Langston v. Allstate Insurance

Gilbert, C. J., delivered the opinion of the Court. This litigation between Jean D. Langston, her son, Lawrence Langston, the appellants, and their insurer, Allstate Insurance Company, the appellee, is being fought on two fronts, i.e., Maryland and Florida. At this point in time, the Langstons have seen their victory, gained in an arbitration proceeding and confirmed in the Circuit Court of the 11th Judicial Circuit in and for Dade County, Florida, in the form of a summary judgment “against Allstate Insurance Company in the amount of $40,000.00,” qualified but not totally nullified by the District Court of Appeal of Florida, Third District, in Allstate v. Langston, Fla. App., 358 So. 2d 1387 (1978).

In the meantime, the Circuit Court for Montgomery County, patently declining to follow the Florida arbitration proceeding or the Dade County circuit court, entered a judgment in favor of the Langstons against Allstate for $5,000. The battle between the litigants is being waged over whether claimants, under a motor vehicle policy insuring two vehicles on separate premiums, may “stack” or pyramid coverage so as to obtain the maximum amount payable on each vehicle. Phrased in more explicit terms, the issue is, when two premiums are paid in one policy for two vehicles, may the claimant add or “stack” the maximum amount ⁴¹⁶ payable to any one person under the policies so that the $20,000 maximum amounts on each policy become a total of $40,000. The arbitrators expressed no opinion on the question, nor should they have done so under Florida law, because that State has held in Government Employees Insurance Co. v. Mirth, 333 So. 2d 545, 547 (Fla. 3d.

DCA 1976) that: “Under a liability indemnity insurance policy providing uninsured motorist coverage, issues relating to the merits of the claim against the tort-feasor are triable on the arbitration, but an issue bearing on coverage is not to be so tried, and is triable by the court. Cruger v. Allstate Insurance Company, Fla. App. 1962, 162 So. 2d 690 ; Zeagler v. Commercial Union Ins. Co. of N.Y., Fla.

App. 1964, 166 So. 2d 616 .” (Emphasis supplied.) See also Allstate v. Langston, supra. The Circuit Court for Montgomery County implicitly held that the “stacking or pyramiding” of benefits was not allowed in Maryland. Moreover, the court sanctioned a credit to Allstate in the amount that the Langstons recovered from the insurance carrier on the vehicle in which Lawrence Langston was riding when he was injured. Our task then is to rise above the debate between the parties and to endeavor to secure for each its respective rights, thereby securing those rights for the people of the State.

THE FACTS. Lawrence S. Langston, a Maryland resident, but a student at the University of Miami, was severely injured on September 23, 1975, as the result of a collision between an uninsured vehicle and a motorcycle on which Langston was a passenger. Langston was paid $15,000, the full amount of the uninsured motorist coverage of the motorcycle owner’s motor vehicle liability. At the time of the accident, Langston was an insured under a motor vehicle liability policy ⁴¹⁷ containing uninsured motorist coverage.

That policy had been issued in Maryland by Allstate to Mrs. Jean D. Langston. It insured her against liability and loss occasioned by an uninsured motorist. The policy covered two vehicles, a 1972 Ford and a 1966 Chevrolet. Lawrence Langston was included within the ambit of the policy by his status as son of the insured and resident of the same household as the insured.

The policy limit as to an uninsured motorist for each vehicle was $20,000 each person, $40,000 each accident. 1 The damages to Lawrence “far exceeded” the $15,000 that was paid to him by Universal Underwriters Insurance Co., the motorcycle operator’s insurance carrier. Lawrence, therefore, made demand upon Allstate in the amount of $40,000, a figure he arrived at by “stacking” the $20,000 coverage afforded for damages caused by an uninsured motorist 2 on each of his mother’s two vehicles. Allstate rejected the “stacking” concept. Instead, it deducted the $15,000 paid to Lawrence by Universal Underwriters from the $20,000 figure to which it contended it had obligated itself through the issuance of the policy to Mrs. Langston and offered the sum of $5,000 to Lawrence in settlement of his claim.

