability provisions of that policy or the uninsured motorist provision of that policy.” Erie filed a cross-claim, alleging that the Reliance and Arnica policies afforded primary coverage and asking that those companies provide a defense for and indemnify the Muhlys and Aiello. On September 18, 1984, the court determined that, at the time of the accident, Aiello was not operating the vehicle with the permission of the Muhlys or in the reasonable belief that he had such permission. Accordingly, it ordered that there was no coverage afforded under either the Reliance or Arnica policies, and that Erie was the uninsured motorist carrier for Orsini.

Nine days later, declaring pursuant to Md.Rule 2-602 that there was no just cause for delay, the court entered final judgment “as to the Cross-Claim filed herein by the defendant, Erie Insurance Exchange.” The intention, clearly, was to adjudicate the questions of coverage, as raised in Counts III through VI of Orsini’s various complaints and in Erie’s cross-claim, and to permit an appeal to be filed with respect to those matters. 1 Although the docket could have been a bit clearer, we shall consider that a final, appealable judgment has been entered ⁶¹⁶ with respect to Counts III, IV, and VI, and as to Erie’s cross-claim. Erie has indeed appealed, raising the single question of whether the circuit court erred in concluding that it was obligated to provide the primary uninsured motorist coverage to Orsini. All parties now agree, for purposes of this appeal, that Aiello’s insurer, Amica, has no responsibility to Orsini. The fight is between Erie and Reliance.

It is further conceded that Orsini does have uninsured motorist protection under the Erie policy. The precise point of dispute is whether the uninsured motorist coverage under the Reliance policy also extends to Orsini. If it does, Reliance would be the primary insurer as to Orsini and Erie would be the “excess” insurer; if it does not, Erie has sole responsibility as to Orsini. The question of coverage by Reliance breaks down into two parts.

There is first the question of whether Orsini is covered under the policy as written. If so, that is the end of the matter. If not, there is the question of whether the policy, as written, affords less coverage than is mandated by law — i.e., whether various provisions of Md.Code Ann. art. 48A require Reliance to cover persons such as Orsini and thus effectively provide such coverage by operation of law. Insurance policies, like the regulations of the Internal Revenue Service, are often not the easiest things to read and understand.

Definitions tend to chase each other. So it is here. Part I of the Uninsured Motorist endorsement obligates Reliance to pay all sums which “the insured” is