Hoffman v. United Services Automobile Ass'n

ELDRIDGE, Judge. Pursuant to the Maryland Uniform Certification of Questions of Law Act, Maryland Code (1974, 1984 Repl. Vol.), §§ 12-601 to 12-609 of the Courts and Judicial Proceedings Article, the United States District Court for the District of Connecticut has certified questions regarding uninsured motorist coverage required by the Maryland Insurance Code. The statement of relevant facts, as set forth by the certifying court, discloses that on July 23, 1979, Kenneth Hoffman purchased an automobile insurance policy from United Services Automobile Association (USAA), with him ¹⁶⁹ self and his wife Sandra Hoffman as named insureds.

The policy was issued in Maryland where the Hoffmans resided and covered two vehicles owned by the Hoffmans. In addition to liability and uninsured motorist coverage, the policy included a “Supplementary Uninsured Motorists” endorsement which amended the definition of “uninsured” vehicle to include “underinsured” vehicle, and defined “underinsured” vehicle. The limits under this coverage were $300,000 for each person injured and $500,000 for each accident ($300,000/500,000). For this coverage the Hoff-mans paid a premium that included a separate amount for each of the cars.

On July 19, 1980, while in Branford, Connecticut, the Hoffmans were passengers in a car driven by Richard Whelan, a Connecticut resident. A vehicle driven by Richard Nowakowski, also a Connecticut resident, collided with Whelan’s vehicle. As a result of the accident, Sandra Hoffman was killed and Kenneth Hoffman was seriously injured. Whelan’s car was insured by a Hanover Insurance Company policy containing underinsured motorist coverage of $50,000/100,000.

Nowakowski had insured his vehicle with Travelers Insurance Company, the policy having liability coverage of $20,000/40,000. For purposes of the certified questions of Maryland law, it is assumed that Nowakowski was the underinsured motorist whose low policy limits triggered the underinsured motorist coverage issued by Hanover and USAA. Whelan and Kenneth Hoffman, individually and as personal representative of his wife’s estate, sued Nowakowski in Connecticut. On March 17, 1982, the New Haven Superi- or Court, upon agreement by Hoffman, Whelan, Hanover Insurance Co., and Travelers Insurance Co., apportioned Nowakowski’s liability coverage and Whelan’s underinsured motorist coverage.

Under the apportionment, the estate of Sandra Hoffman was entitled to receive a full per person limit of $20,000 from Nowakowski’s liability coverage in Travelers and $30,000 from Whelan’s underinsured motorist ¹⁷⁰ coverage in Hanover ($50,000 per person limit minus the $20,000 paid by Travelers). Kenneth Hoffman was entitled to receive $5,398 from Travelers and $8,379 from Hanover. Thereafter, Hoffman, individually and as personal representative of his wife’s estate, sued USAA in the United States District Court for the District of Connecticut to obtain benefits under the supplementary endorsement relating to underinsured motorists. On March 9, 1984, Hoffman moved for summary judgment.

He sought to combine or “stack” the underinsured motorist coverage of the two cars owned by the Hoffmans for total coverage of $600,000/1,-000,000. USAA opposed this motion on two grounds of Maryland law. It relied on § 543(a) of the Maryland Insurance Code, 1 which prohibits recovery of uninsured motorist benefits “from more than one motor vehicle liability policy or insurer on either a duplicative or supplemental basis.” USAA asserted that in light of § 543(a), as interpreted by this Court, 2 Hoffman cannot recover any “uninsured” motorist benefits from USAA as the estate has already obtained $50,000 from another insurer, an amount in excess of statutorily required uninsured motorist coverage. USAA also argued that if Hoffman were to recover any amounts under the USAA policy, the language of that policy and Maryland law prohibit “stacking,” and as such USAA’s total exposure would be limited to $300,000/500,000.

In response to USAA’s first argument, Hoffman contended that the coverage he was claiming was issued in addition to the required uninsured motorist coverage and thus was wholly outside of the limits of § 543(a). In response to USAA’s second argument, Hoffman contended that because ¹⁷¹ he paid a separate premium for each vehicle, he was entitled to recover under the insurance provided each vehicle. The United States District Court stayed the motion for summary judgment and certified to this Court the following four questions of Maryland law: “1. Whether Article 48A, § 543(a) is rendered inapplicable to the plaintiff’s policy because the uninsured motorist coverage is amended by an endorsement providing underinsured motorist coverage as well as uninsured motorist coverage. 2.

