Hartford Accident and Indemnity Ins. Co. v. Birdsong

WILNER, Judge. In this appeal, we are asked to revisit Hartford Ins. Co. v. Birdsong, 69 Md.App. 615 , 519 A.2d 219 (1987), confess that we were dead wrong in that case, and make appropriate amends. We shall, of necessity, revisit that decision, but we shall decline the invitation to engage in any expression of nostra culpa.

In May, 1980, Mr. and Mrs. Victor Birdsong were injured when a truck driven by one Jake Spurlin collided with the rear of their vehicle. The truck was owned by K.D. Jalousie of New Jersey, Inc. (Jalousie); it was en route to Baltimore to be refitted by Duralite Truck Bodies and Container Corporation (Duralite). Duralite had engaged T.R. Transport, Inc. to bring the truck to Baltimore, and T.R. Transport had hired Spurlin to do the driving. Jalousie was insured by Hartford Accident & Indemnity Insurance Company (Hartford); Duralite was insured by Liberty Mutual Insurance Company (Liberty Mutual).

The present controversy stems from a disagreement as to whether either of those insurers also covered Spurlin. In April, 1983, Mr. and Mrs. Birdsong sued Jalousie, Duralite, Spurlin, and the three trustees for what we assume was by then a defunct T.R. Transport, Inc. Mr. Birdsong sued for his own bodily injuries; he and his wife made a joint claim for loss of consortium. Hartford defended Jalousie; its assigned counsel filed a plea to the complaint and actively pursued a defense. Liberty Mutual did ³⁴⁵ likewise on behalf of Duralite.

Spurlin failed to answer. One of the three trustees for T.R. Transport, Inc. was apparently never served; a second was served but failed to answer; the third filed an answer. Shortly after Spurlin was served, counsel for the Bird-songs wrote to the Hartford-assigned lawyer for Jalousie, suggesting that Hartford should defend Spurlin. That suggestion was rejected.

The Hartford/Jalousie attorney pointed out that the Hartford policy excluded from coverage anyone using the truck while working in the business of repairing it; he contended that, as Duralite had sent Spurlin to get the truck for the purpose of “servicpng] and repair,” Spurlin “is excluded from coverage under our policy and in our opinion would be covered under Liberty Mutual’s policy.” Liberty Mutual had a different view. It concluded that T.R. Transport, Inc., Spurlin’s employer, was an independent contractor insofar as Duralite was concerned and that “Jake Spurlin’s status as the employee of an independent contractor, in addition to other good and sound reasons, makes it manifestly plain that he was not an insured under the terms of the policy entered into between Liberty Mutual Insurance Company and Duralite Truck Body and Container Corporation. Thus, there is no duty on the part of Liberty Mutual Insurance Company to defend Jake Spurlin in the above captioned case.” Both companies, then, were content to let Mr. Spurlin fend for himself, notwithstanding that (1) he was apparently unrepresented, (2) he had failed to answer the complaint, and (8) his conduct and his status were obviously going to be the key factors in any eventual apportionment of liability to the other defendants. When Spurlin failed to respond, the Birdsongs moved for, and on March 12, 1985, obtained an order of default.

See Md.Rule 2-613(a). A copy of that order was mailed, the same day, to Jalousie and Duralite. Duralite let the matter pass. Jalousie waited 34 days and then filed a motion to set aside or stay entry of a default ³⁴⁶ judgment against Spurlin “until a coverage dispute is resolved.” Jalousie confirmed in its motion that “there has been an allegation” that Spurlin is covered under one or more of the policies issued to Jalousie, Duralite, or T.R. Transport, Inc., and that the companies for those defendants “have not been able to resolve as to whom if anyone owes a duty to defend Jake T. Spurlin.” It averred further that the companies “have been attempting to resolve their differences inter-company and there may well be coverage available to [Spurlin] by the carrier for one of the three above named defendants.” It alleged, moreover, that “there is a viable defense to this case,” pointing out that Jalousie had filed a third-party complaint against the manufacturer and seller of the truck, alleging “a brake failure on the vehicle which caused the accident.” 1 If that claim were “viable,” Jalousie contended, “it would be a viable defense to the claim of the plaintiffs against [Spurlin] and consequently, the default judgment for failure to file a plea would prejudice the defendant [presumably Spurlin] wrongfully as he would have a good and viable defense.” Jalousie claimed, finally, that “[Spurlin] being without counsel is not familiar with what is necessary to file the appropriate plea, and based upon the dispute between the insurance companies none of the defendants have come forward and filed a plea for fear of waiving any denial of coverage that they may have.” The relief actually sought by Jalousie in this motion was to deny or stay any “Final Order of Default” pending “a determination as to who has coverage for this defendant by ³⁴⁷ filing of a Bill for Declaratory Judgment which will be filed within 30 days from the date of this motion, involving all of the parties to this lawsuit and their respective insurance carriers. ” (Emphasis added.) 2 The Birdsongs opposed Jalousie’s motion on the grounds that (1) Jalousie had no standing to make the motion, (2) the motion, in any event, was untimely under Md.Rule 2-613(c), and (3) no substantial reason was given for Spurlin’s failure to plead.

