Kendall v. Nationwide Insurance

KARWACKI, Judge. At issue in this case is the proper construction of the provisions of an automobile liability insurance policy relating to uninsured/underinsured motorist coverage issued by Nationwide Mutual Insurance Company (“Nationwide”), the Respondent, to Shirley Lou Kendall (“Shirley”), one of the Petitioners. On April 26, 1991, Shirley was the owner and operator of a 1986 Pontiac that was involved in a motor vehicle accident with a motor vehicle operated by Carl Jeffrey Hickey (“Hickey”). At the time of the accident Shirley’s husband, Herbert Richard Kendall (“Herbert”), also a Petitioner, was a passenger in the 1986 Pontiac.

Both Petitioners suffered serious personal injuries. At the time of the accident, Shirley maintained an automobile liability insurance policy with Nationwide covering three vehicles she owned. According to the declaration page of the policy, a 1975 Chevrolet had uninsured/underinsured 1 motorist coverage limits of $100,000 per person and $300,000 per occurrence for which a premium of $22.00 was paid. By contrast, a 1978 Chevrolet and the 1986 Pontiac had the statutory minimum requirements 2 of uninsured/underinsured ¹⁶¹ motorist coverage limits of $20,000 per person and $40,000 per occurrence for which a premium of $11.80 per vehicle was paid.

The vehicle operated by Hickey was insured by the Maryland Automobile Insurance Fund with statutory minimum liability limits of $20,000 per person and $40,000 per occurrence. Because of the low liability limits on the Hickey vehicle, Petitioners filed a claim against Nationwide seeking the highest uninsured/underinsured motorist coverage limits stated in their policy, notwithstanding the fact that the vehicle for which these limits were listed was not involved in the accident. Nationwide denied their claim. Petitioner, Herbert, filed the initial complaint in the Circuit Court for Montgomery County naming as defendants his wife and Hickey.

Shirley filed a cross claim against Hickey. Nationwide filed a motion to intervene as a party defendant, and that motion was granted. Shirley subsequently filed a cross claim against Nationwide asserting four counts sounding in contract, negligence, breach of Maryland statute, and declaratory judgment. Herbert also filed a cross claim against Nationwide essentially adopting Shirley’s cross claim against Nationwide.

Shirley moved for partial summary judgment as to the contract and declaratory judgment counts, asserting that as ¹⁶² the named insured she was entitled to the highest limits available on her policy for uninsured/underinsured motorist coverage. Accordingly, Shirley sought damages in the amount of $100,000 per person and $300,000 per occurrence, as those were the highest limits available under one of the three vehicles covered by the insurance policy. Herbert joined her by also filing a motion for summary judgment, again adopting Shirley’s motion in pertinent part, claiming that he was also entitled to the highest limits available as he was a family member living in Shirley’s household. Nationwide responded to the motions for summary judgment and asserted that a claimant under a multi-vehicle liability insurance policy is only entitled to the uninsured/underinsured coverage limits as stated on the declaration page for the vehicle that was involved in the accident.

Nationwide contended that because the liability limits of the vehicle driven by Hickey were the same as the limits of uninsured/underinsured coverage for Shirley’s 1986 Pontiac that was involved in the accident, the coverage did not apply as the Hickey vehicle was not underinsured. The trial court heard oral arguments and, finding that the policy was ambiguous, entered an order granting summary judgment, declaring that the Petitioners were entitled to uninsured/underinsured motorist coverage under the Nationwide policy in the amount of $100,000 per person and $300,000 per occurrence. Finding no just reason for delay, the trial court purported to certify the judgment as final pursuant to Maryland Rule 2-602(b). 3 Nationwide noted an immediate appeal to the Court of Special Appeals. In an unreported decision the Court of Special Appeals dismissed Nationwide’s appeal because the trial court’s certification of the declaratory judgment as a final judgment pursuant to Md. ¹⁶³ Rule 2-602(b) was improper.

Cf. Huber v. Nationwide Mutual Insurance Company, 347 Md. 415 , 701 A.2d 415 (1997). The case was remanded for further proceedings on the bifurcated issues of liability and damages. At trial the jury determined that Hickey was the sole party responsible for the accident.

Judgments were entered on special damage verdicts against Hickey and Nationwide in favor of Shirley for $100,000 and Herbert for $81,551.91. Both Hickey and Nationwide noted an appeal to the Court of Special Appeals. The judgments against Hickey were affirmed, while the judgment against Nationwide was reversed and the case remanded. The sole issue presented on appeal by Nationwide was whether the trial court erred in finding that there was an ambiguity in the uninsured/underinsured provisions of Nationwide’s automobile policy, such that Shirley and Herbert Kendall were entitled to the uninsured/underinsured policy limits of $100,000 per person and $300,000 per occurrence as stated for the 1975 Chevrolet notwithstanding this was not the vehicle involved in the accident.

