Glens Falls Insurance v. American Oil Co.

Barnes, J., delivered the opinion of the Court. This appeal presents for the first time in this Court the question of whether or not an insurer in the usual type of automobile liability policy may, in an action by a third party seeking indemnity under the policy, raise a defense of non-coverage based on an intentional, non-accidental act by the insured, subsequent to a judgment in ¹²² favor of the third person against the insured in an action in which the declaration declared in negligence and in which the insurer was not a party and did not defend. As the court below directed a verdict against the appellant, Glens Falls Insurance Company (Glens Falls), we must assume that Glens Falls could have proved the following facts, as alleged, to be true. On December 29,1964, at approximately 7:10 p.m., Mrs. Hilda P. Jordan, after returning home from her work, requested her husband, Leonard J. Jordan, to drive her to their daughter’s home in Baltimore County not far from the residence of the Jordans.

While proceeding to the daughter’s home, Mr. Jordan told his wife that he would “run you into these trees.” Mrs. Jordan said, “Well, you cannot do it without hurting yourself.” Mr. Jordan kept on driving and when he approached the daughter’s home, he refused to stop, proceeded to the end of Bond Avenue at its intersection with Reisterstown Road. Mrs. Jordan attempted to leave the automobile when Mr. Jordan failed to stop at the stop sign requiring motorists to stop on Bond Avenue before entering Reisterstown Road, but was unable to get out because the handle on the car door was broken. A short distance from Bond Avenue on Reisterstown Road was a gasoline filling station of American Oil Company, the appellee (American). After entering Reisterstown Road, Mr. Jordan stated that he would run into the tanks of the American gas station which he proceeded to do.

After striking the gas tanks the automobile driven by Mr. Jordan turned over on its left side and caught fire. The impact had thrown the Jordans to the back seat. Mrs. Jordan wound the window down on the rear right side, whereupon Mr. Jordan pushed her aside and got out himself. Dan Burgess, the lessee of the American gas station responded to Mrs. Jordan’s cries for help, climbed upon the burning vehicle and helped Mrs. Jordan to get out.

Officer Cookerly of the Baltimore County Police Bureau arrived at the scene shortly after the occurrence. He testified that when he arrived both Mr. and Mrs. Jordan ¹²³ were out of the automobile, although he later stated that both of the Jordans were in his vehicle when he questioned Mr. Jordan in regard to how the occurrence took place. He testified that Mr. Jordan said that he lost control of the automobile and ran into the gas tanks and further that Mrs. Jordan did not dispute the account of the occurrence. Mrs. Jordan denied that she was present at the first alleged interview and testified that as soon as she regained her senses from the shock of the impact and the other circumstances, she immediately walked to her daughter’s home which was only about a block away.

Mr. Burgess stated in his testimony that he did not recall seeing Mrs. Jordan at the gas station after he had jumped down from the burning vehicle. She testified that when the officer asked her if she needed medical attention, she indicated that she did not. The reason she did not tell the officer then what she later told him was: “I was too confused at that moment.” She said she was “upset,” and she “did not say anything.” During the morning of January 4, 1965, Mrs. Jordan called the police and talked with Officer Cookerly and told him that her husband had intentionally driven his automobile into the gas tanks on December 29 in order to kill her. This was verified by Officer Cookerly’s testimony.

She testified that her husband suffered from multiple sclerosis, was under active medical treatment, but she did not observe anything unusual about him when he returned home from his work on December 29. She testified that she called the police on January 4 “to see if they could get him out of the house. He had been in the house all that week, and I knew he was either sick or needed attention at the time, because he had been there a week almost.” She then gave Officer Cookerly a statement in regard to the happening of the occurrence at that time. Officer Armacost went to the Jordan home later on January 4 and at approximately 11:58 a.m. found Mr. Jordan dead with a coat hanger around his neck.