The Langstons, in accordance with the terms of their policy, 3 demanded that the dispute “be settled by arbitration ⁴¹⁸ in accordance with the rules of the American Arbitration Association.” Seemingly racing to circumvent the arbitration proceeding, Allstate, on March 2, 1977, filed, in the Circuit Court for Montgomery County, a “Bill for Declaratory Relief.” That bill was followed two days later in Florida, by Allstate’s instituting a “Complaint for Injunction” 4 and then on March 9, 1977, a “Motion for Temporary Stay” of the arbitration pending the determination of the Maryland suit brought in Montgomery County. The motion to stay was denied so that the arbitration hearing was held in Dade County on March 14,1977. The arbitrators made the following award: “THE UNDERSIGNED ARBITRATOR(S), designated under the arbitration provision of Policy No. 0-18-550435, having been duly sworn and having heard the proofs and allegations of the parties, AWARDS as follows: The Arbitrators [s/e] AWARD to the claimant is FORTY THOUSAND DOLLARS AND NO CENTS ($40,000.00). This AWARD is subject to a judicial determination of the applicable policy limits.

Claimant contends stacking applies. Respondent denies this. Respondent contends it is entitled to a $15,000.00 set-off. Claimant denies this.

Claimant contends there is $40,000.00 in coverage. Respondent contends the coverage is $5,000.00. The Arbitrators make no decision in this regard. If the coverage is $5,000.00 the AWARD is $5,000.00.

If the coverage is $40,000.00 the AWARD is $40,000.00. This Award is in full settlement of all claims submitted to this arbitration.” ⁴¹⁹ On the basis of the arbitration award, the Langstons moved for summary judgment. The Dade County court granted the motion and entered judgment for Lawrence by confirming and adopting “as the judgment of... [the] court” the “Award of Arbitration.” On July 28, 1977, the Dade court “entered two additional orders. One was entitled ‘Order Granting ... [Lawrence’s] Amended Motion for Summary Judgment.’ That order did not contain confirmation of the arbitration award, but recited that the motion for summary judgment was granted, and ordered ‘that accordingly summary judgment shall be entered against Allstate ... in the amount of $40,000.00.’ The other, entitled ‘Final Judgment,’ ordered that Lawrence recover from Allstate ... the said amount of $40,000.00, with provision therein for execution to issue.” Allstate v. Langston, supra.

Allstate moved for a rehearing which was denied and then, as we have seen, appealed to the District Court of Appeal of Florida, Third District. While the matter was pending in the Florida trial court, Allstate moved that summary judgment be granted to it by the Montgomery County trial court on the ground that there was “no genuine dispute between the parties as to any material fact, and that... [it] was entitled to judgment as a matter of law.” Md. Rule 610. The circuit court denied the Langston motion to stay the Maryland case until after disposition by Florida. On December 12, 1977, the court heard argument on Allstate’s motion for summary judgment, opposition thereto, the Langstons’ “Counter-Motion for Summary Judgment” and the opposition to that motion.

The court denied the counter-motion but granted Allstate’s motion and entered judgment in favor of the Langstons for $5,000, the amount Allstate maintained that it owed under Mrs. Langston’s motor vehicle liability policy after allowing a deduction of a sum equal to the amount recovered from Universal. This appeal followed, but before the matter was argued in this Court, the Florida intermediate Court of Appeals, as we have previously said, reversed the Dade, County circuit court. ⁴²⁰ The Florida appellate court held that “[t]he action initially filed in Maryland for coverage determination conferred on that court the jurisdiction to litigate and settle the question. Wade v. Clower, 94 Fla. 817 , 114 So. 548 (1927). For that reason, the question as to the coverage limit could not have been decided in the subsequently filed action in Dade County ... even if the latter action had been brought for that purpose____ Where the policy was issued in Maryland to a resident of that State, the construction and legal effect of the terms of the policy and the rights and obligations of the parties thereto are to be determined by the laws of that State.

(Citations omitted).” THE LAW. Before we explore whether the so-called “stacking or pyramiding” is permitted by the Maryland statute, we think it well to discuss the question of the credit allowed Allstate as a result of the payment to the Langstons by Universal Underwriters of $15,000. If there were any doubt over whether a credit could be taken, it was resolved in a strikingly similar case, by the Court of Appeals in McKoy v. Aetna Casualty & Surety Co., Inc., 281 Md. 26 , 374 A. 2d 1170 (1977). McKoy was struck by a negligent driver while she was operating her vehicle in Washington, D.C. The negligent driver was insured by Government Employees Insurance Company (GEICO), but the liability of GEICO, under the policy was limited to $10,000. 5 McKoy alleged her damages to be substantially in excess of $20,000.