Whether intra-policy stacking is permitted, that is, are the plaintiffs entitled to aggregate the underinsured motorist coverage maintained on each of the two vehicles covered by USAA’s single insurance policy. 3. Whether standard provisions in the plaintiff’s USAA insurance policy, such as the declarations page, the “other insurance” provision and the “limits of liability” provisions, preclude intra-policy stacking, that is, the aggregation of the underinsured motorist coverage on each of the two Hoffman vehicles covered under the single automobile insurance policy issued by USAA. 4. Any and all other attendant questions of Maryland law, the resolution of which is deemed by the Court of Appeals, to be of assistance to this court in the ultimate resolution of this matter.” I. Section 541(c) of the Maryland Insurance Code requires every motor vehicle liability insurance policy issued in Maryland to have uninsured motorist coverage in the amount of $20,000/40,000. 3 As this Court said in Nationwide Mutual Ins. v. Webb, 291 Md. 721, 737 , 436 A.2d 465 ¹⁷² (1981), “the purpose of uninsured motorist statutes is ‘that each insured under such coverage have available the full statutory minimum to exactly the same extent as would have been available had the tortfeasor complied with the minimum requirements of the financial responsibility law’ ” (citation omitted). This mandatory coverage has “the purpose of providing minimum protection to individuals injured by uninsured motorists.” Yarmuth v. Gov’t Employees Ins.

Co., 286 Md. 256, 264 , 407 A.2d 315 (1979). Section 543(a) places certain limits on, inter alia, recoveries of the required minimum uninsured motorist benefits under § 541(c). Section 543(a) in its entirety reads as follows: “Notwithstanding any other provision of this subtitle, no person shall recover benefits under the coverages required in §§ 539 [personal injury protection] and 541 [liability and uninsured motorist coverage] of this article from more than one motor vehicle liability policy or insurer on either a duplicative or supplemental basis.” USAA urges that § 543(a) be interpreted to apply in cases such as this, where the insured has already recovered from the primary insurer and now is attempting to obtain benefits from a second policy or insurer under policy language like that here involved. Before addressing USAA’s assertion that § 543(a) precludes any recovery by the estate, however, it would be appropriate to examine the policy provisions and the nature of the “Supplementary” insurance which USAA in fact sold to the Hoffmans.

The declarations page of the Hoffmans’ policy included, among other coverages, bodily injury liability in the amount of $300,000/500,000, property damage liability in the amount of $10,000, comprehensive and collision with a deductible of $250, and uninsured motorist coverage in the amount of $300,000/500,000. The general terms of the uninsured motorist coverage were provided in an endorsement entitled “Protection Against Uninsured Motorists Insurance—Maryland.” This endorsement stated that USAA “will pay all sums which the insured or his legal representative shall be legally entitled ¹⁷³ to recover as damages from the owner or operator of an uninsured highway vehicle.” Subsequently the endorsement defined an uninsured highway vehicle as “(a) a highway vehicle with respect to the ownership, maintenance or use of which there is, in at least the amounts specified in Section 7-101 of Article 66V2 of the Annotated Code of Maryland [$20,000/40,000], neither (i) cash or securities on file with the Administrator of the Department of Motor Vehicles of the State of Maryland nor (ii) a bodily injury and property damage liability bond or insurance policy, applicable at the time of the accident____” In addition the policy contained a second endorsement entitled: “Supplementary Uninsured Motorists Insurance (Bodily Injury—Property Damage—Limits—Underinsured Motorists).” This endorsement provided as follows: “It is agreed that, with respect to such insurance as is afforded by the policy for damages because of bodily injury and property damage caused by accident and arising out of the ownership, maintenance or use of an uninsured highway vehicle, or an uninsured motor vehicle, subdivision (a) of the definition of ‘uninsured highway vehicle’ or ‘uninsured motor vehicle’ is amended to include ‘underinsured highway vehicle’.... ” Thereafter the endorsement defined an “underinsured” highway vehicle as a “highway vehicle with respect to the ownership, maintenance or use of which, as respects damages because of bodily injury or property damage or both, the sum of the limits of liability under all bodily injury and property damage liability bonds and insurance policies respectively applicable to bodily injury or property damage at the time of the accident is less than the applicable limits of liability under this insurance; ...” By the supplementary endorsement, USAA expressly extended coverage from the traditional uninsured motorist situation, defined in the standard uninsured motorist en ¹⁷⁴ dorsement, to coverage of what in insurance parlance is referred to as an “underinsured” motorist situation. Underinsured motorist coverage applies when- an insured is involved in an accident with a motorist, who may carry extensive liability insurance far in excess of any amounts statutorily required, but whose liability coverage is less than the insured’s underinsured motorist coverage. See 8C Appleman, Insurance Law and Practice, § 5103 (1981); Note, Underinsured Motorist Coverage: Legislative Solutions to Settlement Difficulties, 64 N.C.L.Rev. 1408 n. 4 (1986).

