Keeney v. Allstate Insurance

SALMON, Judge. Article 48A, section 542(b), of the Maryland Annotated Code (Supp.1995), provides: 1 ³⁹⁸ Written offer to settle. — (1) If an injured person receives a written offer, from a motor vehicle insurance liability insurer or that insurer’s authorized agent, to settle a claim for bodily injury or death and the amount of the offer of settlement in combination with any other settlements arising out of the same occurrence would exhaust the applicable bodily injury or death limits of the liability insurance, policies, bonds, and securities, the injured person shall submit by certified mail, to any insurer that provides uninsured motorist coverage for the bodily injury or death, a copy of the liability insurer’s written offer to settle. (2) Within 60 days after receipt of the notice required under paragraph (1) of this subsection, the uninsured motorist insurer shall send the injured person: (i) Written consent to acceptance of the settlement offer and to the execution of releases; or (ii) Written refusal to consent to acceptance of the settlement offer. (3) Within 30 days after a refusal under paragraph (b)(2)(ii) of this subsection, the uninsured motorist insurer shall pay to the injured person the amount of the settlement offer.

(4) (i) Payment as described in paragraph (3) of this subsection shall preserve the uninsured motorist insurer’s subrogation rights against the liability insurer and its insured. (ii) Receipt by the insured person of the payment described in paragraph (3) of this subsection shall constitute the assignment, up to the amount of the payment, of any recovery on behalf of the injured person that is subsequently paid from the applicable liability insurance policies, bonds, and securities. (5) The injured person may accept the settlement offer and execute releases in favor of the liability insurer and its insured without prejudice to any claim the injured person may have against the uninsured motorist insurer: ³⁹⁹ (i) On receipt of written consent to acceptance of the settlement offer and to the execution of releases; or (ii) If the uninsured motorist insurer has not met the requirements of paragraphs (2) or (3) of this subsection. The sole contention of the appellant, Angelina Keeney, personal representative of the estate of Charles C. Genovese, is that the trial judge erred when he ruled that section 542(b) applies only to automobile accidents that occur after October 1, 1995.

This case stems from an automobile accident that occurred on September 9, 1995. On that day Charles C. Genovese (Genovese) was proceeding eastbound on Edison Highway near the intersection of Sinclair Lane in Baltimore City when a motor vehicle, operated by Thomas E. Neubauer (Neu-bauer), crashed into the rear of his vehicle. This collision caused Genovese’s vehicle to collide with several others, and as a result, Genovese was seriously injured; due to these injuries he was rushed to Johns Hopkins Hospital where he died. On the date of the accident, Neubauer was insured by Fireman’s Fund Insurance Company (“Fireman’s Fund”) under a policy that provided liability limits of $25,000 per person/$50,000 per occurrence.

Genovese, in turn, was covered by a policy issued by Allstate Insurance Company. Allstate’s policy provided uninsured motorist coverage (UM), with policy limits of $50,000 per person/$100,000 per occurrence. Under the policy, an uninsured vehicle was defined so as to include underinsured vehicles. A vehicle that had bodily injury liability protection in effect and applicable at the time of the accident but in an amount less than the applicable UM limits of the Allstate policy, met the policy’s definition of an underin-sured vehicle.

Allstate’s UM endorsement included the following provision: [A]ll rights of recovery against any responsible party or insurer must be maintained and preserved for our benefit. By letter dated December 19, 1995, appellant’s counsel notified Allstate that Fireman’s Fund had tendered its $25,000 ⁴⁰⁰ policy limits for injuries Genovese had sustained in the subject accident. Appellant’s counsel demanded that Allstate pay to the estate of Charles Genovese its UM limits, i.e., $25,000, which was the difference between Allstate’s UM limits of $50,000 and Fireman’s Fund’s liability limits. Between December 19, 1995, and February 21, 1996, Allstate and appellant’s counsel exchanged correspondence, but Allstate gave no answer to the question as to whether it would consent to the release of Neubauer or to the acceptance of Fireman’s Fund’s offer.