The Court of Special Appeals held that the Nationwide policy was not ambiguous because the policy specifically stated that limits apply to each insured vehicle as stated in the declarations and, accordingly, that the trial court erred in granting summary judgment in favor of the Kendalls and against Nationwide. Hickey v. Kendall, 111 Md.App. 577 , 683 A.2d 789 (1996). Shirley and Herbert filed petitions for a writ of certiorari to this Court, seeking review solely of the proper construction of the uninsured/underin-sured motorist provisions of the automobile insurance policy issued to Shirley by Nationwide. We issued the writ, and we shall affirm the decision of the Court of Special Appeals.

I. Petitioners and Respondent both argue that a plain reading of the policy dictates a decision in their respective favors. The provisions of the automobile insurance policy issued by Nationwide to Shirley provides in relevant part as follows: ¹⁶⁴ “The Insuring Agreement For your payment of premiums in amounts we require and subject to all of the terms and conditions of this policy, we agree to provide the coverages you have selected. Your selections are shown in the attached Declarations, which are a part of this policy contract. * * * Uninsured Motorist Coverage Under this coverage we will pay all sums for bodily injury and property damage that you or your legal representative are legally entitled to recover as damages from the owner or driver of an uninsured motor vehicle. Damages must result from an accident arising out of the ownership, maintenance, or use of the uninsured motor vehicle.

Bodily injury means bodily injury, sickness, disease, or death. Relatives living in your household also are covered for bodily injury damages under this coverage. Anyone else is protected while occupying: 1. your auto. 2. a motor vehicle you do not own, while it substitutes temporarily for your auto. Your auto must be out of use because of breakdown, repair, servicing, loss, or destruction. * * * An uninsured motor vehicle includes an underinsured motor vehicle.

This is one for which there are bodily injury liability coverage or bonds in effect. Their total amount, however, is less than the limits of this coverage. These limits are shown in your policy’s Declarations. * * * Limits And Conditions of Payment Amounts Payable for Uninsured Motorist Losses Our obligation to pay uninsured motorists losses is limited to ¹⁶⁵ the amounts per person and per occurrence stated in the attached Declarations. The following conditions apply to these limits: 1.

Bodily injury limits shown for any one person are for all legal damages claimed by anyone for bodily injury or loss of services of one person as a result of one occurrence. Subject to this limit for any one person, the total limit of our liability shown is for all damages, including loss of services, due to bodily injury to two or more persons in any one occurrence. 2. Limits shown for property damage are for all legal damages claimed by one or more insureds for property damage as a result of one occurrence. 3. The insuring of more than one person or vehicle under this policy does not increase our Uninsured Motorist payment limits.

Limits apply to each insured vehicle as stated in the Declarations. In no event will any insured be entitled to more than the highest limit applicable to any one motor vehicle under this or any other policy issued by us.” (Emphasis added). We begin by examining the rules of interpretation governing the contract of insurance. Although the petitioners argue that we should construe the policy against the insurer, we are unable to. do so unless the policy is ambiguous.

An insurance policy is a contract between the parties, the benefits and obligations of which are defined by the terms of the policy. We have repeatedly held that the construction of insurance contracts in Maryland is confined to the few well-established principles that are applied to the construction of contracts generally. Pacific Indem. Co. v. Interstate Fire & Cas.

Co., 302 Md. 383, 388 , 488 A.2d 486, 488 (1985). “An insurance contract, like any other contract, is measured by its terms unless a statute, a regulation, or public policy is violated thereby.” Id. at 388 , 488 A.2d 486 . Shirley paid different premiums in order to obtain different limits of insurance coverage for each vehicle under her policy. ¹⁶⁶ “Under Maryland law, when deciding the issue of coverage under an insurance policy, the primary principle of construction is to apply the terms of the insurance contract itself.” Bausch & Lomb v. Utica Mutual, 330 Md. 758, 779 , 625 A.2d 1021, 1031 (1993). As we clearly held in Cheney v. Bell National Life, 315 Md. 761, 766 , 556 A.2d 1135, 1138 (1989), “Maryland does not follow the rule, adopted in many jurisdictions, that an insurance policy is to be construed most strongly against the insurer. Rather, following the rule applicable to the construction of contracts generally, we hold that the intention of the parties is to be ascertained if reasonably possible from the policy as a whole.” In this case, reading the provisions of the policy as a whole as set forth above demonstrates Nationwide’s effort to explain to the policy holder in detail her rights and the rights of her relatives when living in her household.

At the beginning of the policy, under the general heading “The Insuring Agreement” Nationwide clearly states that “Your” (the policy holder) selections (the coverages and limits you have selected) are shown in the attached declarations. The provision further states that the selections are a part of the policy contract. Clearly, Nationwide expressed its intention to be obligated by the limits as set forth on the declarations page. The policy then goes on in greater detail under each specific type of coverage to define the terms and conditions relevant to that coverage.

As we have stated, the terms of an insurance contract are to be interpreted utilizing well-established principles that guide the interpretation of contracts generally. Pacific Indent. Co. v. Interstate Fire & Cas. Co., 302 Md. at 388, 488 A.2d at 488 .