Mrs. Jordan was interviewed later in the afternoon of January 4 at ¹²⁴ the Reisterstown police station and she gave Officer Fielding at that time the same version of the happening of the occurrences of December 29, 1964, as she gave in her testimony in the Circuit Court for Baltimore County on April 29,1968. American filed an action on June 15, 1966, against the administrator of Mr. Jordan’s estate in the People’s Court of Baltimore County and gave Glens Falls Insurance Company, Mr. Jordan’s insurer and appellant in this case, notice of the filing of the action. On August 23, 1966, American took a judgment by default against the defendant administrator.. This judgment was made absolute in favor of American against the administrator of Mr. Jordan’s estate on August 23, 1966.

In the declaration filed in this People’s Court action, it was alleged in relevant part: “[Tjhat on said date, Defendant’s decedent was operating a motor vehicle owned by him in a northerly direction on Reisterstown Road, and did then and there carelessly, recklessly and in a negligent manner cause said vehicle to leave the traveled portion of the highway and to strike and run into the property owned by the Plaintiff; that the Defendant’s decedent, Leonard J. Jordan, was negligent in that he was operating his vehicle at a high and improper speed in the circumstances then and there prevailing, failed to stop or divert the course of his vehicle and to avoid colliding with the Plaintiff’s property when in the exercise of due care he could and should have done so, and the Defendant’s decedent was otherwise careless, reckless and negligent ; and the Plaintiff further says that all of its losses and damages were directly caused by the negligence of the Defendant’s decedent without any negligence on the part of the Plaintiff thereunto directly contributing.” 1 ¹²⁵ American, on November 25, 1966, issued a writ of fieri facias on the judgment against the administrator of Mr. Jordan’s estate and the Sheriff made a return of nulla bona on November 30. Thereafter American made demand upon Glens Falls to pay the judgment, interest and costs and payment not being forthcoming, filed the present action in the Circuit Court for Baltimore County to recover the amount of the People’s Court judgment. Glens Falls defended on the ground that there was no coverage under the automobile liability insurance policy in which Mr. Jordan was the insured and that the loss described in the declaration did not happen through any negligence of Mr. Jordan, the decedent. After taking testimony, hearing argument and considering trial memoranda, the Circuit Court (Jenifer, J.) filed a written opinion in which the trial court indicated that the insurer, having received notice of the action and having failed to participate, was concluded by the judgment in the People’s Court action and was estopped by that judgment from raising the question of coverage in the pending case.

The trial court entered a judgment absolute in favor of American against Glens Falls on July 25, 1968, for $2,359 with interest from August 23, 1966. A timely appeal was taken from that judgment by Glens Falls to this Court. Two questions were briefed and argued before us on this appeal: 1. Did the trial court err in ruling that the insurer, Glens Falls, was estopped by the judgment in the People’s Court from raising the question of coverage under the in ¹²⁶ surance policy because the property damage of American resulted from intentional, non-accidental conduct of the insured? 2.

Was the evidence before the trial court sufficient to establish coverage under the policy to pay for property damage caused by the insured’s negligence? The trial court did not find it necessary, in view of its opinion that Glens Falls was estopped by the People’s Court judgment from raising the question of coverage because of intentional, non-accidental damage, to pass upon the second question. Inasmuch as there is conflicting evidence and inferences in regard to the second question, we will remand the case to the trial court to try the second issue because we are of the opinion that the trial court was in error in its ruling on the first question. See Maryland Rule 874 a.

The policy issued by Glens Falls to Mr. Jordan, the insured, provides in relevant part, as follows: “INSURING AGREEMENTS «j * * * “Coverage B-Property Damage Liability: To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by accident and arising out of the ownership, maintenance or use of the automobile. (Emphasis supplied) * * * “II. Defense, Settlement, Supplementary Payments : With respect to such insurance as is afforded by this policy for bodily injury liability and for property damage liability, the company shall: “ (a) defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but ¹²⁷ the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient;” (Emphasis supplied) It is apparent to us that under the clear terms of the policy, the insurer is obligated under Coverage B to pay only for that property damage “caused by accident.” We construed these words in a liability policy in Harleysville Mutual Casualty Company v. Harris & Brooks, Inc., 248 Md. 148 , 235 A. 2d 556 (1967). Judge Singley, for the Court, in the opinion in that case, quoted the definition of an “accident” from both the Shorter Oxford English Dictionary (2d Ed. 1939) and Webster’s Twentieth Century Dictionary (1950).