Despite the clear policy language, USAA nevertheless contends that § 543(a) prohibits recovery under this under-insured motorist endorsement because Hoffman has already recovered statutory mínimums from another insurer. In fact USAA asserted at oral argument that, under Maryland law, there can be no such thing as underinsured motorist coverage. USAA argues that § 543(a) precludes a supplemental recovery from a second policy when the insured has recovered the statutorily minimum required coverage from a primary policy; therefore, according to USAA, an insurer cannot offer “underinsured” coverage which purports to provide this supplemental coverage. USAA relies on three cases from this Court which have addressed § 543(a).

In Travelers Ins. Co. v. Benton, 278 Md. 542 , 365 A.2d 1000 (1976), we applied § 543(a) to personal injury protection (PIP) benefits mandated under § 539 in the amount of $2,500. The plaintiff Benton had incurred medical expenses and lost wages in excess of $5,000 as a result of an accident while riding as a passenger in a vehicle owned by Henry Leland and insured by the Maryland Automobile Insurance Fund (MAIF). Benton had recovered $2,500 PIP benefits from MAIF under the required coverage in the policy on Leland’s vehicle.

Benton then sought to recover the $2,500 required PIP benefits from Travelers, Benton’s own insurer. Travelers refused to pay, asserting that § 543(a) limited recovery to the primary coverage carried by the vehicle owner. To resolve the ¹⁷⁵ question of whether Benton could recover from both MAIF and Travelers, we analyzed § 543(a) and stated ( 278 Md. at 545-546 , 365 A.2d 1000 ): “The coordination of benefits provision contained in § 543(a) specifies that recovery shall be under one, but not both policies; it says in no uncertain terms that no person shall recover PIP benefits ‘from more than one motor vehicle liability policy or insurer on either a duplicative or supplemental basis.’ ” Accordingly, we held that Benton could not recover an additional $2,500 under the required PIP coverage issued by a second insurer. In Yarmuth v. Gov’t Employees Ins.

Co., supra, 286 Md. 256 , 407 A.2d 315 , we considered the application of § 543(a) to uninsured motorist coverage. Albert Starr, his wife, and their son were killed when the car in which they were traveling collided with an uninsured tractor trailer. The vehicle driven by Starr was owned by his employer and insured by the Zurich Group insurance companies. Yarmuth, the personal representative of the Starr estates, recovered the policy limit of $40,000 uninsured motorist benefits from Zurich.

As Starr and his family members were named insureds under their own automobile liability policy issued by the Government Employees Insurance Company (GEICO), Yarmuth thereafter sought $40,000 from GEICO under the required uninsured motorist coverage in that policy. GEICO refused to pay, asserting that § 543(a) barred recovery from a second insurer. This Court held that the principles of Benton were applicable to the uninsured motorist situation in Yarmuth . In Rafferty v. Allstate Ins.

Co., 303 Md. 63 , 492 A.2d 290 (1985), Maureen Rafferty, while riding as a passenger in a vehicle insured by State Farm, was killed in a collision caused by an uninsured motorist. Two other women traveling with Ms. Rafferty were also killed. Accordingly State Farm, the insurer of the car in which the women were traveling, divided the policy limits of the uninsured motorist coverage among the three estates, each receiving $33,333. ¹⁷⁶ In addition, Rafferty’s estate sought uninsured motorist benefits from Allstate which had issued a policy to Maureen Rafferty’s father with Maureen as a named insured. This policy insured three vehicles with uninsured motorist coverage of $20,000/40,000 for each vehicle. 4 Ms. Rafferty’s estate claimed $26,667 under the Allstate policy, the $60,000 per person limit less $33,333 received from State Farm.

In other words, the personal representative of the estate conceded that § 543(a), as interpreted in Yarmuth , precluded a second recovery of amounts already, received from the primary insurer, but he maintained that a secondary insurer is liable for amounts greater than amounts paid by the primary insurer up to the coverage limits in the secondary policy. Allstate refused to pay, claiming recovery by Rafferty would be “supplemental” and prohibited by § 543(a). Because Maureen Rafferty’s estate had recovered $33,333 from State Farm, an amount in excess of the $20,000 statutory minimum uninsured motorist coverage, this Court held that § 543(a) precluded any recovery from Allstate. While USAA contends that Benton, Yarmuth and Rafferty control