Inasmuch as the GEICO policy limit was less than $20,000, the tort-feasor was, for Maryland purposes, deemed to be an uninsured driver, as that term was used in the Aetna policy insuring McKoy against injury by uninsured motorists. ⁴²¹ GEICO paid McKoy $10,000 in satisfaction of its obligation under its policy. McKoy then claimed indemnification from Aetna, under the uninsured motorist coverage, in the amount of $20,000. Aetna asserted that it was entitled to a set off of the amount paid by GEICO so that it was liable only to the extent of $10,000. The circuit court agreed with Aetna, but the Court of Appeals did not.

The Aetna policy provided in pertinent part: “ T. UNINSURED MOTORISTS COVERAGE (Damages for Bodily Injury and Property Damage Caused by Uninsured Highway Vehicles) ‘The Company will pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured highway vehicle because of bodily injury or property damage, caused by accident and arising out of the ownership, maintenance or use of such uninsured highway vehicle; provided, for the purposes of this coverage, determination as to whether the insured or such representative is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insured or such representative and the company or, if they fail to agree, by arbitration. ‘HI. LIMITS OF LIABILITY ‘Regardless of the number of insureds under this insurance, the company’s liability is limited as follows: (a) The limit of bodily injury liability stated in the schedule as applicable to “each person” is the limit of the company’s liability for all damages because of bodily injury sustained by one person as the result of any one accident and, subject to the above provision respecting “each person,” ⁴²² the limit of liability stated in the schedule as applicable to “each accident” is the total limit of the company’s liability for all damages because of bodily injury sustained by two or more persons as the result of any one accident. (d) Any amount payable to an insured under the terms of this insurance shall be reduced by (1) all sums paid to such insured for bodily injury or property damage by or on behalf of the person or organization legally liable therefor and (2) the amount paid and the present value of all amounts payable to such an insured under any workmen’s compensation law, exclusive of non-occupational disability benefits.’ ” (Emphasis supplied.) The Court held that the words “any amount payable” as employed in Clause III (d) “should be construed as providing for a setoff against the total damages suffered and not against the face value of the endorsement.” 281 Md. at 30 . The Court went on to say: “Section I, ‘Uninsured Motorist Coverage,’ sets out the basic liability of Aetna, to pay all damages which the insured is legally entitled to recover resulting from an accident with an uninsured motorist.

Section III, entitled ‘Limits on Liability,’ begins ‘the company’s liability is limited as follows.’ This strongly suggests that the limitations which follow are to be understood as limits on the primary liability articulated in Section I. Section 111(a) then limits liability to $20,000 per person. Sections 111(b) and (c) concern limits on property damage and claims made under other insurance. Finally, Section 111(d) contains the setoff clause. There is no indication that 111(d) is in any way subordinated to 111(a).

Both clauses stand on equal footing, and both must therefore be understood as ⁴²³ independently modifying the primary liability of Section I. That is, amounts paid to an insured on behalf of the tortfeasor shall be deducted from ‘all sums which the insured ... [is] legally entitled to recover as damages from the owner or operator of an uninsured highway vehicle.’ Under the terms of this contract the setoff clause, 111(d), applies to the total damages incurred and is not a further limitation upon the $20,000 limit set forth in clause 111(a).” 281 Md. at 30-31 . The Allstate policy which we are called upon to construe provided: “SECTION II “PROTECTION AGAINST BODILY INJURY AND PROPERTY DAMAGE BY UNINSURED AUTOMOBILES COVERAGE SS — Uninsured Motorists Insurance Allstate will pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of bodily injury, sickness or disease, including death resulting therefrom, hereinafter called ‘bodily injury’, sustained by the insured or property damage, caused by accident and arising out of the ownership, maintenance or use of such uninsured automobile; provided, for the purposes of this coverage, determination as to whether the insured or such representative is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the insured or such representative and Allstate or, if they fail to agree may be made by arbitration.[ 6 ] ⁴²⁴ No judgment against any person or organization alleged to'be legally responsible for the bodily injury or property damage shall be conclusive, as between the insured and Allstate, of the issues of liability of such person or organization or of the amount of damages to which the insured is legally entitled unless such judgment is entered pursuant to an action prosecuted by the insured with the written consent of Allstate. 3. ‘uninsured automobile’ means: (a) a motor vehicle with respect to the ownership, maintenance or use of which there is, in at least the amounts specified by the financial responsibility law of the state in which the insured automobile is principally garaged, no bodily injury and property damage liability bond or insurance policy applicable at the time of the accident with respect to any person or organization legally responsible for the use of such automobile, or with respect to which there is a bodily injury and property damage liability bond or insurance policy applicable at the time of the accident but the company writing the same either has denied coverage thereunder or is or becomes insolvent; or (b) a hit-and-run automobile as defined; but the term ‘uninsured automobile' shall not include: (i) an insured automobile; (ii) a motor vehicle which is owned or operated by a self-insurer within the meaning of any motor vehicle financial responsibility law, motor carrier law or any similar law; ⁴²⁵ (iii) a motor vehicle which is owned by the United States of America, Canada, a state, a political sub-division of any such government or an agency of any of the foregoing; (iv) a land motor vehicle or trailer if operated on rails or crawler-treads or while located for use as a residence or premises and not as a vehicle; or (v) a farm type tractor or equipment designed for use principally off public roads, except while actually upon public roads. 6. Limits of Liability. (a) The limit of bodily injury liability stated in the declarations as applicable to ‘each person’ is the limit of Allstate’s liability for all damages, including damages for care or loss of services, because of bodily injury sustained by one person as the result of any one accident and, subject to the above provision respecting each person, the limit of liability stated in the declarations as applicable to ‘each accident’ is the total limit of Allstate’s liability for all damages, including damages for care or loss of services, because of bodily injury sustained by two or more persons as the result of any one accident.