In the Shorter Oxford English Dictionary “accident” is defined as “ ‘Anything that happens. An event; especially an unforeseen contingency * * ” Webster’s expands this definition somewhat as follows: “ ‘a happening; an event that takes place without one’s foresight or expectation; an event which proceeds from an unknown cause, or is an unusual effect of a known cause, and therefore not expected * * *.’ ” In reversing the trial court’s judgment against the insurer in that case, we recognized that there was a distinction between “caused by accident” and an intentional act, the consequences of which were clearly foreseeable as well as a necessary and natural result thereof. See also 7 Appleman, Insurance Law and Practice, Section 4312 (1942), bearing the heading, Accident, Caused by Ownership, Maintenance or Use — Construction of Terms — (a) Accidental Injury, where it is stated at pages 129-32: “It is quite clear that the term ‘caused by accident’ would not include injuries intentionally inflicted, this generally being considered a risk which it would be against public policy to insure. “An accident, in the eyes of the law, is an undesigned and unforeseen occurrence of an unfor ¹²⁸ túnate character resulting in bodily injury to another. It is a more comprehensive term than the simple term ‘negligence’, although negligence is, of course, included therein, and refers to an unexpected happening rather than one occurring through intention or design.

And whether or not an injury is accidental has been held determinable by the state of mind of the person who inflicts the injury, rather than by that of the injured person. This means that the policy will not cover injuries which have been motivated by an intent to injure, some cases even attempting to distinguish between the term wilfulness and that of wantonness.” See also the annotation entitled, Automobile indemnity or liability policy as covering accident or damage due to wilful or wanton conduct or gross negligence, 173 A.L.R. 503 (1948) and supplemented in 20 A.L.R.3d 320 (1968). As the posture of the case requires us to assume that Glens Falls can prove that the damages here resulted from an intentional wrong and were not within the coverage of the policy, the only question for decision here is whether Glens Falls is precluded from raising this defense, as a result of its failure to participate in the action in the People’s Court of Baltimore County, which resulted in an adjudication of liability of its insured, Mr. Jordan, based on negligence. More simply, the issue is whether Glens Falls is estopped from re-litigating the issues which were decided in the People’s Court proceeding.

The answer to this question is not an easy one, as we find that there are competing judicial philosophies which produce opposite results. As might be expected in this situation, there is a conflict in the authorities which we do not believe can be adequately reconciled. The line of cases which holds that the insurer is collaterally estopped by the judgment entered in the action against the insured based on negligence of which it has ¹²⁹ notice, whether it defends or does not, to raise the question of lack of coverage because an intentional act of the insured caused the injury, is perhaps best illustrated by Miller v. U. S. Fidelity & Guaranty Co., 291 Mass. 445 , 197 N. E. 75 (1935). This was a case factually similar to the instant case.

In holding that the insured was collaterally estopped by the prior judgment against the insured, the Supreme Judicial Court of Massachusetts stated: “The object of the policy is protection against law suits and legal liability. This object could not be attained if the insured were compelled to try over again in an action against the insurer the same issues upon which he has been found liable in the original action. Where an action against the insured is ostensibly within the terms of the policy, the insurer, whether it assumes the defense or refuses to assume it, is bound by the result of that action as to all matters therein decided which are material to recovery by the insured in an action on the policy.” ( 291 Mass. at 448 , 197 N. E. at 77) See also Stefus v. London and Lancashire Indemnity Co., 111 N.J.L. 6 , 166 A. 339 (1933) — (a 10 to 4 decision), cert. denied, 290 U. S. 657 , 54 S. Ct. 73 , 78 L. Ed. 569 ; Medeiros v. First Ins. Co., 50 Haw. , 441 P. 2d 341 (1968); Sims v. Illinois Nat.

Cas. Co., 43 Ill. App. 2d 184 , 193 N.E.2d 123 (1963). The cases which hold that the insurer is not collaterally estopped by the prior judgment against the insured are best exemplified by the decision of the United States Court of Appeals for the Fourth Circuit in Farm Bureau Mutual Automobile Ins.

Co. v. Hammer, 177 F. 2d 793 (4th Cir. 1949),