Initially, we analyze the plain language of the contract according words and phrases their ordinary and accepted meanings as defined by what a reasonably prudent lay person would understand them to mean. Id. at 388 , 488 A.2d 486 . Reviewing the provisions of the policy at issue in the instant case under the Uninsured Motorist coverage section, we note that Nationwide has included a paragraph stat ¹⁶⁷ ing that an uninsured motor vehicle includes an underinsured motor vehicle and defining an underinsured motor vehicle. Undoubtedly this provision of the contract was understood by Shirley as she does not base her claim on an assertion that the Hickey vehicle was uninsured but rather that it was underin-sured because the liability limits did not fully compensate her and her husband for their injuries.

The last sentence in the same paragraph again states that the limits of coverage are as shown in the policy’s declarations. Applying the principle of according words their ordinary meaning to the sentence above indicates that Nationwide’s intention was to be obligated by the limits of the policy as stated. Upon reading in the policy the phrase “as stated in the Declarations page,” the policy holder is clearly directed to the declarations page in order to ascertain all of the applicable limits for the insured vehicles. The phrase “the limits apply to each insured vehicle” means just that—as stated for each, individual vehicle.

This interpretation is further supported by the column arrangement of the declarations page. Each vehicle is listed separately across the top of the policy with the limits for each type of coverage clearly stated beneath the applicable vehicle. A reasonably prudent person would determine the limits of uninsured/underinsured coverage for each vehicle upon a viewing of the declaration page as follows: 4 COVERAGE *See policy for limits and deductible. Bodily Injury Liability Uninsured Motorist VEH l/Pont/86 Limits/Premium $100,000 5 /$57.70 300,000 6 $20,000 7 /$11.80 VEH2/Chev/78 Limits/Premium $100,000/$53.80 300,000 $20,000/$11.80 VEH3/Chev/75 Limits/Premium $100,000/$88.40 300,000 $100,000/$22.00 ¹⁶⁸ Premium Is Based On— Use of Vehicle —Bated Driver -Discounts Applied 40,000 8 Pleasure Adult, Female Multi Car Senior 40,000 Pleasure Adult, Male Annual Milage Multi Car, Senior 300,000 Pleasure Male, Age 21, Married Multi Car II.

We do not agree with the Petitioners’ suggestion that payment of premiums for higher limits of uninsured/underinsured motorist coverage for one vehicle in a multi-vehicle insurance policy creates an expectation that the higher limits will apply to all three vehicles, particularly when there is clear language in the policy to the contrary. “To determine the intention of the parties to the insurance contract, which is the point of the whole analysis, we construe the instrument as a whole.” Pacific Indem. Co. v. Interstate Fire & Cas. Co., 302 Md. at 388 , 488 A.2d at 488 . In assessing premiums for uninsured/underinsured motorists coverage in a multi-vehicle policy, insurance companies factor in that there will also be an increased number of drivers and thus increased exposure.

J. Appleman, Insurance Law and Practice, § 5101, (1981) has addressed the issues involved with the assessment of premiums in multi-vehicle insurance policies: “If there were but a single insured, and only he ever drove an automobile, obviously he can drive only one vehicle at a time and the reasoning of such courts might then be logical. But, in considering basic underwriting and the actuarial computation of rate structures, we must take into consideration the customary procedures of mankind. Automobile policies are now written so as to afford liability protection not only to the named insured, who is usually the owner, but to members of his family, perhaps persons residing in the same household, and—with a few exceptions —anyone operating with the permission of the named insured or adult members of his household. When it comes to UM coverages, we have a like multiplication of exposure, since we have classes of risk, including all of the persons ¹⁶⁹ stated above, and pedestrians as well, with benefits granted in many circumstances when one may be in another vehicle or even upon the highway.

When the insured then owns more than a single vehicle, almost always it is with the contemplation that the second, or third, vehicles will be operated by others. And those others may, also, if injured by an uninsured motorist, expose the insurer to loss under that aspect of the contract. Now it could not reasonably be argued that an insured owning several automobiles could insure only one of them for liability, or for collision, or comprehensive, damages— yet collect as to any loss inflicted by, or upon, any of those vehicles he elected not to insure. Yet this is precisely the result for which policyholders, or their counsel, contend under UM coverages and which has been upheld repeatedly by the courts.

Similarly, it is no more logical to double, or triple, a single limit of UM coverage, the amount of which the insured deliberately selected, and tender it free to the insured. We may summarize the situation where there is a single policy owner, single company, and multiple vehicles by saying that the proper result is: What you buy is what you get—and no more. ’ It is time for those courts, which have been so generous with the funds of others, to take a new look at this problem.” (Emphasis added). (Footnote omitted). It is a well-established rule of construction that a contract should be interpreted in its entirety such that a court does not dismiss or disregard any clause or phrase as meaningless.

Bausch & Lomb v. Utica Mutual, 330 Md. 758, 782 , 625 A.2d 1021, 1033 (1993); Sagner v. Glenangus