The motion had been filed on April 15, 1985; it was denied on July 1, 1985. Yet at no time during that 2V2 month interval (or afterward) did Jalousie or Hartford, its insurer, file the declaratory judgment action promised in the motion. Aside from some discovery and a relatively unimportant amendment to the complaint, nothing more transpired in the case until February 18, 1986, when Birdsong moved to dismiss his complaint against Jalousie and Duralite. 3 The motion was filed pursuant to Md.Rule 2-506(b), which permits a plaintiff to dismiss an action “only by order of court and upon such terms and conditions as the court deems proper.” The motion was co-signed, and thus consented to, by counsel for Jalousie and Duralite; the remaining defendants, however — the two trustees for T.R. Transport, Inc.— did not co-sign or otherwise indicate their consent. Apparently treating the dismissal against those two defendants as a fait accompli, notwithstanding the need for a ³⁴⁸ court order, 4 Jalousie’s and Duralite’s insurers — Hartford and Liberty Mutual — moved to intervene in the action as parties.

The Hartford motion, filed March 7, 1986, was signed by the same lawyer who had co-signed the Birdsong motion to dismiss Jalousie. The Liberty Mutual motion was filed two weeks later, on March 19, 1986. Trial in the case was then scheduled to begin on March 31, 1986; the action had been pending for nearly three years. The insurers complained that, with Jalousie and Duralite out of the case, the only remaining defendants would be unrepresented; they assumed, therefore, that the impending trial would be merely “an inquisition on damages” and that, at that “inquisition,” the “Plaintiff will be unopposed.” At the heart of the Hartford motion were the assertions that: “10.

The Hartford has a genuine interest in the outcome of the inquisition on damages against Spurlin because, in the event of a judgment being rendered against Spurlin that the Plaintiff is unable to satisfy by execution upon Spurlin, then the Plaintiff can institute an action against the Hartford pursuant to Article 48A, Section 481 of the Annotated Code of Maryland and assert whatever claim to coverage Spurlin had, and if successful, recover up to the [] amount of available insurance. 11. Because it is possible that a Court will determine that the Hartford’s position on coverage regarding Spurlin is wrong, and that coverage is owed for this accident under the policy, the Hartford has an interest that is currently unprotected in the outcome of the inquisition on ³⁴⁹ damages. The purpose of this Motion is to permit the Hartford to intervene in this case as a party Defendant and appear at the inquisition on damages to oppose Plaintiffs claims for damages, and generally to insure that the jury get a balanced presentation regarding the nature, extent, and existence of the various personal injuries claimed by Plaintiff.” Liberty Mutual’s motion, though worded differently, was similar in substance. Each company claimed intervention as of right pursuant to Md.Rule 2-214(a), asserting an interest in the action that, as a practical matter, would not be adequately represented by existing parties.

In companion motions or memoranda, both companies made clear that, if allowed to intervene, they intended to undertake further discovery that almost surely would have required a postponement of the scheduled trial. 5 Judge Elsbeth Bothe heard the motions promptly upon their respective filing and denied them. The proceedings in both instances were unrecorded, and no reasons appear in the record for the denials. On March 27, Hartford noted an appeal from the denial of its motion; Liberty Mutual filed an appeal on April 18. Notwithstanding the appeal by Hartford, the case proceeded to trial as scheduled on March 31, 1986; the next day, the jury returned a verdict for Mr. Birdsong, against Spurlin only, for $3,000,000. ³⁵⁰ That fact was, of course, known to us when we considered the earlier appeals.