(c) Any amount payable under the terms of this coverage because of bodily injury or property damage sustained in an accident by a person who is an insured under this coverage shall be reduced by (1) all sums paid on account of such bodily injury or property damage by or on behalf of (i) the owner or operator of the uninsured automobile and (ii) any other ⁴²⁶ person or organization jointly or severally liable together with such owner or operator for such bodily injury or property damage including all sums paid under the Bodily Injury Liability Coverage or Property Damage Liability Coverage of the policy____ (d) Any payment made under this coverage to or for any insured shall be applied in reduction of the amount of damages which he may be entitled to recover from any person insured under the Bodily Injury Liability Coverage or Property Damage Liability Coverage of the policy. (e) Allstate shall not be obligated to pay under this coverage that part of the damages which the insured may be entitled to recover from the owner or operator of an uninsured motor vehicle which represents loss paid or payable to the insured under any automobile physical damage insurance of the policy. Other Insurance. With respect to bodily injury to an insured while occupying an automobile not owned by the named insured, the insurance under this coverage shall apply only as excess insurance over any other similar insurance available to such insured and applicable to such automobile as primary insurance, and this insurance shall then apply only in the amount by .which the limit of liability for this .coverage exceeds the applicable limit of liability of such other insurance.

Except as provided in the foregoing paragraph, if the insured has other similar insurance available to him and applicable to the accident, the damages shall be deemed not to exceed the higher of the applicable limits of liability of this insurance and such other insurance, and Allstate shall not be liable for a ⁴²⁷ greater proportion of any loss to which this coverage applies than the limit of liability hereunder bears to the sum of the applicable limits of liability of this insurance and such other insurance.” (Emphasis supplied.) Allstate asserts that the instant case is distinguishable from McKoy because of certain “technical differences” which “must [be] considered.” They argue, “Subordination of clauses is not the issue as it was in McKoy , as [policy provision] 6(c)(i) applies to a reduction of amounts payable from the ‘coverage’ which is modified or delineated in [policy provision] 6(a). It is the coverage that is reduced, not all sums.” A recent Court of Appeals case, State Farm Mut. Auto. Ins.

Co. v. Md. Auto. Ins. Fund, 277 Md. 602 , 856 A. 2d 560 (1976), construed the meaning of “coverage” as it is used in Md. Ann. Code art. 48A, § 541 (c). As Chief Judge Murphy noted therein: “ ‘[c]overage’ is a common insurance term; it has been defined as the ‘aggregate of risks covered by the terms of a contract of insurance.’ Webster’s Third New International Dictionary 525 (1961).” The present edition, Webster's Third New International Dictionary Unabridged (1976 ed.), carries that same definition of “coverage.” Among its meanings, “coverage” is listed as “1. the act or fact of including or treating: a thing that covers: COYER: as a: INSURANCE: protection by insurance policy: inclusion within the scope of a protective or beneficial plan ... c: the aggregate of risks covered by the terms of a contract of insurance.” See also The American Heritage Dictionary of the English Language (1970 ed.) which defines “coverage” to mean “2.

The extent of protection afforded by an insurance policy.” In other words, “coverage” is insurance. When so read, we fail to see the distinction between McKoy and the case sub judice. “Coverage SS” of the Allstate policy provides that “Allstate will pay all sums which the insured ... shall be legally entitled to recover as damages from the owner or operator of an