Appellant’s counsel, on February 21, 1996, advised Allstate in writing that, because sixty-four days had passed since the letter of December 19 and because Allstate still had not advised appellant as to whether it would consent to the settlement offer of Fireman’s Fund, appellant had decided, “in accordance with ... Article 48A, section 542[b] ... that [she would accept] ... Fireman’s Fund[’s offer].” Appellant also advised that she intended “to continue to pursue the uninsured motorist claim against Allstate.” Allstate’s representative promptly wrote back to appellant’s counsel and warned that “if you accept Fireman’s Fund’s offer and sign the release, Allstate will also be released.” In addition, Allstate advised appellant’s counsel that in its opinion section 542(b) of article 48A did not affect the subject accident because it “only applies to cause[s] of action [that arise] before the date ... of October 1,1995.” On March 19, 1996, appellant gave a “full and final release covering all claims or right of action of every description, past, present, or future, to ... Neubauer.” Nearly fourteen months later, on May 6, 1997, appellant filed a complaint in the Circuit Court for Baltimore City against Allstate.

The complaint alleged that Allstate had breached its contract by failing to pay appellant the amount due under its UM endorsement. Allstate filed an answer to the complaint, along with a motion for summary judgment and a memorandum in support thereof. In its memorandum, Allstate contended that by ⁴⁰¹ granting a full release to Neubauer, appellant had violated the terms of the insurance contract because, under the contract, an injured party could not settle a liability claim without the express consent of the UM carrier. Appellant countered by contending that it had not breached its contract because it had complied with the terms of article 48A, section 542(b).

The memorandum of appellant, as well as the memorandum of law filed by Allstate, focused on the issue of whether article 48A, section 542(b), was applicable in this case. The trial judge ruled that it was not and, accordingly, granted summary judgment in favor of Allstate. QUESTION PRESENTED Did the trial court err when it held that Article 48A, section 542(b), did not apply to cases arising out of automobile accidents that occurred prior to October 1,1995. ANALYSIS Senate Bill 253, which was to become article 48A, section 542(b), was sponsored by Senator Vernon Boozer of Baltimore County.

The purpose of Senator Boozer’s bill, according to the “Senate floor report,” was to provide a remedy to a problem that has existed in Maryland’s tort system for some time. Currently, an injured person who makes a claim against a liability carrier for limits available under the liability policy is frequently not allowed by their uninsured/ underinsured motorist carrier to give the liability carrier a full release of their claim. Therefore, if the injured person wishes to make an additional claim for their injuries against their underinsured motorist coverage, they get caught in a situation where the liability carrier will not give them the limits of the at-fault party’s policy without a release and the uninsured/underinsured motorist carrier will not allow them to give a release to the liability carrier. As a result, they are unable to recover funds from either carrier.

This dilemma can cause a lengthy delay in settlement. ⁴⁰² Senate Bill 253 would eliminate this dilemma by requiring the uninsured/ underinsured motorist carrier to: (1) allow their injured insured to settle with the liability carrier and provide a release; or (2) pay their injured insured themselves to fully maintain their subrogation rights against the liable party. Therefore, the insured party gets his money more quickly and the uninsured/underinsured motorist carrier would have “up front” the liability settlement. (Emphasis added.) The summary of the bill provided in the Senate floor report was terse, viz: SENATE BILL 253 ESTABLISHES A SETTLEMENT PROCEDURE TO BE FOLLOWED WHEN A CLAIMANT IS INJURED BY A PARTY WHOSE LIABILITY INSURANCE LIMIT IS LESS THAN THE CLAIMANT’S UNINSURED MOTORIST LIMITS. On May 25, 1995, Senate Bill 253 was signed into law by Governor Parris Glendening as Chapter 516 laws of 1995.

By its terms, Chapter 516 provided: “[T]he provisions of this Act shall apply to any cause of action arising on or after October 1, 1995.... AND BE IT FURTHER ENACTED, That this Act shall take effect October 1,1995.” The statute does not define the term “cause of action,” and it leaves open the question as to whether the Legislature intended the term to refer to tort actions or to first party contract actions by the insured against his or her insurance carrier. Appellant contends that the Legislature intended the phrase “cause of action” to mean the contract action between an insured and the insurer. In dealing with this issue of statutory construction we must look for and effectuate the intent of the Legislature at the time it enacted the statute.

See Brown v. Housing Opportunities Comm’n of Montgomery County, 350 Md. 570, 575 , 714 A.2d 197 (1998). If, as here, the language of a statute is ambiguous, “we seek to discern the intent of the legislature from surrounding circumstances, such as legislative history, prior case law, and the purposes upon which the statutory ⁴⁰³ framework was based.” Philip Electronics North America v. Wright, 348 Md. 209, 217 , 703 A.2d 150 (1997). As shown by the Senate floor report, the legislative goal of section 542(b), was to resolve a common problem that beset litigants attempting to settle tort claims. The liability carrier for the allegedly negligent party typically was not willing to pay its policy limits unless it received a release from the