We rejected the appeals, however, on two grounds, the second having two prongs. We first observed that, to be entitled to intervene as of right under Md.Rule 2-214(a), the motion to intervene must be “timely,” and that timeliness depends on the individual circumstances of each case. We pointed out that, while the record did not indicate whether Judge Bothe relied on untimeliness as a basis for denying the motions, if she did consider that as a basis, her rulings would not constitute an abuse of discretion. In that regard, we remarked that (1) the companies knew for at least several months before . filing their motions that the Birdsongs believed that one or both of them might be liable for any judgment against Spurlin, (2) their interest in that issue was not protected by their representation of Jalousie and Duralite, who were unconcerned with the amount of any verdict against Spurlin, (3) “[i]n spite of this awareness, they waited until the last few weeks prior to trial to file their motions to intervene,” and (4) despite Hartford’s assertion to the contrary, intervention “almost certainly would have caused delay.” Hartford Ins.

Co. v. Birdsong, supra, 69 Md.App. at 623-25 , 519 A.2d 219 . Because we could not be certain that the motions had, in fact, been denied on the ground of untimeliness, however, we proceeded then to address the substantive merit of the motions. Our conclusion as to that was stated at 626-27, 519 A.2d 219 , as follows: “In the case sub judice, the appellants’ alleged interest was in preventing the appellees from obtaining a large damage award against Spurlin which might then be enforced against the appellants pursuant to Md.Code, supra, Art. 48A, § 481. The problem with asserting such an ‘interest’ is that it is inconsistent with the appellants’ denial of coverage for Spurlin under their liability policies.

Throughout the underlying phases of litigation, the appellants disclaimed coverage for Spurlin, did not attempt to defend him, even under a reservation of rights, ³⁵¹ and failed to institute proceedings to establish the status of coverage for Spurlin. In their motions to intervene, both appellants continued to deny coverage to Spurlin. Because we cannot reconcile the appellants’ assertions, on the one hand, that Spurlin was not covered, and, on the other, that they have a protectable interest which warrants intervention as of right, we reject their argument that such an interest exists.” (Footnote omitted.) In reaching this conclusion, we noted that Hartford “cites only one case [Lawrence v. Burke, 6 Ariz.App. 228 , 431 P.2d 302 (1967)] in which an insurance carrier was found under similar circumstances to have an interest warranting intervention as of right.” Id. at 627, 519 A.2d 219 . We responded that “To the extent that Lawrence supports the appellants’ position, we are not persuaded to follow it.

Furthermore, we believe that Lawrence is distinguishable from the instant case in that the insurer there, at the time it sought to intervene, changed its position and acknowledged potential liability. Id. [431 P.2d] at 307. Lawrence also held that the insurer had a duty to defend the insured in the underlying action. Id. [431 P.2d] at 309.

These factors are not present in this case, where the appellants have been unwavering in their denial of coverage to Spurlin.” Finally, as an alternative basis for finding no protectable interest warranting intervention as of right, we stated, at 628, 519 A.2d 219 : “Even were we able to overlook the inconsistency in the appellants’ position, we would be inclined to find their asserted interests insufficient to warrant intervention. The appellants’ argument in favor of intervention was predicated on the possible occurrence of two events: an award of damages against Spurlin and an attempt by the appellees to enforce such an award against the appellants. While there may be some substance to the appellants’ fears concerning those events, we believe that at ³⁵² the point intervention was sought those fears were ‘merely speculative’ and afforded ‘no present basis upon which to become a party to the proceedings.’ ” (Footnote omitted.) Our mandate issued on February 9, 1987; neither insurer sought certiorari in the Court of Appeals. In May, 1987, Mr. Birdsong filed a separate declaratory judgment action in the Circuit Court for Baltimore City against Hartford, Liberty Mutual, and Spurlin.

In that action, Birdsong claimed that Spurlin’s liability is covered by both the Hartford and Liberty Mutual policies and sought a declaration to that effect. In their answers, the two insurers specifically denied such coverage; they continued to maintain that they had no duty to defend Spurlin and no obligation to pay the judgment rendered against him. The declaratory judgment action, we are told, is still pending in the Circuit Court. In February, 1988, Liberty Mutual filed a “renewed motion” to intervene in the tort case, accompanied by a proposed motion to vacate the “Interlocutory Judgment by Default.” The company asserted that the judgment rendered against Spurlin was “interlocutory” under Md.Rule 2-602 because it did not dispose of all claims against all parties.

According to the docket entries, the insurer noted, (1) Birdsong’s action against one of the three trustees of T.R. Transport, Inc. — Willie Rutherford — had not been